Steelmakers burn expensive alternative fuel as gas pressure hits near-zero

A severe and prolonged gas supply shortage has brought Bangladesh's steel manufacturing sector to a virtual standstill, pushing major plants to cut output and forcing nearly 40% of rerolling mills to shut operations completely.

Industry leaders warn that the ongoing energy crunch, compounded by frequent power cuts and legacy financial strains, threatens to disrupt the country's construction supply chain and drive up steel prices ahead of the peak construction season, beginning in October.

Infographics: TBS

Leading manufacturer BSRM has seen its monthly production drop significantly from its normal output of 2.25 lakh tonnes to an estimated 1.5 lakh tonnes or below this month.

"We're struggling to operate because of low gas pressure, but we're trying to keep the factory running to meet customer demand and keep workers engaged," said Tapan Sengupta, deputy managing director of BSRM.

To keep plants active, BSRM has turned to alternative fuels like furnace oil and light diesel oil. However, Sengupta pointed out that these alternatives come at a steep price: "Furnace oil and LDO cost almost four times as much as gas." Consequently, the manufacturer is forced to run at just 50% to 60% of its normal capacity.

Industry-wide shutdowns and escalating losses

The gas pressure in major industrial hubs like Chattogram has dropped to near zero, forcing prominent manufacturers – including KSRM, GPH Ispat, HM Steel, Golden Ispat, and Anwar Ispat – to suspend or heavily curtail operations.

"Most of the steel mills in the country are closed," said Sumon Chowdhury, general secretary of the Bangladesh Steel Manufacturers Association. "Gas and electricity are almost 100% essential for our industry. Some factories have received no gas at all for the last two weeks."

Sumon said that even integrated steel plants capable of producing billets without gas are limited to 30%-50% capacity due to electricity shortages. He added that the sector is hitting a breaking point after years of accumulated financial stress.

For instance, he said the Russia-Ukraine war drove up global commodity and shipping costs, while Bangladesh's dollar crunch forced importers onto deferred payments. When LCs matured, the dollar rate jumped from Tk85 to Tk110-127, inflicting exchange-rate losses of Tk15,000 to Tk20,000 per tonne of steel and severely draining working capital.

Jashim Uddin, general manager of KSRM, said falling output directly drives up production costs. "You can't reduce fixed costs simply because production falls. The more you produce, the lower your unit cost. When you can't run at full capacity, unit costs shoot up."

Supply tightens ahead of peak season

With factories idling, traders report early signs of market stress. Sudip Das, owner of Chattogram-based dealer Prime Steel, said that steel rebars are currently trading between Tk81,000 and Tk87,500 per tonne.

"Supply in the market has already tightened. As the peak construction season approaches, prices are likely to rise further if production isn't restored," Sudip said.

Calls for immediate LNG injection

With production planning paralysed by uncertainty, manufacturers are demanding urgent government intervention to restore gas pressure by supplying LNG directly into the national grid.

While gas utility authorities have indicated that pressure might gradually improve over the coming week, industry leaders insist that a clear timeline is critical.

"Unless the government gives the industry urgent attention and connects LNG to the pipeline system as soon as possible, the situation will become critical," Sumon urged, stressing that prolonged disruptions will inevitably ripple through contractor networks, housing, and key national infrastructure projects.

Bangladesh is facing a severe energy crisis driven by heavy reliance on expensive imported fossil fuels, acute natural gas shortages, and long-standing infrastructure planning failures, according to the Institute for Energy Economics and Financial Analysis. Power generation deficits regularly exceed 3,500 to 5,000 megawatts during peak hours, triggering widespread load shedding, low gas pressure in industrial zones, and escalating economic strain.