Steel industry on the brink as dollar, gas, power prices surge: Entrepreneurs

The Bangladesh Steel Manufacturers Association has said the country's steel industry is facing a severe crisis due to a surge in the dollar, gas, and electricity prices.

Industry insiders, at a press conference today (19 March), put forward a six-point demand aimed at safeguarding the domestic steel industry

In a written statement, Mohammad Jahangir Alam, president of the association, said the dollar surge hinders access to Letters of Credit (LC) for importing essential raw materials, creating a shortage and supply chain disruptions.

Mohammad Jahangir Alam said increased costs for raw materials, chemicals, components (85% import-dependent), interest rates (9% to 13.5%), fuel oil, electricity, gas, LC commissions, margins, discounting rates, and other charges have significantly raised working capital requirements.

Electricity prices rose 15% last year, with another 10% this year and a further planned increase. Demand charges also rose by 20%. Gas prices nearly tripled, increasing production costs by Tk3 per tonne, he added.

The association leaders said a 2% source tax deduction is deemed excessive and disconnected from actual steel sector profitability. This minimum tax forces producers to pay income tax even without profits. Additionally, a Tk500 per tonne minimum advance income tax on imported scrap is non-adjustable and non-refundable.

At the press meet, the association put forward a 6-point demand to rescue the domestic steel industry grappling with a 40% working capital shortfall due to the rising dollar.

The demands include: Convert short-term loans to long-term loans (up to 12 years) to address the working capital gap and boost Letter of Credit (LC) facilities to 50% for the steel sector.

For calculating credit limits, banks should consider 25% of non-funded liabilities (up from the current 15%) for steel companies and delay the new electricity price implementation from February to March. Additionally, cancel the planned hikes for both electricity tariffs and minimum demand charges in the heavy industrial sector.

Lower the tax deduction at source for steel companies from 2% to 0.5%. Reduce the minimum advance income tax on imported steel scrap from Tk500 to Tk200 per tonne and revoke the recent increase in the Ministry of Industries' CM certificate fee. 

The leaders of the association urged the government to implement a turnover-based fee structure.

Leading steel industry leaders of the country including Anwar Group, BSRM, and Salam Steel attended the event.