Bangladesh: Scrap Imports to Surge Further Amid Rising Billet Production

Bangladesh is aiming high to become self-sufficient in billet production as several large steel mills in country initiated with making huge investment in billet manufacturing. It is projected that in two years Bangladesh will not need to import billets and may start exporting it.

Bangladesh is planning to produce premium quality billet domestically in order to get control over raw materials to fight against fluctuating import prices and to cut import dependency.

As per statistics, the country's billet production capacity is almost doubled in CY16 as right now it is producing 3.5- 4 MnT billet annually, accounting for more than two-thirds of the total yearly demand.

According to data from Chittagong Customs, billet imports slumped 34 % Y-o-Y to 1.15 MnT in CY16, while scrap imports surged 99 % Y-o-Y to 2.16 MnT in CY16.

Changes in duty structures and agreements were the reason behind fall in billet import and cheaper scrap offers resulted in increase in scrap imports. SAFTA agreement between SAARC nations expired on 31 Dec’16 which was later extended. Billets attracted a regulatory duty of 20% at a tariff value to USD 400/MT and 15% VAT before budget, in the budget announced on 01 Jun’17 this has been kept unchanged. On the other hand Specific duty on scrap imports which was at Taka 1500 before budget has been replaced with 5% regulatory duty and 15% VAT.

But a serious issue to be fixed yet is-imported vessels with scrap often have to wait for a long time at ports, causing importers to pay fines.

Presently, insufficient domestic production of crude steel leading country to move towards backward integration and imports of scrap surged highly but many mills that do not make billets and depend on imports have found it tough to do business against duty hike.

The increased domestic production of billet has reduced the cost of import and as per reports mills are saving minimum of USD 150 /MT by importing scrap.

Bangladesh’s leading mill BSRM increased its billet making capacity almost four times to 1.3 MnT in the last one and a half years. Other major mills like Abul Khair Steel, Kabir Steel Re-rolling Mills and GPH Ispat, have also raised their billet making capacity to cater to the rising demand for steel.

Bangladesh based steel mills have requested the government to ensure long-term low-cost loans to facilitate increased investment in the steel industry

Bangladesh’s economy is growing up with lot of expansion projects and development.