Construction industry to face ruin on further hike in MS rod prices

File photo shows a worker laying rod at a construction site in Dhaka. International media reports say manufacturers and miners would raise the price of iron ore, the raw material of MS (mild steel) rod, by 65 per cent from April 1.

The construction industry will face a ruin on any further hike in the price of iron rod, an important construction material, as apartment prices have already gone beyond the reach of common buyers, a seminar in Dhaka was told yesterday.
International media reports say manufacturers and miners would raise the price of iron ore, the raw material of MS (mild steel) rod, by 65 per cent from April 1.
Bangladesh meets 75 per cent of the domestic demand for 25-30 lakh tonnes of steel and iron products through import, while the rest 25 per cent comes from the local ship breaking industry, according to industry insiders.
"Generally developers take advance order for apartments on an agreed price and handover those to the buyers in a span of one or two years. But we fear we will be forced to either resettle apartment prices or cancel orders because of the skyrocketing prices of MS rod, sand and bricks,” Tanveerul Haque Probal, general secretary of REHAB (Real Estate and Housing Association of Bangladesh), told the seminar, moderated by Dr Qazi Kholiquzzaman, president of Bangladesh Economic Association.
Media Foundation for Trade and Development organized it at the National Press Club. Besides different stakeholders of the sector, Mahbub Jamil, chief adviser's special assistant for industries, civil aviation and tourism, and Mohammad Abdul Majid, NBR (National Board of Revenue) chairman, spoke at the seminar.
The REHAB secretary anticipated a setback for the country's construction industry, 15 per cent of which is shared by 361 REHAB members and the remaining 85 per cent by government, individuals and other developers.
Meanwhile, a set of recommendations to overcome the possible crisis were put forward by the speakers at the function, which included government's immediate initiative to formulate a steel sector policy, rationalisation of tariff structure and devaluation of dollar against the local currency.
Local market sources said 60-grade MS rod is now selling at Tk 63,000-64,000 a tonne and 40-grade rod Tk 58,000-59,000 a tonne.
The prices of MS rod have soared because ship breakers have recently raised the prices of iron ore, as said by Masudul Alam Masud, general secretary of the Bangladesh Re-rolling Mills Association, at the seminar.
Masud said in January 2006 the price of ship scrap was Tk29,000 a tonne, which increased to Tk 46,000 a tonne.
Terming the tariff structure 'irrational', he said, “The ship breakers give Tk 1,000 as tax against a tonne of scrap, while we have to pay around Tk 3,800 against the import of a tonne of scrap.”
Denying the ship breakers' role in the hike in scrap prices, PHP Group Chairman Sufi Mizanur Rahman said, "The supply of ships have decreased as well as the cost of old ships have increased recently, which led to such a price hike.”
Borhan Ahmed, the CAB (Consumer Association of Bangladesh) president, pointed to the fact that construction work on as many as 138 schools has been stopped due to unreasonable price spiral of construction materials.
"Before starting the construction of those schools students attended their classes in huts and wood-made houses, but now they have no place," he added.
Shamsul Kamrain, president of Bangladesh Contractors Association, demanded of the government to form a commission for monitoring the local market of construction materials to contain the price hike.
"If the money for any construction work come from foreign source, there is a provision of readjustment of cost in tenders in case of any hike in the prices of raw materials, but such a provision is absent for any locally-funded construction work," Mahbub Zamil said.
"Recently this irrational law came to the notice of the Chief Adviser and he expressed his annoyance at it," he added.
The NBR chairman urged the steel sector people to set up a working committee and to place some concrete proposals on taxes before the board.