Bangladesh's steel production hits 3-year low amid reduced demand

Infographic: TBS

The country's production of crude steel has experienced a significant decline, reaching a three-year low of 5.2 million tonnes. This situation is indicative of reduced demand for primary construction materials due to decreased economic activities.

The recent disclosure of this data was made by the Brussels-headquartered World Steel Association, an international trade body representing the iron and steel industry.

Despite the adverse impacts of the Covid-19 pandemic, Bangladesh's annual steel production remained steady at 5.5 million tonnes in both 2021 and 2020. During these years, the country ranked 29th and 28th globally, respectively. 

In 2019, steel production was 5.1 million tonnes, and the global ranking stood at 30th. However, the ranking slipped to 31st as production declined.

Consequently, the per capita steel consumption in Bangladesh dropped to approximately 43kg in 2022, down from over 45kg in 2020. This figure is significantly lower than India's 81kg and considerably behind China's 645 kg.

Tapan Sen Gupta, deputy managing director of BSRM Group, the largest steel maker in the country, said per capita steel consumption is a major indicator of a country's development.

"Demand has declined because of the slow economic activities," he told The Business Standard.

Gupta explained that the public sector is the largest consumer of steel, holding approximately 70% of the market share in the last few years. The slowdown in the execution of projects has resulted in a decrease in steel consumption. 

He also said private sector investments have been sluggish due to stagflation, characterised by slow economic growth and high inflation.

Moreover, Gupta mentioned that BSRM's production was adversely affected last year due to power outages and a shortage of raw materials caused by the dollar crisis. BSRM produced 1.8 million tonnes of finished steel (rod) and 2.2 million tonnes of billet in 2022, he said.

According to SK Masadul Alam Masud, the founder president of Bangladesh Steel Mills Association (BSMA) and managing director of Shahriar Steel Mills Ltd, the government has focused on implementing projects based on priority, thus limiting its development works. 

He also said the energy crisis has resulted in a slowdown of economic activities, while the shortage of dollars has reduced imports, consequently impacting overall investments in the country and steel prices – Tk1 lakh per tonne.

Adding to his concerns, Masud expressed apprehension regarding the looming political uncertainty, which he believes has the potential to further cut the demand for steel.

According to Md Shahidullah, secretary general of BSMA and managing director of Metrocem Ispat Ltd, the decline in steel consumption is not solely attributed to the reduced demand from the public sector. He highlighted that the sluggish growth in both the housing and industrial sectors has also contributed to this decline.

Also, Shahidullah emphasised that the year-long crisis over the dollar and its appreciation against the local currency, the taka, have significantly increased import costs for steel manufacturers. He further explained that there have been instances where they faced difficulties in obtaining dollars and opening LCs (Letters of Credit) for importing necessary materials.

Imports also declining

The World Steel Association data shows Bangladesh produced 5.1 million tonnes of crude steel, which is a liquid metal, in 2019, and imported (net) another 3 million tonnes to meet the demand. It means Bangladesh consumed 8.1 million tonnes of steel in that year.

As the local steel makers' capacity has grown significantly over the years, imports started to decline – which is also evident in the world steel data. Bangladesh's net import of steel came down to 2.2 million tonnes in 2022, meaning that the country consumed 7.4 million tonnes.

Gupta of BSRM mentioned that world steel's production calculations focus on crude steel, which refers to liquid metal. However, in the case of Bangladesh, approximately 1.5 million tonnes of finished products are produced from scrap, which is not accounted for in world steel's calculations.

The global picture 

Crude steel production in the world in 2022 went down to 1, 885 million tonnes from 1,962 million tonnes a year ago because of the economic slowdown, especially in the USA and Europe.

China remained in the top position, both in production and consumption. The second-largest economy in the world produced 54% of total steel globally, followed by the European Union at 7.2% and India at 6.6%. China also consumed over 51% of the steel the world produced last year.

In terms of per-person steel consumption in 2022, South Korea topped the list with a whopping 928kg, followed by Taiwan with 728kg and China with 646kg. The world's largest economy, the USA's per person steel consumption went down by 10 kg to 279 kg and India's rose by 6 kg to 81 in 2022.