Bangladesh: Imported ferrous scrap index falls by up to $10/t w-o-w; slow inquiries amid dull steel demand

The imported ferrous scrap index for Bangladesh continued to fall w-o-w, primarily driven by dull interest in bulk scrap offers. H2 scrap prices dropped by up to $10/tonne (t) w-o-w and US-origin HMS (80:20) bulk scrap by $8-10/t w-o-w.

Limited construction activities have reduced scrap consumption by mills, particularly among rebar sellers and other steel product suppliers catering to government projects.

According to the market insiders, in Japan's recent Kanto scrap export tender, approximately 15,000 t of scrap were likely booked by a Chattogram-based mill from Bangladesh at JPY 42,720/t ($303/t) FAS, reflecting a decrease of JPY 5,236/t ($23/t) from August's price of JPY 47,956/t ($326/t).

Despite a challenging political environment, Bangladeshi buyers have maintained consistent participation in Kanto tenders. However, there is a noticeable lack of interest in long-voyage materials due to uncertainties surrounding sea freight and shipping routes. Recent trades have been concluded with suppliers from Hong Kong, Malaysia, the Middle East, and Oceania. The difference between CFR and FAS prices is generally around $60-65/t. Japanese H2 scrap offers are currently at $380-385/t, while workable levels for CFR Chattogram are around $365-370/t.

Assessment prices:

• BigMint's assessment of Europe-origin containerised shredded remained largely stable w-o-w at $402/t, while HMS (80:20) prices stood at $390-392/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 $9/t, to $381/t CFR Chattogram.
  
  
• BigMint's weekly assessment indicates that Japan-origin H2 bulk prices have decreased by $10/t w-o-w, to $377/t CFR Chattogram.
  
  

Market Commentary

A Dhaka-based steelmaker commented, 'We are encountering LC opening issues as banks are taking a longer time and charging extra for priority processing. We are now focusing on short sea deals from the Far East and Southeast Asia and avoiding long deep-sea routes."

A market insider informed, "Bangladesh is awaiting the next IMF tranche, which is causing delays. Additionally, banks are requiring higher margins for new LCs, affecting only the larger, established mills."

A representative from a major trading house stated, "Bulk bookings made in early June are just now arriving. Shipments from Japan are taking almost three months to reach Bangladesh, even with medium-sized vessels from this we can understand how slow the process became."

A steel mill representative from Chattogram said, "Imported scrap workable levels are down due to weak demand and delays in LC processing. US-origin bulk HMS offers are around $385-388/t CFR, but bids are below $380/t. Mills are less interested, with production cuts of 50% of previous levels and sluggish rebar sales locally. Suppliers have largely halted offerings to assess market conditions and wait for better profitability, as sea freight costs and declining material collection rates aren't aligning with cargoes. Weak construction activity is expected to persist this month, bringing no relief for long product producers."

Domestic market overview

Domestic scrap is priced at BDT 54,000-55,000/t, with plate scrap from shipbreaking around BDT 67,000-68,000/t. Rebar offers in Dhaka recently dropped to BDT 84,000-85,000/t, and BDT 89,500-90,500/t with minimal activities this week as well.

Recent trends in the Bangladesh steel industry

As per industry reports, in recent months, Bangladesh's steel industry has been grappling with a significant crisis. Demand for steel has plummeted by nearly 50% due to escalating political instability and a marked slowdown in construction projects. The situation became more dire following the political upheaval around the fall of the Sheikh Hasina government, which halted both public and private construction efforts and sharply curtailed the need for steel, particularly rebar.

Steel manufacturers have been forced to cut production by almost 50% in response to this diminished demand for scrap metal, their primary raw material. Consequently, local scrap prices have dropped by 16%, plummeting from BDT 62,000/t in June to below BDT 52,000-54,000/t by now.

The ship-breaking industry, a critical source of scrap, is also struggling. With demand at a low point, ship-breaking yards are unable to sell scrap effectively, despite the higher costs of imported scrap. This has led to further downward pressure on local scrap prices.

The Bangladesh Steel Manufacturers Association is calling for urgent government intervention, including subsidies or other forms of relief, to stabilise the industry. Rising energy costs and changes in revenue policies have further strained profit margins, making the need for support even more pressing.

Outlook: Imported scrap offers in Bangladesh are expected to continue their downtrend, with limited prospects for improvement due to the current market conditions, which are heavily influenced by ongoing political and economic instability. As these challenges persist, the sector is likely to remain under significant pressure, with minimal signs of recovery in the near-term.