MS rod prices jump by over Tk5,000 in a month as demand grows

Infograph: TBS

After a six-month downturn, the country's steel market is showing signs of recovery, with prices of mild steel (MS) rods, a key construction material, surging by Tk5,000-6,000 per tonne over the past three weeks.

Businesses say the demand for MS rods has increased, driving up prices due to a rise in individual home construction projects during the dry season. However, demand from major sectors – government and private sector projects – remains significantly low.

MS rod manufacturers and traders say 75-grade MS rods are currently being sold at the mill gate for between Tk85,000 and Tk88,000 per tonne. Previously, in July, the same rods were sold for as high as Tk95,000 per tonne, but prices gradually declined to Tk80,000-82,000 by mid-December.

Prior to this, the price of this commodity had been increasing steadily since 2021, exceeding Tk100,000 per tonne in the fiscal 2022-23.

Currently, BSRM MS rods are being sold for Tk88,000 per tonne, GPH MS rods for Tk86,000, and KSRM and AKS MS rods for Tk85,000.

The heads of steel rod manufacturing companies have told TBS that the production cost of each tonne of 75-grade rod has exceeded Tk90,000. As a result, despite increasing prices, they are still incurring a loss of Tk2,000 to Tk4,000 per tonne.

Until mid-December, 60-grade rods were being sold at the mill gate for between Tk76,000 and Tk78,000 per tonne. The price has now increased by Tk5,000 to Tk7,000, with 60-grade rods currently being sold for between Tk84,000 and Tk84,500.

HM and Golden 60-grade rods are being sold for Tk84,000 per tonne, while SS, Muntaha, Zulfiqar, Fresh, and Al Aksa 60-grade rods are being sold for Tk84,500.

Nurul Mostafa, proprietor of Khaja Steel in Chattogram's Asadganj area and a wholesale steel rod trader, said demand for and sales of steel rods have increased slightly over the past month.

This increased demand is primarily due to people going for construction work on homes during the dry season, which is considered the best time for construction, he said.

"However, sales are significantly lower compared to previous years. In previous years, an average of 250-300 tonnes of rods were sold daily during the dry season. However, this year, daily sales have fallen below 150 tonnes," Mostafa said.

Selling price below production cost

Sarowar Alam, director of the Chattogram-based HM Steel, said even after price increases, the selling prices of steel rods are still below the production cost, causing the firm a loss of Tk2,000-4,000 per tonne of rods.

Alam stated that 70% of the total steel demand in the country is used in government construction projects. "Individual consumers consume the remaining 30%. Therefore, even if the demand from individual consumers increases, it doesn't significantly impact the overall market," he said.

Even though the business has been incurring losses, Alam said, they have to continue minimum production at the factory. "This is because they cannot stop paying employee salaries and other fixed costs even if they halt production."

Alam further said that HM Steel and Golden Steel jointly have been facing losses exceeding Tk10 crore per month.

Sekander Hossain, chairman of the KR Group, another entrepreneur in the steel sector, said the slight increase in demand and price of rods has brought some relief to factory owners. "This is because factory losses have decreased."

However, at this moment, he said, the group is unable to decide whether to resume factory production.

KR Steel had previously halted production in August due to the mismatch between production costs and selling prices. This factory typically produced 250 to 270 tonnes of rods per day.

According to stakeholders, following the change of government on 5 August due to student-led protests, large-scale development projects have come to a standstill. Additionally, prolonged communication disruptions caused by floods in various districts have slowed down construction activities in the private and individual sectors.

As a result of declining demand and sales, there has been a significant fall in the sales of rods, a primary construction material, they said.

Subsequently, the steel mills reduced their rod production by 40-60% of their capacity, they further said.

According to the Bangladesh Steel Manufacturers Association, there are approximately 200 steel mills in the country, with 40 being major establishments. These facilities collectively have an annual production capacity of around 1.1 crore tonnes of rods.

However, the domestic annual consumption of rods stands at 75 lakh tonnes. To date, investments in this sector have totalled Tk75,000 crore, while the annual turnover amounts to Tk70,000 crore.