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

Steel demand in Bangladesh could take up to an year to return to pre-COVID levels shared Bangladesh’s top importer of ferrous scrap Bangladesh Steel Re-Rolling Mills (BSRM). In an exclusive interaction, the company’s top brass Tapan Sengupta, Deputy Managing Director and Sanjoy Ghosh Head of Supply Chain said BSRM hopes to steadily recover from the pandemic as infrastructure projects fuel the country’s economic activities over the next few quarters. 


Here is their take on the global ferrous scrap and steel market. Excerpts  


Bangladesh’s steel industry is badly hit by COVID-19. What factors do you think could drive domestic steel demand in the coming days? 

Demand for finished steel is improving, albeit slowly. It could take a year for the end-user demand to return to the pre-pandemic level. The government has chalked out a lot of initiatives to aid mega construction projects, and the economic situation is improving as activities recover. As a part of its economic stimulus, the government is giving loans at lower interest rates for manufacturers, infra, and housing projects, among others. The construction sector could remain strong and pull out all other dependent industries from the crisis. 

How has BSRM managed to cope with COVID-19 pandemic? 

The impact of the pandemic in March and April was at its peak. Overall production of the country, and that of BSRM, dropped to the 35-40pc capacity levels. For about two months, we idled our blast furnaces in keeping with the drop in domestic demand. We will reach our normal production levels within the next few weeks. For another year or so, our motto would be to tide over the crisis, profits and margins will improve later. 


Could you share your views on the ongoing and new infrastructure projects in Bangladesh and their impact on steel demand? 

Infrastructure projects could become demand drivers for another couple of quarters. To retain and bring new investors on board, focus on the infrastructural and communication projects remains important. Projects like Rooppur nuclear power plants, Padma bridge, Jamuna Multi-Purpose Bridge, and elevator express are among the major projects which are expected to generate metal demand. 


Any possibility of steel exports by BSRM?

We do not have any plans to export either billets or rebar. Exports are not economically viable at present. A few mills may have done it to generate immediate liquidity. 


What is the Bangladeshi government’s stance on ferrous scrap imports. Has the government devised any policy or action plan to wean off imports? 

For a small country like Bangladesh, initiatives from the government to lower dependency on the imports of ferrous scrap could take longer time than other subcontinental markets like India, where scrappage policy is in the final stages. To fulfill the gap between requirement and consumption of ferrous scrap, we are likely to focus only on the imports of bulk vessels, be it from the US, Europe, or Japan, after considering the economic viability. 


Presently, domestic ferrous scrap generation is about 1mn mt while consumption is around 4.5-5mn mt. As mills ramp up production, this gap could increase further. The national steel consumption is presently around 45kgs per person. A rise in consumption will also increase scrap generation. The per capita consumption could exceed 60kgs in the next two years. 

Could you share your insights on the containerized scrap market?

Australian material is preferred for its quick delivery time over scrap from other origins. In 2019, imports from Australia were, therefore, 500pc higher than the preceding year. For the Africa-origin material, however, there is no guarantee about the quality and thus we try to stay away from it. 


Around 30pc of scrap imports by BSRM are in containers. These days amid the pandemic, port congestions and facilities have restricted its inflow. 


Supply is very short and importers are rushing to secure material from wherever possible. This has driven up the prices for melting scrap globally, and have outpaced the rise in finished steel demand as well as prices. During the pandemic, collection and generation was limited. As buyer countries resume production, restocking activities have increased. Supplier countries, however, are dealing with the second wave of COVID-19.  


Recently, Bangladeshi buyers were active in the bulk market. How long do you think this is likely to continue? 

Bulk imports are likely to continue into Q4 FY2021. Mills are competing to secure raw materials as they ramp up production. Many governments have infused liquidity to ease steelmakers’ woes and aid economic recovery. In Q4 FY2021, BSRM aims to hit 100pc utilization of rolling mill and increase its capacities. But the reemergence of COVID-19 in Europe and the US could keep the industry in the doldrums. 


What are your expansion plans?

BSRM has rebar capacity of 1.6mn mt, while billet capacity is at 2mn mt. The company has plans to set up another rolling mill to cater to the rising domestic steel demand, mainly since our rolling capacity is lesser than the melting capacity. 


We usually do not opt for shipbreaking plates for rebar and opt to make rebar from billets. For billet production, we prefer to import ferrous scrap. Bangladesh’s shipbreaking supply is also insufficient to meet our requirement. 



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