Bangladesh: Imported ferrous scrap market witnesses sluggish trade; offers rise w-o-w

The imported ferrous scrap market in Bangladesh has remained largely stagnant. Steel mills are eager to procure scrap, but they face a significant challenge in securing letters of credit (LCs) from banks, which has deterred them from entering into contracts with sellers. The delay in LC openings continues to be a major concern for market players, impacting their ability to secure scrap at favourable prices. Sellers are seeking higher prices due to the uncertainty surrounding LC issuance.

Throughout the week, indicative prices for imported shredded scrap from the UK have been in the range of $445-450/t CFR, while UK-origin HMS (80:20) has seen indicative prices between $425-430/t CFR. These prices have shown a slight increase w-o-w.

The market has seen limited offers and bids, with sellers being open to negotiations only if LCs can be provided promptly. For instance, HMS (80:20) from Australia was offered at $425/t CFR, where discounts are possible if LCs can be provided within a specific timeframe, say within a week. The hesitation to issue LCs by banks has been a significant challenge.

The BDT (Bangladeshi Taka) has depreciated, with exchange rates hovering around BDT 110 against the US dollar. Meanwhile, 'hundi' has attained popularity, as per local media reports. The 'hundi' rate is around BDT 117-119/$1, showing a difference of BDT 5-8 from the prevailing exchange rate. This has added another layer of complexity to transactions and pricing.

Throughout this week, scrap has been sourced from Australia, the UK, Chile, the US, Hong Kong, and Singapore. This shows that buyers are sourcing scrap from various origins.

Market participants anticipate a correction of $5-10/t in the coming week. Some mills are cautiously negotiating deals, and there is hope that improved weather conditions will stimulate demand for finished and semi-finished steel for use in the construction sector.

Domestic market: The domestic scrap market in Bangladesh has been subdued, partly due to upcoming elections and a slowdown in government spending on infrastructure projects. Local scrap prices have declined on a relative basis, with HMS (80:20) at BDT 58,500/t($533/t) and local PNS scrap at BDT 61,000/t ($556/t) ex-Chattogram. Rebar prices have shown regional variations, with prices in Chattogram at BDT 94,000-95,000/t ($857-866/t) and in Dhaka at BDT 84,000-85,000/t($766-775/t)

Bangladesh is facing a problem with the money it saves from abroad, called remittances. In August, the amount of money people sent back home dropped substantially by 21.57%, the lowest in six months. This August marked the lowest remittance inflow in the past four years. This decline raises red flags about the additional strain it might put on Bangladesh's already shrinking foreign currency reserves.

Outlook: Market players are cautiously optimistic with potential positive developments in the construction sector and ongoing negotiations offering hope for increased market activity in the coming weeks. Negotiations for LCs and prices are ongoing, suggesting that there may be opportunities for container deals from origins like South America, Hong Kong and Australia. The market is expected to correct by $5-10/t in the next week, as per sources, as buyers are waiting for more clarity and stability.