Bangladesh Steelmakers Squeezed by Higher Costs and Weak Demand

Jagaran Chakma, Dhaka — Local steelmakers are facing higher production costs just as construction demand remains weak, forcing mills to offer discounts to keep sales moving — a margin squeeze that highlights the broader industrial stress from the energy crisis and economic slowdown.

The price of 60-grade mild steel (MS) rod, widely used in construction, has risen to Tk 92,500-Tk 94,500 per tonne from Tk 88,000-Tk 92,000 a month earlier, according to the Trading Corporation of Bangladesh (TCB). But the higher quoted prices have not translated into better returns, as manufacturers are cutting prices through discounts to secure orders.

💰 Cost Pressure Sources

• ⚡ Electricity tariff increase: +17.86% for industrial consumers (June 2026)
• ⚡ Gas shortages: low gas pressure affecting reheating furnaces
• ⚡ Power disruptions: frequent load shedding
• 💰 Higher fuel costs: transport and logistics
• 💰 Port charges and VAT: additional cost burden

💰 Cost Breakdown per Tonne

• 💰 Electricity tariff impact: +Tk 1,785 per tonne
• 💰 VAT, port charges, fuel, transport: additional ~Tk 1,775 per tonne
• 💰 Total additional cost: ~Tk 3,560 per tonne
• 💰 Price increase implemented: Tk 2,500-Tk 3,000 per tonne
• 💰 Discounts offered: ~Tk 1,500 per tonne
• 📊 Net price increase visible: ~Tk 1,000 per tonne

👥 Industry Leaders' Assessment

Sumon Chowdhury, Secretary General of the Bangladesh Steel Mill Association (BSMA): "Steel manufacturers have been forced to raise prices by around Tk 2,500-Tk 3,000 per tonne due to higher power tariffs, but inadequate gas supply and frequent power disruptions are making production increasingly difficult."

Mohammad Jahangir Alam, BSMA President: The electricity tariff increase alone raised production costs by about Tk 1,785 per tonne. After accounting for VAT, port charges, fuel, transportation and other expenses, the additional cost reaches about Tk 3,560 per tonne.

Manwar Hossain, Chairman of Anwar Group of Industries (Anwar Ispat): "The basic problem is demand generation. There is hardly any demand in the market now, and we are having to sell products with great difficulty." Steel prices rose by about Tk 1,000 per tonne, but manufacturers were offering discounts of around Tk 1,500 to secure sales.

📊 Market Activity and Demand

• 📊 Market activity: 50-60% of normal levels
• 📊 Construction demand: weak, not generating sufficient orders
• 📊 Quoted price vs selling price gap: Tk 1,500/tonne discount
• 📊 MS rod price: Tk 92,500-94,500/tonne (up from Tk 88,000-92,000)

🏢 Industry Capacity vs Demand

• 🏢 Modern steel mills: ~40 in Bangladesh
• 🏢 Re-rolling mills: 150+
• 📊 Combined annual capacity: ~1.22 crore (12.2 million) tonnes
• 📊 Domestic demand: only ~50 lakh (5 million) tonnes/year
• 📊 Capacity utilisation: ~41% (5M demand vs 12.2M capacity)
• 📊 Current operation rate: 50-60% of capacity (due to gas/power)

⚡ Gas Shortage Impact on Production

Gas shortages are particularly damaging for mills that depend on reheating furnaces:

• ⚡ Gas burners shut: some mills' burners closed for 13+ days
• ⚡ Ladle preheating: needs 600-700°C gas heating before molten steel pouring
• ⚡ 50-60% capacity operation: due to load shedding and low gas pressure
• ⚡ Intermittent gas supply: pressure improves temporarily then falls again

🌏 Strategic Context

• 📊 660 textile mills also affected by gas shortage (ID 458)
• 📊 62 power plants faced generation disruption
• 📊 400+ RMG factories closed in 3 years (ID 513)
• 📊 Government bank borrowing FY26: Tk 165,538 crore
• 📊 Government spending pressure: 42% of budget on non-discretionary items
• 📊 ADP spending: 10 ministries with zero spending in July

🌏 Strategic Implications

• ⚠️ Cost-demand squeeze: costs rising while demand at 50-60%
• ⚠️ Discount absorption: Tk 1,500/tonne discounts eroding margins
• ⚠️ 41% capacity utilisation: massive overcapacity vs demand
• ⚠️ Gas shortage critical: 13+ days of burner shutdown
• ⚠️ Construction slowdown: weak demand across sector
• ✅ Price adjustment attempted: Tk 2,500-3,000/tonne increase
• ✅ Industry organisation: BSMA representing 40 mills + 150 re-rolling

The steelmakers' margin squeeze represents a microcosm of the broader industrial stress affecting Bangladesh's manufacturing sector — with rising energy costs (17.86% electricity tariff increase), gas supply disruptions (13+ day burner shutdowns), and weak construction demand (50-60% of normal) creating a perfect storm for an industry already operating at only 41% capacity utilisation. The Tk 1,500 per tonne discount being offered to secure sales demonstrates the gap between quoted prices and actual market clearing prices — a pattern that reflects the fundamental demand deficiency in the construction sector and the broader economy through the LDC graduation transition period.