Bangladesh: Imported scrap market under pressure amid liquidity crisis, LC delays

In Bangladesh, demand for imported scrap remains limited mainly due to challenges faced by buyers in opening Letters of Credit (LCs). Offers for shredded scrap from Europe were in the range of $415-420/t CFR Chattogram. Indicative prices for HMS (80:20) scrap from Europe were at $400/t CFR, and from Australia at $405-410/t CFR. Bulk offers from the US have also gone down as the market has calmed down a bit.

SteelMint assessment for European shredded scrap stood at $418/t on a CFR Chattogram basis, witnessed a $8/t drop w-o-w.

A trader source explained, "Given the ongoing difficulties in obtaining LCs, buyers are currently showing a preference for bulk shipments over container deals. We have a substantial pending LC order of over 20,000 t. So, for the time being, we are not engaging in such transactions."

Recent offers and deals

• HMS (80:20) price indications from Australia are at $405-410/t CFR Chattogram
  
  
• Europe-origin shredded is being offered at 415-420/t CFR Chattogram
  
  
• PNS offers were heard at $435-440 from Hong Kong/Malaysia on a CFR basis
  
  
• US origin bulk offers $400-405/t for HMS, $415/t for Shredded, and $420/t for Bonus on a CFR basis.
  
  
• 1000 t Australian HMS(80:20) scrap sold at $398/t CFR Chattogram
  
  
• 1000 t PNS from Malaysia booked at $440/t CFR Chattogram
  
  
• 2000 t PNS and HMS mix material from the Middle East booked at $398/t on a CFR Chattogram basis
  
  
• 1000 t Hong Kong origin PNS booked at $440/t on a CFR Chattogram basis
  
  

A trader source mentioned,"We are only selling to those buyers who are able to fulfill LC within 40-50 days. A few days ago, a 32,000 t cargo from Australia was booked by a Bangladeshi mill."

Domestic market: The local steel market also remained subdued as rebar prices dropped due to limited demand. Rebar prices were last heard at BDT 90,000-91,000/t ($819-825/t) exw Chattogram and BDT 80,000-81,000/t ($726- 735/t) exw Dhaka, while domestic billets were assessed at BDT 72,000-74,000/t ($653-671/t). Domestic scrap prices are in the range of BDT 56,000-56,500/t.

Many banks in Bangladesh, including Shariah-based ones, face operational difficulties due to a liquidity crisis exacerbated by the Central bank's recent policy rate increase to combat inflation. The average overnight call money rate reached 7.47%, the highest in years, with the policy rate being raised by 75 basis points to 7.25%. High non-performing loans, foreign currency market volatility, and customer trust issues in some Sharia-based banks have contributed to the prolonged liquidity challenge. As of 15 October, 20 banks and one non-bank financial institution sought liquidity support from the Central bank, totaling BDT 18,381 crore.

Outlook: The imported ferrous scrap market in Bangladesh may encounter difficulties in clearing pending LCs. Buyers may show a strong preference for bulk bookings due to this issue. Additionally, liquidity problems with major banks are expected to cast a shadow over buying activities.