Rod prices skyrocket, jump by Tk4,000 per tonne in two weeks

The prices of mild steel rods have surged by around Tk4,000 per tonne within just two weeks, which manufacturers attribute to increased fuel cost amid a gas supply shortage, rising booking rates of raw materials in the international market, and a decline in raw material imports due to the ongoing dollar crisis.

As per information from the steel mills, mild steel rods of 75-grade are presently available in the market at prices ranging from Tk93,000 to Tk95,000 per tonne, varying across different brands. This marks an increase from the pre-election rates of Tk90,000 to Tk91,000 per tonne.

Among the 75-grade rod brands, BSRM is currently priced at Tk95,000 per tonne, GPS at Tk93,500 per tonne, and both KSRM and AKS at Tk93,000 per tonne. Prior to the election, the rates were Tk91,500, Tk90,500, and Tk90,000 per tonne for BSRM, GPS, and both KSRM and AKS, respectively.

According to industry insiders, the price hike coincides with a period when government projects have not yet commenced in full swing following the 7 January polls. Additionally, large private and commercial construction projects are also at a standstill. They say both the demand and sales of rods are currently low.

Tapan Sen Gupta, deputy managing director of BSRM, the country's leading rod manufacturer, said the steel sector is currently undergoing a critical phase. The surge in the booking rate of raw materials in the international market, coupled with insufficient imports due to the dollar crisis, has led to an increase in the price of steel raw materials by Tk8,000-Tk10,000 per tonne.

He further said insufficient gas supply, compared to demand, has forced factories to bear triple the additional cost to maintain production using alternative fuel.

"Despite the commencement of the construction season, the demand and sales of rods are remarkably low this year. Consequently, although there has been a slight increase in rod prices, it does not surpass the production cost," he said.

Mohammad Sarwar Alam, director of HM Steel and Industry Limited, said there has been a crisis in this industry since the Russia-Ukraine war. Due to the dollar crisis, letters of credit cannot be opened in line with demand, causing steel raw material imports to plummet to 20% of the required amount.

Unless this issue is promptly addressed, a significant shortage of raw materials is anticipated in the coming months, he said.

SM Kamruzzaman, rod trader and owner of Messrs Zaman Enterprises in Chattogram's Asadganj area, said rod prices have resumed an upward trajectory after the election, following a downward trend for around two months.

"While it is typical for rod prices to experience slight increases due to rises in scrap prices and fluctuations in dollar exchange rates, the market has witnessed heightened volatility due to alleged manipulation by a syndicate of rod manufacturing companies," he said.

He said that at one point, Chattogram alone housed over 150 small and large rod manufacturing factories. However, owing to various crises in recent years, the majority of these companies have ceased production.

"Consequently, the entire rod market is now under the control of 10-12 companies. This situation provides the larger companies with the chance to manipulate and destabilise the product's pricing through syndication," he added.

Currently, the 60-grade auto mill MS rods from Golden Ispat and HM Steel brands are priced at Tk90,000 per tonne, Bayezid Steel at Tk89,500, and KR Steel and SS Tiger at Tk88,500 per tonne.

Over the past two weeks, the price of 60-grade semi auto mill rods has also increased by Tk4,000 per tonne. Currently, Golden Ispat's 60-grade rods are being sold at Tk86,000 per tonne, while Ziri Subedar and Al Safa rods are priced at Tk85,000 per tonne.

Decline in raw materials supply

Data from the Bangladesh Ship Breakers and Recyclers Association indicates a decline in the import of steel raw materials.

In December of the previous year, only 17,969 tonnes of scrap ships were imported into the country, compared to 54,138 tonnes in November, 48,356 tonnes in October, 21,107 tonnes in September, and 181,992 tonnes in August.

The prices of scrap, plate, and billet – essential raw materials for steel production – have also experienced abnormal increases due to supply shortages resulting from decreased imports. Over the past week alone, the prices of these raw materials have surged by Tk8,000-Tk10,000 per tonne.

According to information from shipbreaking yards, scrap is currently being sold at Tk63,000 per tonne, plate at Tk75,000 per tonne, and billet at Tk77,000 per tonne. By the end of October, these prices were Tk55,000, Tk65,000, and Tk70,000 per tonne, respectively.

Sikandar Hossain Tingku, chairman of KR Group, said the international market price for scrap ships has risen to $25 per tonne in the last three months. The current booking rate for scrap ships is $525 per tonne, compared to $490-$500 in September.

Due to the increase in booking rates and challenges in opening letters of credit, the import of scrap ships has declined, leading to the closure of most yards. Currently, only 10-12 yards are in operation, he added.