Bangladesh is one of Asia’s most emerging steel markets owing to consistent GDP growth for quite some time.
In 2016, crude steel production has increased from less than one MnT to over three MnT. It is expected to increase further to over 5 MnT by 2017/2018.
Large players such as Abul Khair and BSRM have already commissioned high-capacity induction and electric arc furnaces. Other players are in the process to expand their steel making capacities.
In an exclusive interview, Mr Amir Alihussain, MD, Bangladesh Steel Re-Rolling Mills Ltd (BSRM), explains opportunities and challenges to be faced by country in coming time.
1. Steel making and rolling capacities are seen to be increasing rapidly in Bangladesh. Is demand also rising at similar pace?
A. Demand for steel is increasing in Bangladesh and that is the reason for capacity expansion. GDP growth in the country has been consistent between 6% and 7% every year for the past 15 years or so including the global troubled years of 2008 and 2009. With increasing GDP, there has also been growth in the steel demand in the country.
2. Are smaller mills being displaced by large steel companies? Will the reshaping of the domestic steel industry help enhance production?
A. Every sector within the steel industry plays a role in fulfilling the demand in the country. Even smaller units are moving towards producing graded materials as well as expanding their capacities. The market has been growing for mainly graded materials hence there is no option but to move towards producing as per national and international standards.
3. Bangladesh government has imposed 20% regulatory duty plus VAT on imported billets (all origin). Is the VAT not modvatable ? Will it support the domestic industry?
A. There is 20% Regulatory Duty and 15% VAT on import of billets and a minimum tariff value of USD 380 for assessment of taxes at import stage. For melting scrap, import duty is Taka 1,500 per ton fixed. The tax differential is very high and discourages import of billets. The Vat on billets is not adjustable. The country is not self sufficient in billets, so billets will still be imported at a cost much higher than the cost of making billets locally.
4. Import of Pencil Ingots (HS Code 720601) in Bangladesh from India increased in August this year as it does not attract any duty. Is the government taking any step to restrict it?
A. Steel associations in the country have taken up the matter with the government.
5. Bangladesh is expected to be one of the largest importers of scrap in Asia soon. What could be scrap import numbers in coming years?
A. Scrap import this year would be around 2 million tonnes. In future, scrap import is going to increase as the government is discouraging import of billets.
6. Bangladesh is quickly switching to coal based power plants in order to match rising demand of power in the country. What is the current state of these projects and when do we see actual generation from these plants?
A. Bangladesh is taking up many power projects including coal based power projects. It will take some time to set up these large projects as the country is still not used to set up such large coal based power projects as well as nuclear power plant. However, the government is serious in doing these projects and once they create the infrastructure for coal handling and transportation, these projects will also be completed. No new power will be generated by coal based power projects in the coming 2 to 3 years at least as the projects are just starting. Other power plants will come online during this time and country’s demand will be met accordingly.
7. Are Bangladesh steel makers keen on technology upgrades for quality steel production? Are there any government incentives for the same?
A. Companies which are expanding capacities are going for technology upgrades because graded material needs to be produced in the country in order to fulfill the country’s demand. There are some government income tax incentives in investing in new plants. Other than that, no other incentives are provided.
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