Home ›› 31 Jul 2022 ›› Front
The number of goods, registering more than $1 billion in imports annually, has gone up from three to around twelve over the past decade in Bangladesh, and most of those are industrial raw materials.
Along with cotton, diesel, and old ships, this list now consists of goods such as raw material clinker for cement industry, scrap for steel industry, soybean seed for animal feed industry, wheat for food processing industry and unrefined palm oil.
Prices of these raw materials skyrocketed after the Covid-19 pandemic began spreading across the world, and stayed high even after the crisis eased globally. Just when the international market was regaining stability, Russia’s invasion of Ukraine threw a wrench into the possibility.
These factors have pushed up prices of raw materials used in different industries by eight per cent to as high as 70 per cent, which in turn have caused the locally manufactured product prices to increase as well.
Industry insiders told The Business Post that though the prices of several raw materials – used in industries such as animal feed, home appliance and plastic – have dropped a bit in recent times, this has not been very beneficial to importers due to the soaring rate of USD.
They have mentioned that with high L/C margins and costly dollar, the government is directly discouraging import which will sorely impact the export earnings. Imports like industrial raw materials, and capital machinery should get fiscal and monetary privileges from the regulators to shore up the merchandise exports, and help create enough employment opportunities for the country, they added.
“Restraining imports has a consequence on export earnings. Bid to save forex reserves sometimes causes reserve loss,” a banker-turned industrialist told The Business Post.
The USD rate has gone up by 14 per cent in the last few months.
Animal feed industry
It takes 17-18 ingredients to produce animal feed for the poultry and dairy industries, and Bangladesh is dependent on imports for all of those, except one or two items.
Any price hike in the international market or rise in transportation costs pushes the price of these raw materials up, which then impacts the local industries.
The prices of animal feed ingredients such as corn, fish meal, soymeal, palm oil, MOC, limestone, poultry meal have gone up by eight per cent to 74 per cent in the last year.
Commenting on the situation, Feed Industries Association of Bangladesh’s (FIAB) former general secretary Md Ahsanuzzaman said, “We source some of the feed ingredients locally, but their volume is miniscule.
“We depend heavily on the international market for the majority of other ingredients. Though the prices had gone up following the Covid crisis and Russia-Ukraine war, the rates of some ingredients have even gone down in recent times.”
He continued, “However, the steady rise in the USD rate has pushed up our import costs, which negated any benefits we could have gained from global price drops. The USD rate was Tk 86 – Tk 87, which has now surpassed Tk 100.
According to FIAB data, due to high import costs, soymeal price was Tk 49 per kg in the March-April period last year, which is now Tk 56 – Tk 57 per kg. The price of this raw material rose to Tk 70 in March this year.
Similarly, the price of poultry meal was Tk 62 – Tk 63 in March-April of 2021, which is now Tk 100 – Tk 110 per kg. MOC used to cost Tk 30 per kg, which is now Tk 34 per kg.
Cotton
The price of cotton had increased by up to 99 per cent last June due to the Covid crisis, Russia-Ukraine war, Skyrocketing USD rates and other issues. Though the prices started to drop after June, cotton still costs around 24 per cent more when compared year-on-year.
According to the financial services company NASDAQ, cotton price was $0.78 per pound in December 2020, which rose to $1.5 in April this year. Cotton is now available in the international market for $0.99 per pound.
Industry insiders are optimistic that the cotton prices will not exceed $1 USD, but they added that the rise in USD rate has made importing the material more costly.
Plastic industry
Bangladeshi manufacturers import seven to eight types of raw material to produce plastic goods. Entrepreneurs say the price hike of fuel, hoarding by countries such as China, and rising shipping costs have hiked the price of these raw materials in the international market.
Besides, the devaluation of Taka against the USD has also pushed up import costs.
Industry insiders say the raw material import costs in the plastic sector have gone up by 60 per cent in the last one year, adding that they used to import different grades of PP, HDPE, LDPE, filler, colour masterbatch and additives for $950 – $1,150 in the same months last year.
