The prince of steel
It could be said that Aameir Alihussain was born with a silver spoon in his mouth, but it would be more accurate to say the spoon was stainless steel; for his rise was one of privilege tempered with honest sweat.
After completing his MBA in Pakistan's Lahore University of Management Sciences, he joined the family business, BSRM Steel Mills Ltd, as a director. But first Alihussain had to get his hands roughened: he was initially sent to the manufacturing plant to learn about the steel business.
When Alihussain was called to the head office in 2007 to become the managing director, six years of wearing a hard hat had given the polished MBA the grit to head a company that has made steel since 1952 and is now the country's only third-generation business in the sector.
He recently shared his views about the steel industry in Bangladesh; its opportunities, issues and prospects.
Alihussain says local steel industries meet the demand of the country and traditionally always have some excess capacity, so can meet any export demand: "There is a good opportunity to export to the seven sister-states of eastern India, where Bangladesh has a very big advantage of geography, to supply not only steel but any locally made products."
He says there should be no barriers to steel exports from Bangladesh; that trade agreements should ensure Bangladesh gets duty-free access to Indian eastern states -- and with less cut red tape.
"The steel industry in Bangladesh has a good future because we have grown steadily in the last 15 years," Alihussain says. “The steel industry's growth is highly correlated with that of the economy, and therefore when the economy does well, the industry will also do well.”
For the industry to grow, he says, the government needs to ensure basic infrastructure, power, gas and an educated workforce -- without which, industrial growth will sputter.
In the industry, “mild steel” rebar (known as “MS rod”) is central, providing the bones inside the concrete muscle that holds buildings together.
Alihussain says its quality is often not up to snuff: "Only some companies make rebar conforming to international standards, and a significant percentage of materials produced in the country follows no international or BSTI standards.
“Lack of implementation and enforcement of standards is extremely dangerous for a country like ours, which is in an earthquake zone."
Steel production in the country is fairly efficient when in automated plants; but he explains that this isn't enough: “As an industry, we have a long way to go to match Western efficiency levels.
“We are efficient, not in operations, but in costs. Our cost of labour, power and gas is among the lowest in the world, which gives us a competitive advantage.
“However, due to our port restrictions, all raw materials that we import cost us more in freight compared to our neighbouring countries, and this makes us not as cost-efficient for exports, which overrides the benefits of low-cost utilities.
Alihussain notes that steel making requires a lot of energy, good infrastructure and qualified human resources: "As a nation, we are lacking in all these.
"Regardless of the odds, we are growing; and one can only imagine how much growth we will have if we solve the basic problems in the country."
He says Bangladesh is adopting new technologies but still has long way to go to improve as an industry. "As our economy keeps growing and size of the industry grows, more and more companies will be able to afford newer technologies."
Although state intervention is infrequent, whenever the government does intervene, it distorts in the market, Alihussain says. For example, the caretaker government saw global and local steel prices were very high in 2008, so it forced steel makers to keep lower prices.
That hurt investment in the industry, as well as the bottom line, he says: "That intervention cost the industry many crore of taka in losses, and the industry is still suffering. To this day, those losses have not been recovered."
Alihussain favours only subsidies that level the playing field for industry: "We have long proposed a subsidy on furnace oil, such that the cost of power generated from furnace oil and gas is the same, and the government can have one fixed price for the purchase of power from producers whether it is based on gas or furnace oil.
“This will automatically bring many more entrepreneurs to invest in the power sector, which currently is not happening fast enough due to the faulty policies."
He says there are so many steel manufacturers that it is impossible for them to raise market prices with a syndicate, hoarding, etc. "The steel market operates in the most competitive environment at all times. There is no need for government to intervene at any point in time and create a disequilibrium."
The future of local steel, Alihussain says, is to become greener as well as automated. "We are focussing also on the environment, and have installed fume-extraction systems that work efficiently to protect our environment by controlling the air discharged from the plant.”