Rod prices still high: Real estate sector worried | The Daily Star
12:00 AM, July 29, 2018 / LAST MODIFIED: 03:24 PM, July 29, 2018

Rod prices still high: Real estate sector worried

Rod prices have remained at a high level since April this year—a scenario that steel-makers describe as very stable. But construction companies and realtors on the other hand say that the key construction item is too pricey.

Prices of better quality mild-steel rod (60-grade) were Tk 64,500 to Tk 66,500 per tonne on July 22, down 2.24 percent from Tk 66,000 to Tk 68,000 from a month ago, but up 22.43 percent from Tk 53,000 to Tk 54,000 a year ago, according to state-run Trading Corporation Bangladesh. 

Forty-grade MS rod was sold at Tk 56,000-Tk 58,000 per tonne on the same day, down 1.72 percent from Tk 57,000-Tk 59,000 from a month ago. But it was up 21.28 percent from Tk 46,000-Tk 48,000 on the same day a year ago.

“The price is stable now,” says SK Masadul Alam Masud, a former chairman of the Bangladesh Auto Re-rolling and Steel Mills Association. But Munir Uddin Ahmed, president of the Bangladesh Association of Construction Industries (BACI), says: “Tk 60,000 per tonne would be a tolerable price.”

On the first day of January, each tonne of 60-grade rod sold for Tk 53,500–Tk 54,500 in Dhaka city. In April, it shot up to Tk 73,490 a tonne. Steel-makers blamed higher US dollar price, higher cost of bank loans, the restriction on vehicles on carrying more than 13 tonnes of goods, hike in energy prices, demurrage at ports, higher transport cost, and an increase in raw material prices in the international market for the higher rod prices in Bangladesh.

The situation hasn't changed much since then other than some fall in the price of raw materials, says Masud, also the managing director of Shahriar Steel Mills Ltd. According to him, normally rod prices go down significantly during rainy seasons as construction activities almost come to a halt because of inclement weather. But that hasn't happened this year, leading real estate developers and other consumers to complain that the price has been too high.

The ongoing government projects along with regular construction projects even during the rainy seasons have helped keep the demand for rod stronger, says Masud.  “So, the price has not plummeted.”

Bangladesh's rod consumption has been growing at a healthy pace in the last several years thanks to higher purchasing power of people in the rural areas and an increase in the number of development projects undertaken by the government. Annual consumption rose by 15 to 20 percent in the last two years from 10 percent per year previously.  Bangladesh today consumes about 55 lakh tonnes of rod a year and has an installed production capacity of 70 lakh tonnes to 90 lakh tonnes.

Tapan Sengupta, executive director of BSRM Group, says the notion that steel-millers are making hefty profit at the current price of rod is not true. “Everybody can see what the prices of raw materials in the international market are.”

There are about 300 to 400 steel mills in Bangladesh, Sengupta says. He said rod prices would remain stable in the coming days as the prices of raw materials are steady in the global market.

BACI's Ahmed says the price of rod skyrocketed suddenly but such prices are not sustainable because it will slow down projects and companies with a large number of projects will be weakened financially. “Project implementation will get lengthy. As a result, the cost of projects will go up and companies will lose their competitiveness.”

He says that steel-millers have made the country self-sufficient in steel production and cut import reliance. In recent years, they have invested a lot of money to modernise factories, but that doesn't mean one will realise all the capital investment in just a single year, Ahmed, also the managing director of Star-delta Engineers Ltd, adds. He urged steel-makers to think long-term and raise prices as per hike in prices of raw material and associated costs.

Toufiq M Seraj, managing director of Sheltech (Pvt.) Ltd, says that rod prices have remained at an unsustainable level and it has a negative impact on the real estate industry. The price hike for the most important material for the construction industry comes at a time when the real estate sector has just started to look up after years of downturn,  according to him. The real estate sector has no leeway to increase the price of apartments. “Either companies will have to make less profit or sell products at losses," he says.

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