There was an increase in scrap ship prices in the global market last month, with prices climbing from $525 per tonne to $575 per tonne.
The steel industry in the country is facing significant challenges due to the Covid-19 pandemic, the Russia-Ukraine war, and the subsequent increase in raw material prices and supply chain disruptions.
The recent surge in scrap prices in the international market, driven by the demand for steel in Turkey and Syria’s large-scale infrastructure rebuilding projects following a devastating earthquake, has further compounded the situation.
Entrepreneurs in the steel sector have been forced to reduce rod production by 40%-50%, leading to financial difficulties and struggles to meet operational expenses.
For example, KR Steel Ltd in Sitakunda, Chattogram, has seen its daily production of mild steel (MS) rod (60 grade) drop from around 200 tonnes to below 60 tonnes.
Production in the Golden Ispat and HM Steel factories, owned by the Mustafa Hakim Group in Chattogram, has recently decreased by approximately 40%.
This decline means that the factories now produce around 960 tonnes of MS rods per day, compared to their previous output of 1,600 tonnes per day.
Mustafa Hakim Group’s director, Sarwar Alam, highlighted that the steel industry relies on a consistent supply of raw materials, electricity, and gas. Shortages in these resources lead to increased production costs and depreciation expenses for machinery.
The current demand for scrap ships in the international market, particularly in Turkey and Syria, has resulted in a surge in scrap prices. This is due to the Turkish government’s urgent infrastructure reconstruction efforts following a devastating earthquake.
Entrepreneurs are urging the removal of import barriers for raw materials to address the existing crisis.
Companies like BSRM, a leading rod manufacturer, are relatively unaffected, while smaller entrepreneurs are grappling with significant challenges as per the production concern.
Over the past month, international scrap ship prices have risen from $525 per tonne to $575 per tonne. Correspondingly, domestic scrap and MS rod prices have become unstable, experiencing an increase of approximately Tk 5,000 per tonne in the last month.
Melting scrap is now being sold at Tk 68,000 per tonne in shipbreaking yards, while steel raw material plates and billets have also seen price hikes, reaching Tk 75,000 and Tk 82,000 per tonne, respectively.
The escalating costs have impacted the shipbreaking sector, which may face closure if the situation persists. In the steel industry, the annual demand for steel in Bangladesh is approximately 7.5 million tonnes, with Chattogram’s 50 factories previously supplying 4 million tonnes of rods.
However, the closure of around 40 factories in recent years has significantly reduced rod production in Chattogram to only 1-1.5 million tonnes.