Increasing steel capacities to boost Bangladesh's scrap imports in 2023

• Country's ferrous scrap imports expected to remain stable this year
  
  
• Govt-funded infra projects to boost scrap demand in 2023
  
  
• Korea's growing appetite may hit supply from US, Japan to Bangladesh
  
  
• Ship-breaking may continue to add significantly to scrap generation
  
  

Morning Brief: Bangladesh's ferrous scrap imports saw an increase of 4% y-o-y to 3.95 million tonnes (mnt) in calendar year (CY) 2021, as per SteelMint statistics.

The major supplying countries were the US, UK/EU, Australia and Japan.

However, the country's scrap imports are expected to remain largely stable in CY22 with a recent drop in freight rates as the Ukraine-Russia war concerns subside but will increase in CY23 with new steel capacities coming up, said Sanjoy Ghosh, Head of Supply Chain, BSRM, Bangladesh, during a session held recently as part of SteelMint's ENGAGE 2.0 webinar series.

Factors supporting scrap imports in CY23

• Setting up of new furnaces: A few steel mills in Bangladesh are planning capacity expansion or setting up new furnaces. However, these projects are still underway and may be completed by CY23. Hence, this will increase the steel mills' scrap consumption in the years to come.
  
  
• Govt-funded infra projects to boost scrap demand: Steel demand in Bangladesh may remained supported mainly by the government-funded infrastructure projects which were launched to stimulate the economy that was hit by Covid-19. These projects may pick up the pace because of the general elections scheduled for 2023. Hence, scrap demand is also likely to remain supported this year as well as in 2023.
  
  

Current challenges

• Volatility in freight rates: A significant rise was seen in freight rates last year due to the container shortage amidst the impact of the Covid-19 pandemic which increased further this year due to the Russia-Ukraine war. However, as the war impact subsided, freight rates have come down while container shortage has also eased.
  
  

The existing volatility in freights and container issues have become a challenge for Bangladeshi scrap importers.

• Supply to Bangladesh may decline: South Korea has been a key importer of Russian scrap. However, with sanctions on Russia, Korea will look towards the US west coast and Japan for imports, which will directly impact Bangladesh's bulk scrap imports.
  
  

Furthermore, due to high Japanese scrap prices, Bangladeshi buyers tried to import from the EU and UK. But, this year, supply from these regions may also decline due to increased demand from Turkey, the largest scrap importer in the world.

Bangladesh's imported scrap market scenario

Bangladesh is a country which is entirely dependent on scrap for steel-making since it lacks its own iron ore mining resources. The country has been importing over 3.5 mnt of ferrous scrap, at least since 2019.

The import market had traditionally been at 60% containerised and 40% bulk, the latter being mainly sourced from the US and Japan.

However, there has been a pronounced emphasis on bulk with imports of the same rising steadily from a low of 1.02 mnt in 2017 to 2.43 mnt in 2021. The previous (2019) 40:60 bulk-container ratio has realigned to 60:40.

The bulk cargo bookings from Bangladesh are further likely to continue in the short to medium term as container issues are yet to resolve fully while buyers are also keen to secure high-grade material, SteelMint understands.

Dependence on ship-breaking sector

Bangladesh is one of the largest ship-breaking markets across the world. In CY21, this sector contributed the major share in domestic scrap generation. Furthermore, the movement in ship-breaking increased by around 40%.

The significant growth seen last year underpins hopes of more scrap generation from this segment this year too.