Bangladesh: Bulk ferrous scrap imports rise 9% y-o-y in CY'24 despite H2CY24 market slowdown

• Chattogram mills buy in bulk amid better LC access
  
  
• Imported HMS (80:20), H2 tags fall 7% y-o-y in CY'24
  
  

Bangladesh's bulk ferrous scrap imports rose by 9% in calendar year 2024 (CY'24) to 3.55 million tonnes (mnt), compared to 3.26 mnt in CY'23.

Key drivers behind the rise in bulk scrap imports in Bangladesh:

In 2024, major mills in Chattogram and Dhaka imported approximately 3.4-3.5 mnt of bulk scrap. Despite a sluggish market, especially in the Japanese H2 segment, the increase in import volume was largely driven by strong buying from financially stable Chattogram mills, which had better access to letter of credit (LC) facilities. These mills, undeterred by political turmoil and financial challenges in the second half of the year, favoured bulk shipments over containers to ensure a steady supply for future production cycles.

In the last quarter of 2024 (Q4CY'24), imports dipped slightly by 2% to 1.04 mnt, compared to 1.06 mnt in Q4CY'23.

Notably, in the first quarter, February 2024 recorded a significant 96% increase to 174,428 tonnes (t) from 89,075 t in February 2023. However, April 2024 saw the largest decline of 19% to 224,391 t from 277,654 t in April 2023.

Meanwhile, July saw increased bulk inquiries as compared to containers due to rising container freights. Inquiries for bulk cargoes from the Netherlands, Indonesia, and Japan, along with New Zealand, increased in June, which helped keep July's bulk scrap bookings on the higher side. The country imported 396,639 t in July, an increase of 14% m-o-m.

Sponge iron imports: Bangladesh's sponge iron imports in CY'24 stood at 236,200 t. Volumes showed significant monthly fluctuations, peaking in May at 29,500 t and dropping to a low of 7,700 t in October. Prices followed a similar trend, rising to their highest of $408/t in May before declining to $354/t in December, possibly indicating a correlation between import volumes and prices throughout the year.

Yearly average prices decline

• US-origin bulk HMS (80:20) prices declined to $400/t CFR Chattogram, a 7% y-o-y drop from $430/t CFR in 2023.
  
  
• Japanese-origin bulk H2 prices declined to $395/t CFR Chattogram, a 7% y-o-y decrease compared to $425/t CFR in 2023.
  
  

Country-wise breakup

US: In CY'24, imports from the US jumped by 33% to 1.72 mnt from 1.3 mnt in CY'23. Notably, August 2024 saw the highest increase, with monthly volumes surging nearly 200% to 198,926 t from 7,032 t in August 2023.

Japan: In CY'24, volumes from Japan rose 13% to 0.56 mnt, from 0.50 mnt in CY'23. Notably, July 2024 saw the highest increase, with volumes doubling y-o-y to 84,772 t, compared to 40,680 t in July 2023.

Australia: In CY'24, shipments from Australia increased by 16% y-o-y to 0.40 mnt from 0.35 mnt in CY'23. Notably, March, May, September, and October 2024 recorded significant growth, given that Bangladesh recorded nil imports from Australia during the same periods in 2023.

Major developments

Political strife engulfs Bangladesh: The political turmoil in Bangladesh surrounding Former Prime Minister Sheikh Hasina's resignation weakened metal and recycling trade flows, impacted connectivity and trade, and caused operational challenges and trade disruptions, particularly affecting the steel industry in Dhaka.

Japanese H2 scrap hits two-year low: Japanese H2 scrap prices dropped sharply over 2024, driven by weak demand, Tokyo Steel's multiple price cuts, and the appreciation of the Japanese yen (JPY) against the US dollar. This adversely impacted Chattogram's market. As key buyers such as Vietnam, South Korea, and Taiwan shifted to cheaper alternatives, Bangladesh's recyclers faced reduced demand and a tighter pricing environment, limiting their ability to offer competitive rates. Additionally, Japan's Kanto scrap export tender bids for December 2024 touched almost a four-year low.

Ship-breaking market encounters headwinds: Bangladesh's ship-breaking market in 2024 faced challenges from political unrest, the taka's depreciation, weak steel prices, and economic instability. Flooding and inflation limited purchasing activity, while stagnant steel plate prices at $521/LDT hindered competitiveness. The IMF-driven currency devaluation further strained the market, leaving the sector subdued with limited recovery prospects.

Taka depreciates: Since May 2024, the Bangladeshi taka (BDT) weakened against the US dollar, dropping from 109 to 120 per dollar by December 2024. This drop was mainly due to higher demand for foreign currency, a larger trade deficit, and lower foreign exchange reserves. Political instability and less foreign investment also put pressure on the taka, leading to higher import costs and inflation.

Outlook

The Bangladeshi steel industry's challenges are expected to continue due to weak demand caused by construction delays, especially in rural areas. Mills are struggling with large steel inventories despite offering discounts, which has kept production low at 40-50% of capacity.

In January, a slight improvement in the LC process is expected, as banks are set to allow mills to use their existing LCs, offering some relief. However, high scrap prices, currency fluctuations, and cautious buying by mills continue to pressure the market.

Scrap imports remain costly, with suppliers' prices above what mills are willing to pay. Until demand improves and financial issues ease, the steel industry will likely remain under strain.