Rod prices remain high despite low demand, scrap price fall
Along with scrap, the prices of plates and billets have also dropped substantially.
Prices of Mild Steel (MS) rods continue to hover around the Tk1 lakh mark despite low demand and dwindling prices of raw materials (scrap, plate and billet) in the global and local markets.
The price of scraps, the main material for manufacturing rods, has decreased by at least Tk10,000 per tonne over the past three months but the top-grade MS rods are selling for Tk96,000-1,00,500 per tonne for the last five months, traders and shipbreaking yard owners have said.
Tapan Sen Gupta, deputy managing director of BSRM, the country's top rod producer, told The Business Standard, "It is true that in the international market price of scraps has come down slightly but there will be hardly any impact of it in our local market due to the high exchange rate of the dollar. There are challenges in opening import letters of credit (LC) due to the dollar crisis."
Keep updated, follow The Business Standard's Google news channel
Due to soaring prices, the demand for MS rods has also fallen in the market, said traders.
Asked about the reason for the low demand, SM Kamruzzaman, the proprietor of wholesale rod trader M/s Zaman Enterprise at Asadganj in Chattogram, told The Business Standard, "A number of factors are at play here. Due to the abnormal increase in the price of rods, people have reduced construction work. Besides, the construction work of many government projects is now at a standstill due to the increase in the dollar price. That is why rod sales have dwindled."
Scrap prices fall sharply
Sekandar Hossain, owner of KR Ship Breaking Yard, told TBS that at present per tonne of scrap is selling for only Tk60,000 in the local market, which was around Tk71,000 at the end of May.
Along with scrap, the prices of plates and billets have also dropped substantially. Currently, per tonne plates and billets are selling for Tk75,000 and Tk77,000, respectively. Two months ago, plates were sold for Tk82,000 and billets for Tk85,000 in the market, he said.
Meanwhile, the price of scrap ships in the international market has decreased by more than $80 per tonne in the last three-four months. Currently, scrap is selling at $540 per tonne in the global market, which was more than $620 during the March-May period.
Abu Taher, president of the Bangladesh Ship Breakers and Recyclers Association, told TBS, "The price of scrap and old ships has been falling in the international market for the last three to four months. However, as the dollar rate increases day by day, more money has to be paid against imported scrap ships."
"To make matters worse, scrap, plate and billet prices have come down in the local market due to reduced demand for raw materials in steel mills. Shipbreaking traders are at risk of incurring losses," he said.
Taher also said that around 15-16 lakh tonnes of scrap are stored in shipbreaking yards during normal times. But the current stock of scrap is below 2-3 lakh tonnes.
But the cheaper raw materials seem to have no impact on the prices of MS rods. The rod market has been gradually heating up since November 2020. The price of the product, which was sold at a maximum price of Tk55,000 per tonne in October 2020, increased gradually in two and a half years and reached the Tk1 lakh mark in March this year.
Why are rod prices still high?
Rod manufacturers and traders said prices remain high because the production cost is still high due to the strong dollar and dwindling demand for the product in the market.
According to MS rod manufacturing companies, 75-grade MS rod is currently selling in the market for Tk96,000-1,00,500 per tonne, depending on the brands. BSRM is selling at Tk1,00,500, Abul Khair Steel (AKS) at Tk97,500, KSRM and GPH Ispat at Tk96,000. The prices have remained nearly the same in the last five months.
However, the price of 60-grade rods has decreased by Tk3-5,000 per tonne over the last month. Currently, KR Steel and HM Steel are selling it at Tk87,000 and others are selling the product at Tk85-86,000. Even a month ago, 60-grade MS rods from various companies were sold for more than Tk90,000.
When asked why rod prices are still high, Mohammad Jasim Uddin, general manager (Sales) of KSRM Steel, said, "It is true that the price of raw materials has come down in the international market. But the exchange rate in the domestic market is increasing day by day. Now we have to pay Tk118-119 a dollar for imports."
"Higher prices have reduced both demand and sales of rods in the market. We have reduced our production, but we cannot reduce the cost. As a result, customers are not getting the benefit of cheaper raw materials," he added.
According to the Bangladesh Steel Manufacturers Association (BSMA), the country currently has an annual demand of 70-75 lakh tonnes of MS rods. About 55 auto steel re-rolling mills and more than 100 semi-auto and manual mills in the country supply these rods.
