Bangladesh: Imported ferrous scrap index drops by up to $5/t further on limited demand

The imported ferrous scrap market in Bangladesh softened further this week, impacted by a sluggish domestic steel sector, bid-offer disparities and persistent difficulties in opening letters of credit (LCs).

Recent flooding across multiple regions has worsened the situation, stalling construction activities and further weakening steel demand. A market participant shared: "The market is slow, demand is weak. The rainy season and flooding have affected many areas, slowing down both government projects and construction work."

A UAE-based trader said: "HMS scrap offers for Bangladesh are around $395/t CFR, but bids are significantly lower at $380/t, creating a bid-offer gap and dampening market activity."

A Bangladeshi trader said, "No firm offers or deals have been reported. With buyer interest so low, we've decided to pause our offers for now."

Market participants also noted that interest in imported scrap remains limited, primarily due to challenges with LCs mills are still receiving previously booked bulk scrap orders, which has lessened the urgency for new imports, and buyers are reluctant to accept current price levels.

Assessment prices:

• BigMint's assessment of Europe-origin containerised shredded down by $5/t w-o-w at $395/t, while HMS (80:20) prices stood at $385-390/t at a similar level assessed last Wednesday.
  
  
• BigMint's latest weekly assessment indicates that US-origin HMS (80:20) bulk prices have decreased by $3/t to $375/t CFR Chattogram.
  
  
• BigMint's weekly assessment indicates that Japan-origin H2 bulk prices have decreased by $4/t w-o-w to $365/t CFR Chattogram.
  
  

Domestic market

In the domestic market, local scrap prices were heard in the range of BDT 51,000-53,000/t. On the other hand, plate scrap prices from shipbreaking were around BDT 60,000-62,000/t. Rebar offers in Dhaka stood at BDT 82,000-83,000/t. In Chattogram these were reported at BDT 87,000-88,000/t.

It is worth noting that demand for rebar has remained sluggish, further exacerbated by ongoing floods in Feni and Cumilla, where water levels have remained high for over a month. Estimated losses stand at BDT 142.69 billion, with significant damage to infrastructure and property. Stagnant floodwaters continue to hinder recovery efforts and disrupt transportation. As per industry reports, Bangladesh's external debt has surged to $103.78 billion by June 2024, up from $23.5 billion in 2009, marking a 341% increase.

This dramatic rise reflects deep financial mismanagement and overreliance on foreign loans with per capita debt soaring to $604. The public sector accounts for $83.21 billion of the debt while private sector loans reached $20.57 billion. Allegations of corruption and inefficiency plague large-scale projects, exacerbating the crisis. As debt servicing consumes more revenue, critical social services and infrastructure suffer with foreign exchange reserves dwindling to $20 billion as of mid-September.

Bangladesh's ship recycling market stagnated this week, with no new sales or arrivals in Chattogram, only processing last week's deliveries. The market is affected by weak offers that don't reflect fundamentals, alongside a devalued taka nearing BDT 120 against the US dollar due to unrest and economic instability. Local steel plate prices remain low at $538/t, further discouraging recyclers.

Outlook

Imported scrap offers in Bangladesh are expected to remain under pressure, with some buying activity anticipated as the monsoon season ends in late September. For small mills to operate more effectively and remain competitive, the government needs to address the challenges related to opening LCs.