Contractors fear govt projects may lose momentum as rod price rises

The Bangladesh Association of Construction Industries (BACI) has said the ongoing construction projects of the government may lose momentum due to the increase in the price of mild steel (MS) rod.

The leaders of the organisation opined that this situation has emerged as a result of increasing the price of MS rod through a syndicate. In this situation, BACI has demanded price adjustment or rate escalation in all construction projects as per the provisions of the Public Procurement Related Rules (PPR).

At a press conference at the Dhaka Reporters' Unity on Friday, the organisation said currently the price of MS rods in the market has been increased by 25-30% through syndication. The construction sector is being hampered because of this.

As a result, they claimed, many government projects have already lost momentum. If there is no option to adjust to the price at which the tender was bid and the price of the rod remains unchanged in the market, the situation will become more complicated, the contractors claimed.

Engineer SM Khorshed Alam, president of the organisation, told The Business Standard that, "The sector has been doing well over the last decade. Now they are raising prices for extra profit, which has led to a rise in the prices of several other products related to the construction industry."

He said the cement traders are already talking about a rise in clinker prices. As the price of rods is now high, they are also preparing to raise prices. There is also a crisis of stone in the market. Price of that is also increasing.

"If the prices of all products continue to rise in this way, it will not be possible for us to carry out all kinds of public and private construction work," said Khorshed.

Claiming that the mill owners' talk of increase in the price of scrap in the world market is not logical, Khorshed said it was important for the government to hold meetings with the concerned parties soon.

BACI Director (Admin) Hasan Mahmud Babu told TBS that, "If the situation persists, about 50 lakh people involved in the industry will be affected. The mill owners are raising the prices of these products at a time when the construction sector is trying to make a comeback."

He said, "In November 2020, we bought a tonne of MS rod for Tk50,000, but its price in today's (Friday) market is Tk69,900. Last December, it rose to Tk65,000."

Denying the price hike through the syndicate, Chairman of Bangladesh Steel Manufacturers Association Sheikh Masadul Alam Masud told TBS that the price of rod has gone up in the country due to the rise in the price of raw material (scrap) in the international market due to Covid-19 pandemic. Besides, there is a crisis of raw material due to low import of old ships last year.

He said, "In the first week of November, we imported a tonne of scrap at $270. Now it has to be imported for more than $500."

He thinks that the price of rod in the country's market may go up to Tk75,000 per tonne in the next one to two months as the construction work increases during the dry season in the country.

Meanwhile, the Trading Economics, an online platform that provides historical data, economic forecasts, news, and trading recommendations, says that the price of per tonne finished rod in the world market was Tk50,500 in last November. In December it increased a little to Tk51,000.

However, at the end of the first week of January, the finished rod is being sold at Tk55,000.

According to industry insiders, the implementation of different development projects across the country has given a boost to the steel industry, prompting investors to expand their businesses.

They pointed to the fact that the leading steel manufacturers in the country have moved to expand their businesses in recent times as the per capita steel consumption has increased in line with economic development.

Bangladesh's combined annual installed capacity of producing steel in 2018 was 8.5 million tonnes, while the total consumption was 7 million tonnes. Per capita steel consumption in the country almost doubled over the past eight years, standing at over 45kg in 2018.

People involved in this sector expect that the implementation of government projects would add 217kg to this figure in the next few years. The current size of the domestic steel market is around Tk45,000 crore, industry insiders said, adding that around 400 companies in this sector employ roughly 3 lakh people.

President of Consumer Association of Bangladesh Ghulam Rahman called upon the government to take initiatives to create a competitive market and set prices in line with the world market as the market of iron products in the country has expanded along with the number of various development projects.

He said, "There is a high possibility that the consumers would get cheated as these businesses are highly profitable. So, in order to control the price of finished products, this market should be monitored like the markets of other consumer goods."

He also suggested controlling the market by reducing import duty to create competition in the market keeping in mind the needs of the consumers.