Construction gets costlier as rod prices soar

All construction projects – be they private or public – are becoming far too dear because of the skyrocketing prices of iron rod in the domestic market.

The price of steel continues to rise due to the hike in prices of imported raw materials in the international market.

Moreover, the price of iron extracted from shipbreaking has also surged, further raising the price of steel.

The prices of the key construction material jumped nearly by 35-40 per cent this year in the local market, compared to that in the previous year in the wake of spiralling scrap prices in the overseas market, said sector people.

As a result, all the countrywide construction projects and the real estate industry are feeling the pinch of the rod price hike, they added.  

Entrepreneurs in the real estate sector said the rising cost of steel is having a direct impact on their business, driving up building costs.

During a spot visit to different places, it was found that the iron rods of different brands were being sold at between Tk 65 and Tk 77 per kg in the capital.

The retail price of 60-grade MS (mild-steel) rod rose by 35.18 per cent while the price of that 40-grade by 35.10 per cent compared to the same period a year ago, the data from the state-run Trading Corporation of Bangladesh shows.

“The 60-grade MS rod, or better quality, is now being sold at between Tk 73,000 and Tk 75,700 per ton which was Tk 54,500 to Tk 55,500 per ton in October 2020. On the other hand, 40-grade MS rod is now being sold at between Tk 69,000 and Tk 71,5000 per ton, which was earlier sold for Tk 51,500-Tk 52,5000 per ton during the same period last year,” the TCB data also mentioned.

There are around 100 rod manufacturers in the country. Of them, Bangladesh Steel Re-rolling Mills, Bandar Steel Industries Ltd, Abul Khair Steel, Rahim Steel Mills, Kabir Steel Re-Rolling Mills, Ratanpur Rerolling Mills and Anwar Ispat Ltd are the major players meeting 60 per cent local demand.

Besides, a few other companies like GPH Ispat, Kamal Steel and Re-Rolling Mills, Rani Re-rolling Mills Ltd, HKG Steel Mills Ltd, SAS Group, Vikrampur Steel Ltd and Shahriar Steel Mills Ltd meet the rest of the 40 per cent domestic demand.

“We are selling BSRM item at Tk 76.5 per kg. The rods of 8 mm, 10 mm, 12 mm, 16 mm and 20 mm sizes are sought more by the customers. As the prices of rod increased heavily because of the Covid-19 fallout, our business is now on the wane,” said Shamsul Alom, a manager of Superior Steel and Iron Agency at Bangshal in the capital.

While talking to The Business Post, Kamal Steel and Re-Rolling Mills proprietor Md Sheikh Kamal said, “There are around 100 companies that manufacture rods from ship scraps and melting scraps in Bangladesh.”

“Since the country has no iron or chemical mines, we are to entirely dependent on imports for the raw materials, the prices of which also entirely depends on the international market,” he added.

“We used to import certain chemicals at a cost of $500 per ton just before the Covid-19 outbreak, now we need to spend $1100 for the same material. Besides, scrap prices also increased from $400 to $560 during the same period,” explained the businessman.

Bangladesh imports raw materials from different countries including Brazil, UK, USA, New Zealand, Australia, Singapore, Canada and Italy.

Bangladesh Steel Mill Owners Association president Sheikh FazlurRahman said, “Apart from the raw materials’ price hike, electricity and gas bills have also gone up, which has also created a fresh challenge for the millers.”

“Now we are purchasing a ton of melting scrap at a cost of $570, which was only $320 in October last year. Besides, carrying costs also increased significantly.”

Sources said the international container shipping companies are not even willing to come to Bangladesh because of the unusual delay at the ports for unloading imported goods.

Annually, Bangladesh needs around 60 lakh tons of scraps for this industry.

Of the total amount, 60-70 per cent are imported while the remaining 30 per cent is met by the local shipbreaking industry.

Some sector people such as hawkers, storekeepers, suppliers and manufacturers are directly or indirectly involved in producing rods and thus around one crore people are involved in this segment.

“The growth rate of this industry may be 10-12 per cent,” said a director of Vikrampur Steel Ltd.

“We have also noticed that some foreign companies have expressed their interest in setting up factories in Bangladesh but I think it is unnecessary to invite foreign firms in this sector where local companies are capable enough to produce more quality rods if the government provides more facilities.”

Meanwhile, the country’s leading steelmaker BSRM Steels has set a target to invest Tk 1,850 crore for further enhancing its production capacity by 2023.

The company will invest for setting up of the new bar and wire rolling, and also for expansion of melting unit in order to augment the rolling capacity by 6 lakh metric tons per annum and melting 2.5 lakh metric tons yearly to cater to the growing market demand for quality steel products, said the company in a filing with the Dhaka Stock Exchange on October 24.

The company posted a profit after tax of Tk 3,04.7 crore in the last fiscal year, a significant jump from Tk 74.2 crore recorded in the same period a year earlier while most of the business came to a halt.

BSRM Steels also stated that an increase in sales, higher prices and decrease in operational expense brought higher profits to the company during the pandemic.

Talking to The Business Post, Bangladesh Association of Construction Industry president engineer SM Khorshed Alam observed that various development projects including infrastructure construction have been largely hampered due to the hike in rod price.

“Around 25-26 per cent of total construction expenditure goes for iron rods when it comes to implementing any infrastructure development projects. However, it is used less in house building. Around four lakh contractors and over 50 lakh construction workers are engaged in this vibrant sector,” he also said.

The construction sector contributes 8 per cent to the national GDP but the overall construction cost has increased by around 10 per cent because of the price hike of all sorts of construction materials such as rod, cement and stone, according to the sector people.

The annual demand for MS rods is around 60 lakh metric tons in the country and the government should adjust and control unusual price hikes of all the construction materials, they said.