But the prices have now hit $1,350 – $1,550 per tonne. The current rates are slightly lower than $1,650 per tonne recorded a week ago.
Bangladesh usually imports plastic industry raw materials from the Middle Eastern countries and from Vietnam, Singapore, Malaysia, and Thailand too.
Bangladesh Plastic Goods Manufacturers Association’s Vice-President and Yakin Polymer Chairman Kazi Anwarul Haque said, “The price of plastic industry raw material prices are linked to fuel oil rates.
“Due to a number of recent factors, the prices of some raw materials have increased by as much as 100 per cent. Raw material prices have gone down by $50 – $70 per tonne in recent weeks, but we have doubts about whether this price will remain stable in the coming days.”
Electrical, electronic home appliances
Local manufacturers of home appliances – such as TV, refrigerator, air conditioner, microwave oven, ceiling fan and irons – import sheet metal, tempered glass, foaming chemicals, resin, copper, aluminium and steel tubes and many other raw materials and components.
Most of these raw materials come from Korea and China, while some are imported from India and Taiwan.
Entrepreneurs say after the Covid crisis pushed up freight charges and USD rate, and due to several other issues, the price of raw material used in the industry has gone up by around 20 percent to 60 per cent.
Chief Supply Chain Management Officer Mohammad Mohasin Sarder of Walton Hi-Tech Industries – one of the country’s largest home appliance manufacturers, said, of the raw material and components, 45 per cent are imported from Korea, 35 per cent from China, 5 per cent from Taiwan, 5 per cent from India and the remaining 10 per cent from other countries.
He added, “When volatility – triggered during the post-Covid period – hit the global supply chain, the prices of foaming chemicals and resin rose by 50 per cent to 60 per cent compared to the usual rates.
“Moreover, sheet metal prices have increased by 40 per cent to 50 per cent, tube items 60 per cent, tempered glass 40 per cent, electronic components 20 per cent to 25 per cent, and packaging paper 40 per cent to 45 per cent.”
The shipping costs too increased three to fourfold depending on the country. In terms of LC payments, the USD exchange rate has gone up by 14 per cent.
Rod and cement industry
Clinker – a raw material used by the cement industry – is a major import of Bangladesh. The industry also imports 3-4 other types of raw material including limestone.
The prices of these raw materials have gone up due to the recent circumstances, which in turn pushed the price of cement up in the local market.
Managing Director of Metrocem Cement Md Shahidullah said, “We import key raw materials such as clinker from Indonesia, Malaysia, UAE, Saudi Arabia, Vietnam, Pakistan, and Thailand.
“The price of this material has reached $68 per tonne, compared to $40 recorded last year. Besides, freight fare also went up during the period. The exporting countries blamed the price hike on skyrocketing coal prices.”
Clinker prices will not go down until the Russia-Ukraine war ends and the USD rate comes down, he added.
Bangladesh Steel Manufacturers Association (BSMA) General Secretary Md Shahidullah said, “We import raw materials such as scrap from Europe, US, Australia, Africa and some countries of the Middle East to produce rods.
“The raw material prices had increased from $280-$320 to $550-$580 per tonne in one year. However, the prices dropped to $540 per tonne in the international market a month ago.”
He continued, “The price of chemicals per tonne rose to $1,400 from $700 - $800 during the same period. The ongoing scarcity of raw materials is creating a challenge for manufacturers.
“Meanwhile, freight fares rose from $800 a year ago to $2,500 – $3,000 now. The overall increase in raw material rates is impacting the price of locally manufactured products. We will readjust our prices if the price of raw materials and other associated costs go down.”
Ceramic industry
The CEO of Shinepukur Ceramics Ltd Mohammed Humayun Kabir said, “About 20-25 raw materials are needed to manufacture a quality ceramic product.
“Of those, most of the raw materials are imported from different countries such as the UK, Japan, New Zealand, China, India, Egypt, Thailand and Vietnam. We are facing a challenge at the sourcing level while importing raw materials due to the rising rate of USD.”
