Challenges of doing steel business

Steel is one of the most innovative alloys in the world and has a significant contribution to every area of our life. Steel industry plays a fundamental role not only in driving economic development, but also in other complimentary industries like transport, energy, heavy engineering and construction.

Bangladesh is one of the leading emerging steel markets in Asia, with a growing development of steel raw materials and steelmaking technologies. Our country's GDP growth is now 7.68 percent, which is significantly higher than many other emerging markets.

The demand for the steel industry in any country is mainly driven by two factors: implementation of the government's ADP (Annual Develop­ment Programme) plan as well as the government's infrastructure development activities, and the individual-level demand for the industry and especially the real estate sector.

Currently, the demand for steel in our country is increasing day by day. Now the per capita steel rebar consumption in Bangladesh is only 45kg. This is expected to grow to 75kg by 2022.

Because the government has begun working on infrastructure development and industrialisation of the country with many mega projects which are expected to increase the steel industry's growth by 15 percent in the future.

Golden Ispat Limited is doing its best to contribute to the development of the country. As a contributor to Bangladesh's re-bar industry, Golden Ispat Limited believes that quality improvement and upgrading of construction is needed in the country. In this regard, they have been working in this industry for the last four decades.

Golden Ispat Limited is a sister concern of Mostafa Hakim Group. Mostafa Hakim Group is not only producing the finest quality re-bars, but also producing the highest quality cement and bricks. So, it is undoubtedly to be said that Mostafa Hakim Group is accelerating the country's sustainable construction.

Photo: Rehman Asad/TBS

We are currently producing 2,20,000 metric tonnes of re-bar annually. But due to the confidence and greater acceptance of the customers across the country, by the mercy of Allah, we are launching another production unit in south Chittagong in June 2020. The production capacity of the unit is 4,50,000 metric tonnes annually.

The contribution of quality construction materials is required for the development of sustainable and advanced infrastructure. It accelerates the economy and better life of future generations of the country. In this respect, we are constantly working to produce and market the highest quality products.

The demand for "branded" re-bar in our country alone is estimated at about 2.5 million metric tonnes a year. Bangladesh typically spends 1.7 million metric tonnes or 70 percent of the annual demand for branded re-bar during the season.

Golden Ispat Limited has been able to gain and maintain the unhindered trust of the countrymen as a brand. Because of that, we are always maintaining consistency of quality, accurate weight and timely supply of products to the valued customers.

There are several challenges in our steel industry that affect the continuity of our business. I think all relevant institutions and government-specific policies related to this industry will accelerate the development of this industry.

Availability of raw materials: Steelmaking companies mostly depend on imported raw materials to produce steel. The shipyard industry that we currently have in our country is unable to supply the raw materials that will fully meet the demand of the country. We have no iron ore in our country. So, it is a major drawback for us to import 100 percent of the raw materials from another country.

The insufficiency of raw materials in our country and the volatility of raw material prices in the international market greatly affect our business operations. Moreover, we have to import the majority of the chemicals used in the production.

Now the per capita steel rebar consumption in Bangladesh is only 45kg. This is expected to grow to 75kg by 2022. Because the government has begun working on infrastructure development and industrialisation of the country with many mega projects which are expected to increase the steel industry's growth by 15 percent in the future.

Availability of power and gas: Steel industries require large volumes of gas and uninterrupted power supply. Any adverse changes to electricity regulations could affect business. Companies also require heating billets and shortage of gas supply will thus affect their operation. The supporting role of power and gas regulatory institutions are important to this industry.

Interest rate risk: The interest rate is the risk that a company faces due to unfavourable fluctuations of interest rates. Changes in the government's monetary policy, along with increased demand for loans or investments, tend to increase the interest rate. Such rise in interest rates mostly affect companies having floating rate loans or companies investing in debt securities.

Project inefficiency: It is an important factor of our steel industry. If a project runs smoothly, the suppliers of product (steelmakers) are benefitted because of fair working capital projection and consumption. But if the project does not run well according to their time proposal, delay of a project may affect the company's financial instrument.

Changes in regulation: Any unexpected policy changes (such as customs laws, income tax, value added tax and others) created by various regulatory authorities of the government adversely affect the business of our company. Many a time, the unrest in the steel market is caused by lack of business-friendly policies.

This impedes the continuation of our business. Now, steel producers are facing challenges in carrying goods after the Ministry of Road Transport and Bridges tightened rules on the transfer of goods by vehicles.

I hope, above all, that the progressive policies of the government and the supporting role of the respective institutions will ensure the development of the steel industry in our country.

[The writer is a director of Golden Ispat Limited.]