Despite the extreme economic volatility of the past three years, Bangladesh’s steel industry has continued to grow. Bangladesh was already the third largest destination for U.S. scrap exports in 2022. In the first five months of 2022, the United States exported 667,200 tons of scrap steel to Bangladesh, second only to Turkey and Mexico.
However, the current development of the steel industry in Bangladesh still faces challenges such as insufficient port capacity, power shortages and low per capita steel consumption, but its steel market is expected to grow strongly in the coming years as the country moves towards modernization.
GDP growth drives steel demand
Tapan Sengupta, deputy managing director of Bangladesh Rolling Steel Corporation (BSRM), said the biggest development opportunity for Bangladesh’s steel industry is the rapid development of infrastructure construction such as Bridges in the country. Currently, Bangladesh’s per capita steel consumption is about 47-48kg and needs to rise to about 75kg in the medium term. Infrastructure is the foundation of a country’s economic development, and steel is the backbone of infrastructure construction. Bangladesh, despite its small size, is very densely populated and needs to develop more communications networks and build infrastructure such as Bridges to drive more economic activity.
Many of the infrastructure projects that have been built are already playing a role in Bangladesh’s economic development. The Bongo Bundu Bridge, completed in 1998, connects the eastern and western parts of Bangladesh by road for the first time in history. The Padma multi-purpose Bridge, completed in June 2022, connects the southwestern part of Bangladesh with the northern and eastern regions.
The World Bank expects Bangladesh’s GDP to grow by 6.4 percent year-on-year in 2022, 6.7 percent year-on-year in 2023 and 6.9 percent year-on-year in 2024. Bangladesh’s steel consumption is expected to rise by a similar amount or slightly more over the same period.
At present, Bangladesh’s annual steel production is about 8 million tons, of which about 6.5 million tons is long and the rest is flat. The country’s billet capacity is about 5 million tons a year. Growth in steel demand in Bangladesh is expected to be supported by more steelmaking capacity, as well as higher scrap demand. Large conglomerates such as Bashundhara Group are investing in new capacity, while others such as Abul Khair Steel are also expanding capacity.
Starting in 2023, BSRM’s induction furnace steelmaking capacity at Chattogram City will increase by 250,000 tonnes per year, which will increase its total steelmaking capacity from the current 2 million tonnes per year to 2.25 million tonnes per year. In addition, BSRM will add an additional 500,000 tons of rebar annual capacity. The company now has two mills with a total production capacity of 1.7 million tons/year, which will reach 2.2 million tons/year by 2023.
Steel mills in Bangladesh must explore innovative ways to ensure a steady supply of raw materials as scrap supply risks will increase as demand for scrap rises in Bangladesh and other parts of the world, industry sources said.
Buy bulk carrier scrap steel
Bangladesh has become one of the major buyers of scrap steel for bulk carriers in 2022. Bangladesh’s four largest steelmakers increased their bulk carrier scrap purchases in 2022, amid on-off purchases of container scrap by Turkish steel mills and strong purchases by countries such as Pakistan.
Tapan Sengupta said that currently the imported bulk carrier scrap is cheaper than the imported container scrap, so the scrap imported by BSRM is mostly bulk carrier scrap. In the last financial year, BSRM imported about 2m tonnes of scrap, of which container scrap imports accounted for about 20 per cent. 90% of BSRM’s steelmaking material is scrap steel and the remaining 10% is direct reduced iron.
Currently, Bangladesh procures 70 per cent of its total scrap imports from bulk carriers, while the share of imported container scrap is only 30 per cent, a sharp contrast to the 60 per cent in previous years.
In August, HMS1/2 (80:20) imported bulk carrier scrap averaged US $438.13 / ton (CIF Bangladesh), while HMS1/2 (80:20) imported container scrap (CIF Bangladesh) averaged US $467.50 / ton. The spread reached $29.37 / ton. In contrast, in 2021 HMS1/2 (80:20) imported bulk carrier scrap prices were on average $14.70 / ton higher than imported container scrap prices.
Port construction is under way
Tapan Sengupta cited the capacity and cost of Chattogram, the only port in Bangladesh commonly used for scrap imports, as a challenge for BSRM. The difference in shipping scrap from the West Coast of the US to Bangladesh compared to Vietnam was about $10 / ton, but now the difference is about $20- $25 / ton.
According to the relevant price assessment, the average CIF imported steel scrap from Bangladesh HMS1/2 (80:20) so far this year is US $21.63 / ton higher than that from Vietnam, which is US $14.66 / ton higher than the price difference between the two in 2021.
Industry sources say scrap is unloaded at the Chattogram port in Bangladesh at a rate of about 3,200 tonnes/day, excluding weekends and holidays, compared with about 5,000 tonnes/day for scrap scrap and 3,500 tonnes/day for shear scrap at the Kandra Port in India, including weekends and holidays. Longer waiting times for unloading mean Bangladeshi buyers have to pay higher prices than scrap users in countries such as India and Vietnam to obtain bulk carrier scrap.
The situation is expected to improve in the coming years, with the construction of several new ports in Bangladesh coming into operation. A large deepwater port is under construction at Matarbari in Bangladesh’s Cox’s Bazar district, which is expected to be operational by the end of 2025. If the port goes ahead as planned, it will allow large cargo ships to dock directly at the docks, rather than having large vessels anchor at anchorages and use smaller vessels to bring their goods to shore.
Site formation work is also underway for the Halishahar Bay Terminal in Chattogram, which will increase the capacity of Chattogram Port and if all goes well, the terminal will be operational in 2026. Another port in Mirsarai could also come into operation at a later date, depending on how private investment materializes.
Major port infrastructure projects underway in Bangladesh will ensure further growth of the country’s economy and steel market in the coming years.
Post time: Sep-28-2022