As demands fizzle, steel, cement makers scale back operations
Cement sales have plummeted by 35%-40%, while demand for construction rods has dropped by as much as 70%, according to industry sources.
Bangladesh's steel and cement industries, already grappling with sluggish demand over the past two years, are now going through an even worse time as development projects have slowed down following the mass protests that forced former prime minister Sheikh Hasina to resign and flee the country on 5 August.
Cement sales have plummeted by 35%-40%, while demand for construction rods has dropped by as much as 70%, according to industry sources.
Over the past two months, the price of mild steel rods has dropped by Tk6,000-Tk7,000 per tonne due to declining demand, sources say.
This has led to growing stockpiles and a sharp reduction in new production. Mill owners say they have been forced to shut down operations, although they continue to pay workers despite the lack of work.
Industry leaders warn that without a swift resolution to the political crisis and a rebound in government-funded projects, the steel and cement sectors could face long-term damage.
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Demand, sales sharply decline
Chattogram-based HM Steel typically produces 600-700 tonnes of MS rods daily under normal conditions. However, with demand and sales dropping, production has recently fallen to 250-300 tonnes.
Sarwar Alam, director of HM Steel, told TBS that they are forced to sell rods at Tk2,000-Tk3,000 below production cost due to reduced demand. As a result, the factory has cut production by 50%-60% to minimise losses.
He added that their other factory, Golden Steel, has also reduced output to 150-200 tonnes per day, down from the usual 400-500 tonnes.
Strong market players are also feeling the pinch at this time. BSRM, one of the leading rod manufacturers and marketers in the country, has been significantly impacted by the recent market slowdown.
Industry insiders say following the change of government, major development projects have slowed significantly. Many politically connected contractors, who exerted undue influence on project awards, have gone into hiding fearing reprisal.
The suspension of elected local government representatives has also stalled development work starting from the city corporation level down to upazila and union levels. As a result, sales of rods and cement have plummeted, they added.
Tapan Sen Gupta, BSRM deputy managing director, said following the change of government on 5 August, work on both public and private construction projects has come to a halt and no new projects have been initiated.
"As a result, steel prices have seen a sharp decline over the past two months. Demand and sales have dropped by 50% during this time, forcing us to cut our production to cut losses," he said.
Some stop production, some make cuts
Another Chattogram-based steel manufacturer, KR Steel, has halted production due to ongoing losses caused by declining demand and low sales.
Sekandar Hossain, chairman of KR Group, told TBS, "Since the market price of rods dropped below production costs, we completely stopped factory operations on 22 August."
He added that KR Steel typically has a daily production capacity of 250 to 270 tonnes of rods.
Several factories under the PHP Group have also halted production, according to a senior official from the group.
Industry insiders say many factory owners have reduced operations from three shifts to two and extended the weekend to two days instead of one to minimise losses.
According to rod manufacturers and traders, 75-grade (automatic) MS rods are currently selling for Tk86,000-Tk88,000 per tonne at the factory level, down from Tk92,000-Tk94,000 per tonne two months ago.
Similarly, the price of 60-grade (semi-auto) rods, which was Tk86,000-Tk88,000 per tonne two months ago, has now dropped to Tk78,000-Tk81,000 per tonne.
Shahriar Jahan, deputy managing director of KSRM Group, said they are currently losing Tk24,000 per tonne of rod. The production cost for one tonne of rod is currently Tk1.10 lakh to Tk1.12 lakh, while it is being sold for just Tk86,000 per tonne, he said.
According to the Bangladesh Steel Manufacturers Association (BSMA), there are around 200 steel factories in the country, with around 40 being large companies. The sector has an annual production capacity of about 1.10 crore tonnes of rods, while the country's annual consumption is around 75 lakh tonnes. The total investment in this sector is around Tk75,000 crore.
Raw material costs rising
Meanwhile, raw material prices are rising in the international market making entrepreneurs worry about increasing losses.
Didarul Alam, director of Taher Group, noted that the price of scrap in the domestic market had fallen from Tk58,000 to Tk50,000 over the past two months due to reduced demand.
However, influenced by the international market, scrap prices have increased by Tk3,000 in the last three days and are currently selling at Tk53,000, he said.
Similarly, the price of pellets, which had dropped from Tk78,000 to Tk70,000, is now selling at Tk72,000 per tonne due to a global price hike.
Cement sector cracks under pressure
Premier Cement is one of the leading cement manufacturers in the country, supplying cement for all major mega projects, including the Rooppur Nuclear Power Plant, Padma Bridge, and Karnaphuli Tunnel.
However, the company's cement sales declined by 25%-35% in the last quarter (July-September) compared to the previous quarter (March-June).
Amirul Haque, managing director of Premier Cement, told TBS that sales have decreased primarily for two reasons. First, several major infrastructure projects have stalled. Second, various construction activities have been halted due to a leadership vacuum from the city corporation to the union level.
As a result, instead of experiencing growth, the cement business has seen negative growth. He emphasised the need to restart necessary infrastructure and ongoing projects.
Traders say cement is currently selling for Tk465-Tk485 per bag in the market.
SM Arifuzzaman, a wholesale cement trader in Chattogram city and owner of Messrs Aiza Enterprises, noted that during normal times, an average of 10,000-15,000 bags of cement were sold daily. However, sales have dropped over the past two months, now averaging only 250-300 bags per day.
Royal Cement, another large manufacturer, typically used to sell an average of 50,000-60,000 bags of cement per day. Abul Mansur, the company's general manager, reported that sales have declined drastically over the past two months.
He stated, "Our factory has the capacity to produce 96,000 bags of cement per day with average production ranging from 50,000 to 70,000 bags depending on demand. However, due to the lack of demand, we have had to reduce production to 20,000-30,000 bags."
According to industry insiders, there are 40 cement manufacturing companies in the country, including several subsidiaries of the same group. These companies have a production capacity of about 7.8 crore tonnes, while the annual demand is around four crore tonnes.
