Key takeaways from 4th Bangladesh International Trade Summit 2024

• Rise in power prices to stoke inflation in the near term
  
  
• Steel prices to rise amid inflation, firm global scrap prices
  
  
• Overcapacity in power, cement sectors major concern
  
  

The 4th Bangladesh International Trade Summit organised by BigMint and held in Dhaka between 14-15 May 2024 witnessed the convergence of experts and opinions from diverse fields related to the economic challenges confronting the country today and the outlook on the steel, cement, power, and renewable energy sectors.

Below are highlights from the conference:

Macroeconomy

• To tackle inflation the Bangladesh Bank raised rates by 50 basis points on 8 May 2024 and the crawling peg system for the local currency is an effort to keep the BDT stable and raise key interest rates to tame inflationary pressures. This is likely to affect the trade balance by disadvantaging commodity importers.
  
  
• The conditions embedded in the $4.7 IMF loan programme are likely to stoke energy and commodity inflation in the near term.
  
  
• The government raised electricity prices by 15% last year and the withdrawal of subsidies will push prices higher. Therefore, inflation will be hard to tackle in the near term.
  
  

Steel & Ferrous scrap

• Steel capacity in Bangladesh to increase to 13-15 mnt by 2025, while per capita steel demand may increase to around 90 kg by 2030 from a level of 45 kg in 2023. According to data, steel demand may rise at a CAGR of 8-12%.
  
  
• Despite stable international rates, the import cost of scrap will increase in Bangladesh as USD prices have increased substantially in the country. Coupled with the parallel rise in electricity prices, this is bound to drive steel prices higher.
  
  
• The use of scrap steel is increasing in the USA, EU, and India, for which Bangladeshi buyers are now looking for new sources in Australia, Malaysia, and West Africa. Steadily growing demand has also created a supply shortage of scrap.
  
  

• Despite iron ore and coal prices correcting this year, scrap prices have been resilient due to supply shortages and low collection rates amid robust demand. India's import demand may remain strong this year post-elections, and so prices will stay higher for Bangladeshi buyers, too.
  
  

Flat steel dynamics

• Chinese steel exports, by some estimates, may rise by 36-42% y-o-y in 2024. Exports in March 2024 were at a level of 10 mnt. This is due to the saturation in domestic demand in China.
  
  
• Chinese steelmaking margins are at historically low levels and higher exports will dent global steel prices. Global iron ore prices in the medium term are expected to soften as more supplies (with the operationalization of the Simandou mines in Guinea) come into the global market. Coking coal prices have been corrected, too.
  
  
• Indian steel exports will face stiff competition as China invades most traditional markets with super competitive offers. On the other hand, imports into India remain a persistent threat because of China and now that major Vietnamese mills have renewed BIS licenses and Indonesian mills (Dexin) will follow suit.
  
  
• Bangladesh's flat steel consumption stood at around 1.2-1.5 mnt out of total consumption of 7.4 mnt in 2023. Efforts to attain self-sufficiency in auto production and moving away from imports, construction of renewable energy infrastructure in the country, and converting short-term loans to long-term ones for capital diffusion will lead to diversification in product portfolio and applications.
  
  

Shipbreaking market

• Price outlook for 2024: Containers $500-520/LDT and bulkers $480-500/LDT. Global market outlook to improve from 2025 onwards after a decline in total tonnage in 2023.
  
  
• Bangladesh's preference for bulkers to persist but total ship-breaking tonnage dropped to around 1 mnt in 2023 from 2.5-3 mnt earlier due to forex crisis and LC issues.
  
  
• Four yards in Bangladesh have received HKC certification and 8-9 yards are in the pipeline. The establishment of the Bangladesh Ship Recycling Board in 2018 and formulation of new policies related to waste disposal and incineration will further facilitate compliance.
  
  
• Bangladesh's ratification of the HKC is scheduled for mid-2025 and the major challenge today is to raise compliance to a level where the country's recyclers are able to receive European vessels for demolition.
  
  

Power, cement & renewable energy

• Excess capacity in the power sector, inflation, and the rise in electricity prices are key concerns. Coal imports have grown markedly over the years and cross-border electricity trade is gaining momentum. Hydropower imports from Nepal via Indian transmission networks herald a new beginning.
  
  
• The country targets 40% clean power by 2041, however, land acquisition for utility-scale solar projects, access to capital, etc. are key constraints. Competitive bidding at reverse auctions for renewable projects, as in India, may go a long way in lowering overall costs.
  
  

• Demand for cement is likely to increase at a CAGR of 5-6% till 2030 and beyond. However, the industry will face short-term headwinds on high import costs, inflation hitting infrastructure and construction sectors, and domestic overcapacity. While consumption is around 40 mnt, capacity stands at 78 mnt.
  
  
• Near-total dependence on imports of clinker, limestone, etc. renders the domestic industry vulnerable amid global commodity inflation. The government should do more to facilitate limestone and gypsum exploration and mining, especially in the northern parts of the country.