Bangladesh: Currency devaluation, LC issues impact imported scrap trade activities

Imported scrap buyers in Bangladesh remained less active in booking fresh slots. Despite this, prices in the imported market rebounded towards the beginning of the week on active trading by Indian buyers.

Increased production costs and lower margins from finished steel sales kept market activities slow, SteelMint understands. However, the situation become worse owing to depreciating Taka value, creating obstacles in opening Letters of Credit (LCs).

The Bangladeshi Taka (BDT) continued its slide against the US dollar, hitting an all-time low of 94.6 in the currency exchange market.

"Previously booked cargoes have not even opened the LC, hence buyers are quiet. Additionally, small buyers are facing huge problems," said a major scrap buyer.

Industry participants believe that the market may remain dull till Sept'22 owing to monsoon and limited demand from end users.

Container scrap offers

• Fresh offers of UK-origin shredded are being heard at $480-490/t CFR levels, up by $5/t w-o-w.
  
  
• SteelMint's assessment for UK-origin HMS (80:20) stands at $455-460/t CFR, up by $5/t w-o-w.
  
  

"Currency fluctuation incurred huge losses to the buyers and steelmakers, making them stay away from booking imported material," said a Dhaka-based scrap buyer.

Bulk buyers quiet

The increasing value of dollar has hit the market adversely and it is likely to continue for some time. Major mills like BSRM and GPH were quiet this week and the market was mostly silent.

"People don't see container bookings like before. Some bookings may be done by small mills while all big players will continue bulk trading," said a bulk scrap trader.

Meanwhile, bulk USA-origin HMS 1&2 (80:20) price stood at $400-410/t CFR but no fresh deal has been heard at this rate.

Bangladesh's bulk ferrous scrap imports registered a sharp fall of 42% in July 2022 to 0.19 million tonnes (mnt) as compared to 0.33 mnt in June 2022, as per customs data. The USA continued to be the top exporter at 0.16 mnt, followed by Japan at 0.03 mnt only. On a y-o-y basis, scrap imports were down by 24% as against 0.25 mnt in July 2021.

Domestic scrap prices move up amid shortage

The market showed mixed sentiments this week. The domestic market was up due to the shortage of local scrap which pushed prices up to BDT 65,000/t exy basis. However, tradable levels remained at BDT 60,000-61,000/t exy basis.

• SteelMint assessment for domestic rebar prices remained unchanged at BDT 84,000/t ($887/t) exw-Chittagong levels, unchanged w-o-w.
  
  
• Secondary mills in Dhaka region are quoting rebar at BDT 80,000/t ($845/t), stable w-o-w.
  
  

Outlook

Industry participants believe that the imported market may take some time to stabilise as the sharp currency devaluation has impacted the market adversly. Furthermore, the Muharram Ashura holidays ahead may keep the market sluggish till 10th of August.