Scrap prices across the globe have jumped by $100 (around Tk8,471) per tonne in the span of just one month, causing local markets to heat up, too.
The severe shortage of scrap on the global market has put steel manufacturers in Bangladesh in a tight spot, as they are now facing difficulty in booking enough scrap to keep production running at their factories, industry insiders told The Business Standard.
They added that the rate of each tonne of scrap on the international market was $300 (around Tk25,414) at the beginning of November, and is now around $390-400 (around Tk33,039-33,886).
Moreover, local markets are facing a shortage of scrap due to the global market's lack of supply.
Bangladesh produces around seven million tonnes of steel products annually, and for this, the country imports over 4.2 million tonnes (MnT) of scrap and billet.
Meanwhile, the local ship-breaking industries supplied around 2.5 million tonnes of scrap in 2019.
According to shipbreakers, the local scrap market is volatile too, as the import of scrap ships dropped this year due to the Covid-19 crisis. In 2020, it is likely to drop to 1.8 MnT.
However, in 2019, shipbreaking yards supplied 2.5 MnT of scraps by importing scrap ships.
Even the local shipbreaking scrap prices have increased by around Tk10,000 ($125) per tonne, making the overall situation very difficult for steel manufacturers, industry insiders said.
Responding to a query, the Bangladesh Ship Breakers Association's (BSBA) President Md Abu Taher said, "The price of each MnT scrap that comes from local shipbreaking yards has further shot up from around $340 (around Tk28,803) to $430 (around Tk36,427) in the last month."
The price hike of raw materials has also heated up the market of local finished products. The price of finished steel products, such as mild steel rod, increased by at least Tk4,000-6,000 per tonne in the last one week.
Winter is the peak season for the mild steel rod market in Bangladesh as construction increases during this time.
Managing Director of BSRM Aameir Alihussain told The Business Standard, "There is a shortage of scrap internationally, and prices have increased by around $100 (around Tk8,471) per tonne within a very short time."
"Sourcing has now become difficult for us due to the lack of supply. This is because Western and Asian markets are buying up materials to cover their low inventories as they recover from the pandemic shutdowns," he added.
"Due to the pandemic, the market shrank and there was excess capacity. Also, material prices on the local market came down to very low levels compared to pre-pandemic prices," he explained.
"The whole steel industry has been suffering due to poor prices and needs to increase prices to adjust with the international prices of raw materials," Aameir added.
Manufacturers said they are struggling with booking scrap, which may hinder them from continuing production at their factories.
When contacted, Shahriar Jahan Rahat, deputy managing director of KSRM, told The Business Standard, "There is a severe shortage of steel scrap on the world market. Prices are now at an all-time high compared to those of the last two years and they are continuing to rise. More than the price, the shortage of scrap is alarming and all manufacturers are scrambling to book scrap in order to keep production going."
"China has indicated it will allow scrap imports, which will further worsen the situation. Under these circumstances, keeping up with production capacities in Bangladesh will be difficult and if the local market does not rise, the steel sector – which is already ailing from heavy taxation – will bleed to stagnancy," he added.