Bangladesh: Imported scrap offers soften over $10/t w-o-w; dull steel demand ahead of the upcoming election

In Bangladesh, imported ferrous scrap offers and indicatives dropped by $10-11/t w-o-w, with very limited activities. Suppliers from Europe were inactive amid winter and inclement weather conditions for scrap collection and shipping difficulties across major regions. Also, concerns about the potential change of power in the upcoming elections scheduled for 7 January have led to a decline in finished steel sales, contributing to reduced scrap consumption.

Containerised shredded scrap offers from Europe were heard at $435-440/t CFR Chattogram, while HMS (80:20) stood at $415-418/t CFR.

A trader stated,"As of now, we have not observed any impact of the Red Sea issue on scrap prices. The likelihood of an impact is considered low due to the absence of significant bulk shipments from Europe to India or Bangladesh, coupled with limited container movement."

Similarly, bulk HMS (80:20) from Australia was heard at $422-425/t on a CFR basis. The Middle East-origin HMS (90:10) was offered at $432-435/t. Currently, Japan-origin H2 bulk indicatives were heard at around $415-418/t on a CFR Chattogram basis. Bulk offers from the US hovered around $428-430/t.

A representative from a trading firm stated,"Over the past week, a significant amount of material has been booked in containers as container prices are almost $10/t cheaper compared to bulk. However, these are not prompt shipments, as LC opening takes almost 15-20 days."

Recent deals

A small parcel of 100-t HMS scraps were booked from the Middle East at $405/t CFR Chattogram.

About 5,000 t of HMS (80:20) was booked from Australia at $413-416/t CFR Chattogram.

Around 1,000 t of shredded scraps were booked from the UK at $428/t CFR Chattogram.

A major steel mill secured bulk cargo last week comprising 8,000 t of HMS (80:20) scraps from Singapore at around $430/t CFR.

Domestic market: The domestic steel sector remained subdued due to limited projects amid the upcoming election. Local ship-breaking scrap offers were heard between BDT 61,000-63,000/t, whereas PNS-grade scrap was heard at around BDT 65,000-68,000/t. Rolling mills offered rebar in the range of BDT 88,000-91,000/t exw Dhaka, while primary mills priced their products above BDT 97,000-99,000/t exw Chattogram. Billet offers were heard at around BDT 73,000-76,000/t exw .

Remittances to Bangladesh will remain flat in 2024 at $23 billion, the World Bank forecasts. The World Bank projects stagnant remittances to Bangladesh at $23 billion in 2024. The report notes a current 7% growth rate in remittances. It attributes the stagnant growth in formal remittances to the lingering effects of a recent balance of payments crisis, which triggered exchange controls and parallel market exchange rate premia Informal channels, including the Hundi market, contribute to fund diversion. The implementation of IMF-supported policy programs may instill confidence in the banking system. Despite robust labor export growth, remittance inflows have remained at $22 billion for the past two years. The Gulf Cooperation Council (GCC) countries' job creation for South Asian workers may be constrained in 2024. The exchange rate issue remains a challenge, hindering improvements in formal remittance flows. The World Bank suggests measures to encourage remittances through legit channels and address institutional weaknesses.

Banking Sector: The capital shortfall of 14 banks in Bangladesh rose by BDT 3,774 crore in Q3 (July-September) 2023, reaching BDT 37,506 crore, primarily due to growing non-performing loans (NPLs). Despite an overall decrease in NPLs by BDT 642 crore, the capital shortfall surged, posing challenges for the banking sector. Six state-owned and specialised banks faced a BDT 31,406 crore shortfall, while six private banks had a shortfall of BDT 6,023 crore, and two foreign banks faced a BDT 77 crore capital gap. The central bank's provision deferral program and gradual deterioration in financial indicators contributed to the increasing capital shortfall.

Election update: The BNP (Bangladesh Nationalist Party) and allied parties declared a nationwide road-rail-waterway blockade on 24 December, demanding the resignation of the Awami League government and the reinstatement of the non-party caretaker government system. Before the blockade, mass campaigns were scheduled for 21-23 December in support of boycotting the election and non-cooperation. This marks the 11th round of the opposition's blockade program since 31 October. The blockade is set to run from 6 a.m. to 6 p.m. on Sunday.

Outlook: The outlook for the imported scrap market in Bangladesh appears uncertain given the current subdued buying interest before the general election in the country. However, sources anticipate that improved activities will commence in mid-January as suppliers return from holidays and buyers seek to replenish stocks for the upcoming production cycle.