Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Bangladesh steel manufactures have cited huge losses after the COVID-19 pandemic disrupted production and imports of raw materials like ferrous scrap. The country’s real estate sector and infrastructure projects have been hit significantly which could result in demand concerns in the coming days.


Bangladesh Steel Mill Owners’ Association estimates their losses could amount to a total of BDT3,500mn ($41mn) in the first half of March. The situation could persist for the next three-four months. Should that happen, the losses could rise to BDT40,000mn ($470mn) in a BDT50,000mn ($5.88bn) industry, a steelmaker told Davis Index.


Industry seeks aid from the government 

To overcome the losses incurred, steelmakers are demanding support from the government. The association suggests banks can extend the tenure of payment for letters of credit by six months without the need to seek prior permissions from the central bank. It also suggests calling for a fund for short-term loans against LCs. 

Impact on infra projects 

Though the Bangladesh steel industry is not as export-oriented as the garments sector, it remains the backbone of the domestic construction sector. Sales of finished steel products have declined sharply in the last two months due to a slowdown in the development of government infrastructure projects. Consumption in the private sector also fell significantly.

Government infrastructure projects account for 35-40pc of the total steel consumption in Bangladesh. Mega infrastructure projects like Padma bridge and Karnaphuli River tunnel and Dhaka-Chattogram elevated expressway have been hampered significantly. Stocks of steel products used in construction remains piled up at sites. Recovery in demand, implementation pace and completion deadlines are likely to extend by one quarter at the minimum, according to industry participants. 

Difficulties in raw material sourcing 

Ferrous scrap from the US, UK, Canada and Australia, accounts for over 90pc of Bangladesh imports. These countries have gone into partial or complete lockdown, hampering trade. With several new cases rising every next day globally, the situation is unlikely to normalise anytime soon.


Bangladesh has about 40 active manufactures with an annual cumulative steel production capacity of 9mn mt. Of these, all small steel manufactures, re-rollers and furnaces have shut their production. Major steelmakers like Abul Khair Steel, GPH Steel, BSRM and KSRM have curtailed operations.

 Large-scale manufacturers cater to more than half of Bangladesh’s annual steel requirement of 8mn mt. These steelmakers were in the market for ferrous scrap imports earlier in the month despite the lockdown which has been till April 14. Steel manufacturers are also struggling with imports of spare parts or capital machinery along with raw materials. Before the lockdown announcements in Asian countries, global ferrous scrap markets had to pay higher freight charges due to non-availably of empty containers. Around 8mn empty containers were lying stranded at the Chinese ports. 

Mills in Bangladesh booked ferrous scrap cargoes actively from Australia and the US in the first two months of 2020. Despite this, with a shortage of domestic scrap driven by a halt in shipbreaking, the supply of ferrous scrap could tighten once markets reopen.

Shipbreaking grinds to a halt due to the outbreak 

Bangladesh’s shipbreaking industry accounts for over 2mn mt of the country’s ferrous scrap supply. With logistical and banking issues, all recyclers have shut operations. A leading HKC certified ship recycler, PHP has closed its factory due to shortage of labour, plummeted demand and a drop in domestic plate prices by over $30-40/mt in two weeks.

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