The steel structure industry witnessed a 50% decline in business during the ongoing coronavirus pandemic, according to the Steel Building Manufacturers Association of Bangladesh.
Industry insiders said private entrepreneurs are reluctant to invest more in new projects, which caused the slump.
Rashed Khan, general secretary of the Steel Building Manufacturers Association of Bangladesh, said, "Apart from the pandemic impacts, raw material price hikes have put big pressure on us as we could not make profits. As an industry that has potential, we did not get any tax incentive from the government."
"Currently, we are paying 65% tax for raw material imports. It is a huge burden for us," added Rashed, who is also the chairman of Modern Structures.
He told the National Board of Revenue at the recent pre-budget seminar that the industry needs tax incentives.
Businesses use steel structures, known as pre-engineered buildings (PEB), for their manufacturing plants to save time and costs because these structures cost less than half of that of concrete ones. PEB makers supply all components to plant sites and then assemble them with nuts, bolts, and anchor bolts.
Besides, the industry is fully dependent on imported raw materials. Due to economic recessions and worldwide Covid-19 restrictions, raw material prices increased by around 40%, causing product costs to increase as well. But industry players could not increase the prices of finished products due to poor demand.
Bangladesh Building Systems Limited, a top company in this sector, posted an operating loss of Tk8.53 crore in the fiscal year 2019-20. It was the first time that the company recorded losses in the last decade and the operating loss continued in the first half of the current fiscal year as well.
The company, which is listed on the stock exchanges, also witnessed a 46% fall in revenue in the last fiscal year. That year, it earned a revenue of Tk87.58 crore, down from Tk163.07 crore in the previous year.
Another listed company Dominage Steel's revenue also fell by 11% to Tk56.52 crore in the last fiscal year but they managed to make profits that year.
A senior analyst at an asset management company said it is very tough to make fresh investment and business expansion decisions when the world is witnessing a fresh wave of coronavirus cases.
"That is why the downward trend in private sector credit growth continued in the seventh month of the current fiscal year. The growth rate was 8.32% in January while the projected growth for the current fiscal year is 14.8%," he added.
The steel structure industry has been growing in Bangladesh for 30 years riding on industrialisation and big government projects. According to industry insiders, around 100 companies are now providing PEB solutions in Bangladesh and at least 20 firms entered the market in the last five years.
Some of the big firms are Magnum Engineering and Construction, Bangladesh Building System, Modern Structures, Steelpac, which is a concern of Energypac Engineering, McDonald Steel Building Products, Quantam Builders and Engineering, Build Trade Engineering, PEB Steel Alliance, ALM Steel Building Technology, Tiger Steel Bangladesh, and Newaz Steel.
Despite challenges, steel structure companies say they will make big investments in the coming days. Bangladesh Building System is to invest Tk16 crore to modernise its factory, complying with the requirements of its foreign buyers who want to build factories in Bangladesh.
"We have signed several agreements with foreign investors. They will build factories in various economic zones here. We will supply prefabricated steel for those factories," a company official said.
"However, they have a requirement of maintaining global standards of prefabricated steel that will be used in their factories. Now we have to make the investment to meet their conditions," he added.
Dominage Steel has also raised Tk30 crore from the capital market through an initial public offering to enhance its production capacity.