Amid the extreme volatility of the last three years, there have been few nations that have stood out as consistent growth stories in steel quite like Bangladesh.
The South Asian country has become the United States’ third-largest export market for steel scrap in 2022, with 667,169 tonnes of US scrap exported there in the first five months of this year – behind only Turkey and Mexico.
And despite protracted problems with Covid-19 last year, Bangladesh’s steel output still registered year-on-year increases of around 16% while its ferrous scrap imports grew by 7%, according to industry estimates.
While Sengupta recognizes the current challenges that Bangladesh faces such as port problems, power shortages and low per-capita steel consumption, he expects strong growth in its steel market over the upcoming few years as the nation continues to modernize.
Steel consumption rising with GDP
The Bangladeshi steel sector’s single greatest opportunity is to capitalize on a radical upbuild in infrastructure such as bridges in the country, according to Sengupta. Per-capita steel consumption, currently at around 47-48kg, needs to rise to around 75kg over the medium term, he said.
“Infrastructure is the backbone of economic development of a country, and steel is the backbone of infrastructure. We need lots [more] infrastructure in our country,” Sengupta told Fastmarkets.
Infrastructure is the backbone of economic development of a country, and steel is the backbone of infrastructure
“An important factor is that Bangladesh is a small country geographically, but it is a very densely populated country, so we need to develop more communication networks and make structures such as bridges to stimulate more economic activity,” he added.
Such projects cannot be understated. The Bangabandhu Bridge, which was completed in 1998, connected the eastern and western parts of Bangladesh by road for the first time ever. The Padma Multipurpose Bridge, inaugurated in June this year, now links the southwestern part of the country to the northern and eastern regions.
Bangladesh’s gross domestic product is forecast to rise by 6.4% for this year, followed by projected increases of 6.7% in 2023 and 6.9% in 2024, according to the World Bank.
Steel consumption should rise by a similar measure or even slightly higher over the same period, Sengupta said.
It currently stands at around 8 million tonnes, with long products accounting for 6.5 million tonnes, and the remainder, flat products, he said. The country’s billet capacity is around 5 million tonnes, he added.
The expected uptick in local demand will require greater steelmaking capacity and increased scrap demand. Major Bangladeshi conglomerates such as the Bashundhara Group are investing in new capacity, while others such as Abul Khair Steel (AKS) are increasing their capabilities.
Effective from 2023, BSRM will add another 250,000 tonnes per year of melting capacity at its electric induction furnace (EIF)-based steelmaking complex in Chattogram, the city formerly known as Chittagong, Sengupta said. That will take the company’s total melting capability to 2.25 million tpy from the current 2 million tpy.
Moreover, BSRM is adding another 500,000 tpy in rolling capacity for rebar. Currently, the company owns two rolling mills with a total 1.7 million tpy of rebar capacity, which will reach 2.2 million tpy in 2023.
Steel scrap supply risks are becoming a major issue in the steel market with rising capacity both in Bangladesh and elsewhere, he says. Bangladeshi mills may have to explore innovative ways to secure their raw materials such as by using long-term contracts linked to price indices, he said.
Bulk buying boom
Bangladesh has been an increasingly regular purchaser of bulk scrap cargoes in 2022. BSRM has been at the heart of this, sourcing cargoes from Japan, the US and Europe this year.
Bangladesh’s four largest mills have raised their proportion of bulk buying this year amid intermittent Turkish buying, high container freight charges and strong container buy prices from rival markets such as Pakistan.
“Now bulk is cheaper than containerized imports and our imports are mostly in bulk. In the last financial year, we imported around two million tonnes of scrap and the container intake was around 20%,” Sengupta told Fastmarkets.
BSRM uses a split of roughly 90% of steel scrap in its furnaces while around 10% consists of imported sponge iron, he said.
Recent pricing shifts means the overall share of bulk buying in Bangladesh is currently around 70% versus 30% in containers, whereas in previous years it was 60% bulk and 40% containers, Sengupta said.
Fastmarkets’ price assessment for steel heavy melting scrap 1&2 (80:20) deep-sea origin import, cfr Bangladesh averaged $440.20 per tonne in June, while the assessment for HMS 1&2 (80:20) containerized import, cfr Bangladesh averaged $461 per tonne. That put the bulk price $20.80 per tonne below the container price.
By comparison, import prices for deep-sea cargoes of HMS 1&2 were on average $14.70 per tonne above those for containerized cargoes in the whole of 2021.
Port problems
When asked about BSRM’s biggest challenge, Sengupta outlines problems with delays and costs at the Port of Chattogram, the only port commonly used in the country to import steel scrap.
The freight difference between shipping a deep-sea scrap cargo from the US West Coast to Bangladesh compared with rival buyer Vietnam was historically about $10 per tonne, but is now around $20-25 per tonne, Sengupta lamented.
“At the moment, our country is losing lots of money because of the Chattogram [port] facility,” he said. “At the moment, this foreign currency is going out of the country with no benefit for anyone.”
The premium for Fastmarkets’ price assessment for steel scrap HMS 1&2 (80:20) deep-sea origin import, cfr Bangladesh over the assessment for steel scrap HMS 1&2 (80:20), cfr Vietnam is averaging at $21.63 per tonne so far this year, up from $14.66 per tonne for the whole of 2021.
A steel scrap seller familiar with the export of bulk cargoes to Bangladesh said that current scrap discharge rates were around 3,200 tonnes per day in Chattogram, excluding weekends and public holidays. At the Indian port of Kandla, the discharge rate is around 5,000 tpd for shredded and around 3,500 tpd for cut grades but including both weekends and holidays, the exporter said.
The higher wait time means Bangladeshi buyers must pay a handsome premium over nations such as India and Vietnam to secure bulk cargo, the exporter said.
But this situation is expected to change in the coming years with several new port projects coming onstream, which are expected to ease the strain on the Port of Chattogram, Sengupta said.
A major deep-sea port under construction at Matarbari in the district of Cox’s Bazar, southern Chattogram, is “progressing,” Sengupta said. It had been expected to become operational by the end of 2025 but faced hurdles in land acquisition, according to local media reports. If operational, the draft would allow large cargo ships to dock at the port, rather than big ships being anchored and smaller vessels used to transport cargo to shore like in Chattogram.
Site development work is also progressing at Halishahar’s Bay Terminal in Chattogram, which would increase the handling capacity of the Chattogram port and “may come into operation in 2026 if everything goes well,” Sengupta said.
Another port in Mirsarai may also come into operation later depending on the obtention of private investment, he added.
Port issues may stand as one of Bangladesh’s largest challenges today, but Sengupta believes that the ambitious projects underway to upgrade this infrastructure will secure further growth in the nation’s economy and steel markets for years to come.
