Steel price in the country may increase again in the near future as costs of raw materials and international freight charges continue to soar, manufacturers said on Saturday.
The price of melting scrap, the core raw material for making rods, surged more than 80% to $550-$590 in the international market since October last year, Bangladesh Steel Manufacturers Association (BSMA) said in a press statement on the day.
They said an increase in construction rod price may slow down construction work, with some projects already showing such signs.
The steel industry in Bangladesh is largely dependent on imports for 80-85% of its raw materials. The dominant sources of imports include the USA, Canada, Australia, South Korea and some European countries.
Due to the pandemic, the source countries' capacity to deliver the necessary materials declined while since the end of the first wave of the pandemic last year. In addition, their own consumption increased as well.
Meanwhile, China which was earlier depending on its own raw material for their steel industry started importing the materials amid the pandemic creating further demand for melting scrap in the international market.
Moreover, the international price of Ferroalloys, another major raw material for steelmaking, increased by more than 80% over the last 8-9 months.
On top of that, container shortage amid Covid-19 has doubled the international freight charges while it is expected to go higher in the coming month.
BSMA called for a reduction in duties on raw material import to avoid a looming price hike.
Many countries including India reduced duties on raw material imports so that their steel industry does not witness cost hikes. The Bangladesh government should do the same, the association suggested.
Otherwise, the price of construction rod might increase further.
In Bangladesh construction rod's price already increased by 15-20% in the last eight months and any further price hike would hinder the pace of the construction sector, said the association adding that this might have a spillover effect on other construction-related industries, such as cement, tiles, brick and hardware.
If this were to happen, around two crore people depending on these sectors would suffer amid the pandemic, according to BSMA.
BSMA in its statement welcomed the budget proposal to withdraw the 4% advance tax on raw material imports. However, the association said that would not help price contention as the amount was adjustable with the value-added tax during sales of the rod.
To reduce the price of construction rod, the association called for reducing the customs duty to Tk500 from Tk1,500 against the import of per ton raw material, alongside reducing the advance income tax to Tk300 per ton from existing Tk500.
Also, the Value added tax (Vat) on per ton rod sale needs to be reduced to Tk500 from the existing rate of Tk2,000 per ton, BSMA said.