BSRM ups investment by 164% to meet growing demand

The steel market leader, BSRM Steels Ltd, has revised up its investment plan for capacity expansion amid a boost in demand for its products.

A year ago, the listed company had announced a Tk700 crore investment plan to increase its annual production capacity of construction rod and some other products by five lakh tonnes, taking the total capacity to over 21 lakh tonnes per year.

But amid soaring demand, it has now planned to increase rod re-rolling capacity by six lakh tonnes, for which it will also increase its billet making capacity by 2.5 lakh tonnes. This will make the company self-reliant for the semi-finished raw material, said company officials.

BSRM Steels Ltd produces billets through melting imported scrap metals and the billets are turned into construction rods and some other mild steel (MS) products.

For the revised melting and re-rolling capacity of 22 lakh tonnes each per year, the total investment needed has been revised up to 2.64 times to Tk1,850 crore and the project is set to be completed by the end of 2023, instead of the previous plan to begin production by mid-2023.  

"We could have sold 5 lakh tonnes more in the 2020-21 fiscal year, if we had the production capacity," said BSRM Head of Accounts and Finance Shekhar Ranjan Kar.

The construction boom after the first wave of Covid-19 increased the demand for steel products by around 15% in the last fiscal year, while BSRM sold nearly one-third more rods over the fiscal year ending in June, he added.

The expansion project would be financed using BSRM's own money and some borrowed funds, the company disclosed.

Two BSRM companies listed in the local bourses announced record sales, profits and dividends for the 2020-21 fiscal year amid reduced marketing, finance and tax expenses.

Bangladesh, still one of the least per-capita steel consuming countries in the developing world, has begun using more of the material amid a long term infrastructure development phase, which includes both government mega projects and also private sector constructions.

Managing Director of BSRM Aameir Alihussain told The Business Standard that demand for steel would keep rising over the decades as the country's economic development is set to continue.

According to industry reports, in 2018, per-capita annual steel consumption in Bangladesh stood at 45 kilogrammes, having doubled in the previous five-eight years. 

The BSRM MD estimated that per-capita consumption has already reached 55kg.

Government megaprojects are the major growth drivers which now consume over one-third of the steel, up from less than 15% a decade ago, according to an industry report by IDLC Finance.

Anticipating the demand, industry players over the last decade have significantly increased their installed capacity to produce over 90 lakh tonnes a year, while the annual demand is estimated to have crossed 75 lakh tonnes, according to Aameir Alihussain.

GPS Ispat opened a new plant last year, with an annual capacity to produce 8.4 lakh tonnes of billet and 6.4 lakh tonnes of MS rod and medium section products, such as support beams and flat bars.

Meanwhile, Chinese steel giant Kunming Iron and Steel Holdings Company has announced to invest $2.3 billion in a steel manufacturing project, along with a power plant at Mirsarai in Chattogram.

A consortium of 17 private sector players named Star Infrastructure Development Consortium Ltd is acting as the local partner of Kunming.

They aim to produce two million tonnes of integrated iron and steel products annually. The operation of this consortium is expected to start by 2022.

There are around 400 steel mills in the country, but more than 65% of the annual demand is being met by a few dozen modern mills selling branded rods.

According to a 2019 industry report by EBL Securities, the top three companies -- BSRM, AKS and KSRM -- serve over half of the market.