Behind the rod price hike in local markets

FT ONLINE

The price of rods increased sharply with the new year compared to last year. It has already affected the construction industry of the country.

Prices went up by over 40% to about Tk73,000 a ton last month from Tk 52,000 a ton the month before, according to the Bangladesh Auto Re-Rolling and Steel Mills Association (BARSMA).

It began to rise gradually since the beginning of the year with soaring prices of melting scrap in the international market amid the US move to slap tariffs on steel and aluminum imports.

Rebar millers claimed the increased import costs is due to the weakening of the taka against the US dollar, the higher transport costs due to the restriction on overloading, and congestion at the ports, has contributed to the hike in prices.

According to the state run organization, Trading Corporation of Bangladesh (TCB), the price of 60-grade rod increased by 36.19%, while the price of 40-grade increased by 35.63% compared to last year.

“60-grade MS rebar, or better quality, is being sold from Tk71,000 to Tk72,000 per ton. The price used to range from Tk59,500 to Tk60,500. On the other hand, 40-grade MS rod is being sold for Tk58,000 to Tk60,000 per ton, which was earlier on sale for Tk50,5000 to Tk51,500 per ton,” the TCB also mentioned.

Rod business companies said there are four major companies in the rebar business market: Bangladesh Steel Re-Rolling Mills (BSRM), Rahim Steel, Bandar Steel Industry Ltd, and Abul Khair Steel Mills ltd. These companies play a major role in the price of rods.

They also said that of these four companies, BSRM has 30% of the country’s rod market. About 20% market share is held by Rahim Steel, Bandor Steel, and Abul Khair Steel Ltd.

A few other companies like Kabir Steel Re-Rolling Mills (KSRM), Ratanpur Rerolling Mills (RSRM), Anwar Ispat ltd, Shafiul Alam steel, Shahriar Steel Mills hold the remaining 50% market share.

When contacted, BSRM Steel Ltd was not interested to talk about the recent price hikes.

Abu Taher, a rod businessman in Old Dhaka said, “We know raw materials, transport costs, and the dollar rate has gone up but this cannot account for this kind of a price hike. The recent price rise is illogical. Perhaps a syndicate is involved here.”

Engineer Munir Uddin Ahmed, president of Bangladesh Association of Construction Industries (BACI), said: “There can be a 7%- 8% rise in prices, but a 50% increase can never be acceptable. All our work require 20%-25% of rebar, so if its price increases then it impacts the total cost.”

“Our industry is being destroyed following the soaring prices. There are 70 million people who are involved in this sector; we are all going to suffer for this,” he said.

In his point of view, “Some syndicates are involved in this price fixing. We request the government to take appropriate action against them, otherwise we would be forced to shut down the construction industry from April 15, 2018.”

Rebar and cement are the main materials for the construction industry; if the prices of these materials go up then the total cost of construction will go up sharply in the country.

They also said, some millers raised prices to profit more. This has slowed down construction work in the country.

Liakat Ali Bhuiyan, Vice-President of Real Estate and Housing Association of Bangladesh (REHAB), said: “The high prices impact the construction industry immensely. About 20% cost will increase following the hike in prices.”

“Construction work will decline this way. More than anything, this impacts the general population,” he also added.

Meanwhile, millers also said rod raw materials like scrap iron, transport costs, port costs the price of the dollar, and higher bank interest rates, all impact their business.

Mr. S.K Masadul Alam Masud, founder chairman of Bangladesh Auto Re-Rolling and Steel Mills Association (BARSMA) and Managing Director of Shahariar Steel Mills Ltd said: “There is no syndicate engaged in fixing rod prices in the competitive market of the country. There are several reasons behind the rise in prices like the increasing dollar rate, going up raw materials prices in international market, raising transportation cost, power and gas bill high, commission trade, advanced income tax, etc.”

He also said, “Earlier we carried about 20 tons of goods by truck, but now we cannot carry over 12 tons due to government rules, and we end up having to pay more in transport costs.”

“If the government gives us more opportunities to use the Pangaon port, an inland port and container terminal on the Buriganga River in Dhaka, then the carrying cost will go down.

He added, “We have to give advance income tax, a huge payroll, turnover fees for machineries, and big commissions to contractors which all raise prices.”