Scrap price drops but cheap MS rods elude consumers

As usual, consumers are missing out on an opportunity of cheaper construction when prices of scrap – the raw material for the steel industry – have seen a drastic drop.

Cashing in on cheaper raw materials, steel manufacturers could lower prices, but instead they have driven their production down by two-thirds on grounds of lower demand. In around 18 months since late 2020, re-rolling mills witnessed nearly 70% price increases, passing the burden on to the consumers.

At the same time, the shipbreaking industry has come to a standstill owing to the unusual fall in scrap prices. The price of scrap has fallen by at least Tk20,000 per tonne in the last three months.

In three weeks, the price of MS rods has dropped by Tk2,000-3,000 per tonne. Rod producers and traders said the price has come down due to reduced demand in the aftermath of excessive price hikes.

Before this, from November 2020, the price of MS rods increased for almost one and a half years, reaching Tk92,000 per tonne in March this year. The price was Tk55,000 in October 2020.

According to businessmen in the steel sector, construction work in the housing and other sectors has stopped due to an increase in the cost of construction materials. This has reduced the sales of MS rods and the price too has come down.

Ibrahim bin Manzoor, proprietor of Khwaja Trading, a wholesale rod trader at Colonel Hat of ​​Chattogram, said people had stopped construction due to the unusual rise in rod prices.

"Besides, due to the floods in different districts of the country, the sale of rods has come down drastically in the last two months. In order to boost the rod market, traders think that rod manufacturers should further reduce the price," he added.

Sarwar Alam, director at HM Steel, said that the price of the rods has come down by around Tk7,000-8,000 per tonne as the price of scrap has come down in the international and domestic markets.

"Even then the demand for rods in the market is very low. Most rod manufacturers have reduced production due to declining demand. The factories are operating on only 30-35% of their production capacity. Earlier a factory was working in three shifts but now it is working in one shift," he added.

According to the Bangladesh Steel Manufacturers Association, there is a demand for 70-75 lakh tonnes of MS rods in the country every year. These rods are supplied by about 55 auto steel re-rolling mills and more than 100 semi-auto and manual mills in the country.

Shipbreaking industry in a struggle

More than 50 shipbreaking yards have shut down operations as scrap prices have fallen below import prices for old ships. And at least 7,000 workers have become unemployed due to a lack of work, according to industry insiders.

Shipbreaking yard owners said that demand and production of steel product MS rods have declined due to excessive price hikes. Demand for steel has also decreased due to the rainy season and floods in various districts of the country.

Sekandar Hossain, proprietor of KR Shipbreaking Yard, said that scrap prices started decreasing from the last week of March.

"For the last three months, the price has dropped by around Tk7,000-8,000 per month. Many shipyards have stopped dismantling ships because of the unusually low prices. Thousands of workers have become unemployed," he added.

According to officials at different shipbreaking yards, at present every tonne of scrap is being sold at yards for only Tk48,000; the price was Tk67,000-68,000 at the end of March. The price has decreased by at least Tk20,000 in the last three months.

Along with scrap, the prices of steel raw material pellets and billets have also come down. Per tonne, pellets are sold at Tk65,000 and billets at Tk66,000 while three months ago the prices were Tk71,000 and Tk80,000 respectively.

In the last three to four months, the price of scrap ships in the international market has dropped by more than $150 per tonne to $500. In February-March, the price was between $650-680.

Abu Taher, president of the Bangladesh Ship Breakers and Recyclers Association, said ship breakers have to spend more on imported ships due to an increase in dollar prices. Yard owners have also reduced the import of ships as demand for and prices of scrap have declined.

"Yards have a stock of 15-16 lakh tonnes of scrap at normal times. But at present, the stock has come down to 2-3 lakh tonnes," he added.

According to the association, ship-dismantling goes on at more than 80 yards in the Sitakunda area of Chattogram on the Bay of Bengal. But over the past three months, more than 40 of them have stopped operations due to an unusual drop in scrap prices. Some 20,000 workers are directly involved in the shipbreaking industry and at least 7,000 of them have lost their jobs during this time.

In the fiscal 2021-22, 232 small and big ships were imported by the yards. The weight of these ships as scrap is 26 lakh tonnes. The cost of importing these ships is Tk13,585 crore.

Steel market

According to steel mills, 75 grade (500 TMT) MS rods of different brands are being sold in the market at Tk81,000-84,000. The price in mid-June was Tk83,000-87,000.

Among the 75 grade rods, BSRM is currently being sold at Tk84,000, KSRM at Tk83,000, AKS at Tk82,500 and GPH at Tk81,000.

Three weeks ago, BSRM was sold for Tk86,500, KSRM for Tk86,000, AKS for Tk84,000 and GPH for Tk83,000.

Currently, among the 60 grade MS rods of auto mills, Golden Steel is selling at Tk80,000, SASM at Tk79,500, Bayezid at Tk79,000, HM Steel at Tk78,500 and KR at Tk78,000.

Three weeks ago, Golden was sold at Tk82,000, SASM at Tk81,000, Bayazid at Tk82,000, HM Steel at Tk83,000 and KR at Tk80,000.