Reinforcing Dominance
*BSRM cements its position as the pillar of the steel industry
With development activities of the government and the booming house sector, how is the consumption rate going to be affected by these two trends?
Bangladesh is currently on a growth momentum and predictions by international agencies note that Bangladesh has a good potential for the future. Steel consumption will increase. With economic growth currently standing at 7%+, construction industry should also be growing by around 10%, investments should keep happening in the country. Steel consumption growth is highly correlated with GDP growth therefore, as long as Bangladesh keeps growing, steel market size will keep increasing as well.
What are the ongoing challenges of the steel industry?
Gas supply has to be consistent which has been a challenge in the past including getting allocation for higher quantities. Since LNG import has started, the problem should be resolved soon. Once the LNG supply starts coming on a regular basis there will be further infrastructure ready to receive a higher quantity of LNG in the future.
The government had suddenly imposed weight limit restrictions on loads on trucks last year. As a consequence, we had to incur huge costs as more vehicles were being required for the same quantity of goods. Lack of adequate vehicles also increased the cost of deliveries and created a crisis. The load restrictions are good and prevalent in many developed countries. However, we should set the load restrictions based on international standards and construct roads and highways as per international standard. Current load restrictions set are lower than what the vehicles, especially the larger axel ones, can carry as per international standards which is a waste of the country’s resources.
Policy decisions should not be made suddenly like the weight restriction on the highways. It is important to comply with restrictions but time should be given so that the companies in the transport business are able to adapt to it. The focus should always be made on business continuity. When adopting new policies, regulators should be mindful of that. This impacts the Ease of Doing Business for the business community.
Port capacity needs to be enhanced as a lot of money is being drained for paying demurrages on imports either directly or through higher freight payments. The country is losing millions of dollars every year due to port congestion and costs of doing business also increase for the business community.
Compliance to local steel standards should be ensured by the government and relevant department like BSTI. There are some substandard products manufactured and sold in the country which should not be used in any construction. In the Steel industry, cost of compliance to international standards is very high and therefore, very difficult for compliant companies to compete with non-standard products available in the market.
Can you tell us how/if the U.S – China trade war has impacted the Bangladesh steel industry?
It has impacted the industry in terms of fluctuating raw materials prices in the international market. Price uncertainty in the international market is causing price fluctuations more frequently and causing domestic market instability. Markets need a stable environment to operate. When there is too much uncertainty, then speculation and feelings come into play which distorts markets.
The price of a 60-grade rod increased by 18%, while 40-grade increased by 17%. Given that they are the main input materials in construction, what does it mean for the industry’s growth?
Load restrictions on local transport vehicles and Chattogram port congestion have pushed costs up. Our objective is to keep working on reducing costs, keep utility costs in control. We expect that in the upcoming vat law, the government will lower the vat rate to encourage the growth of the industry. International prices of raw materials have also increased and there has been a gradual devaluation of the taka as well. Financial costs have also increased from earlier single-digit rates which have pushed up costs for the industry. Companies performance in the industry has been consistent and the prices increases in the past have been driven by cost increases.
Increase in prices is in no one’s interest. If price increases, demand also reduces because affordability comes into questions. Whether it’s a large project or a residential project, they are all based on budgets and approvals and therefore consumption comes down. The steel industry needs support from the government in making sure the cost of import logistics, local logistics, gas and electricity prices, VAT, Income tax and other government-related costs are kept in control and policy decisions are taken which reduces costs of doing business instead of the opposite, which has been happening in the last few years.
Tell us about BSRM’s role in the Mirsarai Economic Zone?
We are supporting economic zones by providing epoxy coated rebar’s, known as BSRM Centura, which is a corrosion resistant steel. Economic zone areas are prone to corrosion due to high salinity in the area. In the future, we will be developing new industry once the economic zone is completed.
BSRM produced the 50mm reinforcing steel solely for the construction of the Padma Bridge, consequently becoming the sole manufacturer of 50mm diameter reinforcing steel in the sub-continent. Does BSRM have plans to export them?
50mm is a unique size used in very large projects depending on soil load condition. If there is any demand in the region, we will be able to cater to it.
With BSRM looking to launch operations in Kenya. What does this mean in terms of expansion for the company?
We are investing in a plant in Kenya with local partners there, it is still at a planning stage.
BSRM enjoys a reputation of being the market leader. How has the company retained its position in the industry?
We have maintained product quality. Grown as a company with consistent economic growth. We have a pool of talented people contributing positively to the goals of the company. We have a good culture in terms of systems and corporate governance and high ethical standards. We treat our employees fairly and equally. We are also socially responsible, continuously investing in CSR activities.
