Rod prices are spiralling with the soaring prices of melting scraps in the international market in the wake of US's announcement of 25 percent and 10 percent tariffs on steel and aluminium imports respectively from March 23.
The development has left realtors sweating: the price hike of rod, the most important material for the construction industry, comes at a time when the real estate sector has just started to look up after years of downturn.
“The price hike will affect the sector seriously,” said Alamgir Shamsul Alamin, president of the Real Estate & Housing Association of Bangladesh.
American millers have been stockpiling scraps, a raw material for steel, upon anticipation of the protectionist move by Trump administration, escalating the prices in the global market.
The US, the world's largest economy, generates 60 percent of the global scraps, according to Manwar Hossain, chairman of the Bangladesh Auto Re-Rolling & Steel Mills Association (Barsma) that represents the country's burgeoning steel industry.
“US President Donald Trump had been talking about levying tariff on steel imports for nearly a year,” he said, adding that the prices of rod have risen more than 20 percent since the turn of this year.
As the time of the announcement drew nearer, American traders went all in building stocks.
The price of each tonne of scrap, which was $310 in the third quarter of 2017, now stands at $435, according to Hossain.
Bangladesh imported 22 lakh tonnes of scrap last year to make billet for steel -- and the US was one of the main sources for local steel millers.
The country requires 40 lakh tonnes of raw materials, mainly scraps, to make billet for manufacturing steel, whose demand grew 11 percent last year.
Of the sum, 35 lakh tonnes are imported and the rest is collected from ship breakers and domestic market, said Tapan Sengupta, executive director of BSRM, one of the biggest steel manufacturers in Bangladesh.
Scrap supply from the US has declined, causing the prices of the raw material to rise globally, he said, adding that the prices of scraps have risen in the local market in the last two and a half months.
“I am very much concerned. Our production cost puts us at risk,” said Hossain, also the managing director of Anwar Group of Industries that also has steel mills.
Since January 1, the price of rod (60-grade), the most important raw material for the construction industry, rose 18 percent, according to data from the Trading Corporation of Bangladesh.
On the first day of January, each tonne of 60-grade rod sold for Tk 53,500-Tk 54,500 in Dhaka city; yesterday, they went for Tk 62,000-Tk 65,000.
However, the same grade of rod sold for Tk 65,500-Tk 67,600 at the retails in Dhaka, Chittagong, Narayanganj and Feni, according to some retailers.
The increased import costs for the weakening of taka against the US dollar and the higher transport costs owing to restriction on overloading also impacted the prices of rod, millers said. “The prices have not increased overnight. Our production cost is rising and is being adjusted at the end-users' level,” Sengupta said.
In 2017, the local millers manufactured 55 lakh tonnes of steel, according to Barsma.
Locally, the scrap price increased more than in the international market thanks to a section of opportunistic scrap traders, said Md Sheikh Kamal, vice-president of the Bangladesh Steel Mills Owners' Association.
Not only rod but the price of cement also rose Tk 40 to Tk 60 per bag, so a developer has to delay or shut down construction works to keep the cost lower.
“This will create wrangle among landowners, developers and apartment buyers,” he added. Realtors echoed the same.
The rising prices of rod will have a huge impact not only on the real estate sector but also the overall construction sector, said Toufiq M Seraj, managing director of Sheltech, one of the leading developers in Bangladesh.