Key takeaways from 3rd Steel and Raw Material Conference - Emerging Bangladesh

The 3^rd Steel & Raw Material Conference - Emerging Bangladesh organised by SteelMint Events witnessed participation of leading Bangladeshi steel producers and delegates from around 15 countries. The two-day event featured a gamut of incisive sessions on steel demand and supply, the raw material scenario and emerging commercial and technical landscape. Below are key pointers:

Macroeconomic indicators & steel industry

Bangladesh's steel producers face supply chain disruptions. Trade realignment due to geopolitical reasons has stoked global energy inflation leading to the sharp rise in freight rates and increased cost of production.

Rise in interest rates coupled with rapid devaluation in the national currency (BDT) has led to import monitoring. The Bangladesh Bank has tightened rules by limiting the value of LCs that can be issued for foreign purchases to $3 million.

Import monitoring may result in power rationing and curb expenditure for non-essential infrastructure projects, thereby impacting steel demand.

High inflation has resulted in demand erosion and the absence of exports impact capacity utilisation. Mills are running at lower capacity utilisation owing to power cuts and inflation. Mills have enough inventories of finished and raw material.

Projected expansion in steel capacity till 2025-2026 is around 4 million tonnes (mnt) driven by infra spending. Capacity will increase from 8 mnt to 13 mnt in the next three-four years. The new capacities are largely through the EAF route.

Bashundhara Group, Meghna Group, etc. are the new entrants with an estimated capacity expansion of 3 mnt, while other mills will be expanding capacity by around 2 mnt in next three-four years.

Steel consumption is likely to rise by around 2 mnt by 2025, with per capita consumption to rise to 60 kg.

Scrap import scenario

Bangladesh is likely to emerge as one of the top three importers of ferrous scrap in the world with rated capacities to come in place.

Over the last three years, bulk scrap imports have grown from 53% to 68% of the country's total imports. Sharp rise in freight rates, longer lead times and unavailability have impacted the container market.

The price difference between container and bulk which used to be around $15/t earlier has risen to $40-50/t due to higher freight rates.

BDT has depreciated by 25% and a majority of Bangladeshi importers who rely on usance LC due to relative stability of the currency are making substantial losses now.

Almost 10 bulk scrap vessels are arriving every month. However, due to lack of port facilities unloading at jetties is very slow and vessels have to be unloaded at anchorages. In the event of imports edging higher, the problem is likely to intensify.

India has booked over 20 bulk vessels in last two-three months accounting for 700,000 -800,000 t of scrap due to recovery in pre-festive domestic steel demand and high coal, sponge iron prices. India has turned active in bulk imports after a long time emerging as a major competitor for Bangladeshi buyers.

Steel decarbonisation goals will raise global scrap demand, while supplies struggle to keep pace. Major exporters such as the EU are likely to prioritise local consumption and may discourage exports. This could have a major impact on the industry in Bangladesh.

Ship recycling scenario

Bangladesh government had proposed to ratify Hong Kong Convention (HKC) compliance by 2023. The timeline could get stretched by a year or two.

The country has only one HKC-compliant yard and two-three others are in the pipeline. However, costs are huge - around BDT 100 crore. Recyclers lack incentive to achieve compliance.

Recyclers will stand to benefit of the government eases import taxes a bit and pays a share of the medical insurance of workers at shipbreaking yards.

The recycling industry will play a pivotal role in generating domestic scrap for the steel industry and HKC compliance will ensure the long-term viability of around 150 yards in the country.