In fits and starts

Features - International Markets

Bangladesh has an upward trajectory as a scrap importer, but commodity and supply chain turmoil provide resistance.

August 24, 2022

The Padma Bridge in Bangladesh is one example of projects in that nation that need steel bars and beams.
© Sourav / stock.adobe.com

Measured by gross domestic product (GDP), Bangladesh has about the 30th largest national economy in the world, depending on which economic organization is compiling the rankings. Yet the nation’s steel industry emerged as the sixth-largest buyer of ferrous scrap exported from the United States in 2021.

Urbanization, industrialization and a rapid infrastructure buildout all are contributing to the nation’s growing production of steel, according to an economic development official contacted by Recycling Today. If the nation stays on track with its growth plans, its need for other scrap materials could soon follow.

Economic growth seldom moves in a straight line, however, and 2022 is shaping up to be a year when some of the expected scrap demand in Bangladesh has run into formidable obstacles.

Among the dominoes

Russia’s invasion of Ukraine in late February, followed by swift and comprehensive sanctions on Russia by the U.S. and other nations, have resulted in the breaking and shifting of commodity trading patterns well beyond the Eastern European region.

An official with a Dhaka, Bangladesh-based international trade and economic development association, who prefers anonymity, told Recycling Today in early March that ripple effects from the conflict were likely to impact his nation.

As of mid-July, his prediction has proven prescient when it comes to circumstances within the Bangladesh steel and ship recycling sectors.

Earlier in the month, Greece-based Hellenic Shipping News and London-based Clarkson Platou Hellas reported that the ship dismantling sector in Bangladesh and neighboring nations was “in turmoil.”

A shortage of U.S. dollars in Bangladesh was cited as one factor for that turmoil, but a Ukraine war-related factor involves a flood of Russian steel billet.

Scrapped vessels from around the world, along with ferrous scrap shipped from other nations, are commonly imported goods in Bangladesh. The vessels provide reusable steel plate and, along with imported scrap, feedstock for the nation’s steel-producing induction and electric arc furnaces (EAFs).

The Russian billet, however, appears to be reducing the need for either ships or No. 1 heavy melting steel (HMS). Shipping news service TradeWinds.com reports in early July that the Bangladesh Ship Breakers Association had advised its member firms not to sell any steel scrap to mills following a $100 per metric ton drop in the scrap’s value.

Another side effect of Russia’s invasion has been the roiling of global energy markets, involving access to Russian oil in an era of U.S. sanctions and higher prices for oil and natural gas as a ripple effect.

By July 7, the Dhaka-based Daily Star reported that “a deepening energy crisis is hitting industries in Bangladesh hard, forcing them to cut production by as much as 50 percent as escalated import bills have forced the country to lower gas purchases from international sources.”

The article mentions the steel industry specifically, with Aameir Alihussain, managing director of EAF producer Bangladesh Steel Re-Rolling Mills Ltd. (BSRM), quoted as saying, “It is a very difficult situation. We are already incurring losses. The energy crisis will widen our losses.”

Alihussain expresses understanding that power cuts will be necessary but adds they “should be kept at a minimum level for industries. Otherwise, the wheels of the economy will slow down.”

© mehaniq41 / stock.adobe.com

Stitching together growth

The 2022 turmoil should not completely eclipse what often has been a good economic development story in Bangladesh. In the past several decades, the trade association official says, rapid growth in the textiles industry has helped spur much of the recent economic growth in Bangladesh.

“It was a driving force to the rise of a middle class and of a better-paid workforce,” he says.

Advances in the nation’s agricultural sector have spurred greater urbanization and a connected leap in construction activity, according to the association executive. As well, a steady flow of remittances from overseas migrant workers bolsters the nation’s currency reserves.

The steel industry in Bangladesh has grown to support these trends, the association head says. He characterizes that sector as being somewhat fragmented. Among the Bangladesh steel producers Recycling Today has reported on, however, are Chittagong-based BSRM and the Bashundhara Group, which is headquartered in Dhaka.

A recent profile of BSRM portrays the company as making 1.8 million metric tons of steel billet annually. Bashundhara Group, meanwhile, is working with Italy-based steel equipment maker Danieli to install what the two companies call and “endless- casting rolling minimill” to produce more than 1 million metric tons per year of steel rebar and wire rod using EAF technology.

Notwithstanding global commodity disruptions, the sector is likely to stay on its growth track—pending the seriousness of 2022 turmoil—as massive infrastructure projects such as a metro rail system in Dhaka, a lengthy transportation tunnel in Chittagong and the 41-span 3.8-mile-long combined highway and rail Padma Bridge continue to require steel bars and beams.

Steel could be the early beneficiary of Bangladesh’s economic fast track (the nation has averaged nearly 6 percent annual GDP growth during the past two decades), but the association chair says he also knows of producers of aluminum, copper, containerboard and plastic that all will have growing raw materials requirements.

“The growth pattern is there, and this in a nation with more than 160 million people,” he says. “Imagine it like a mini- China. There is a market, and we soon will have more than 100 special economic zones. That will entail yet more construction and more requirements for metals.”

In the scrap sector, some U.S.-based processors and traders clearly already are benefiting from the Bangladesh economic growth story. Overseas suppliers of other scrap materials to Bangladesh ultimately “will make a lot of money” the trade association executive predicts.

While U.S. Census Bureau statistics placed Bangladesh sixth on the buyers’ list for ferrous scrap from the U.S. in 2021, as of last year, the nation did not make an impact in terms of aluminum or copper scrap purchases. “That’s going to change,” he forecasts.

A glance at the numbers

Data gathered by the U.S. Census Bureau and aggregated by the U.S. Geological Survey (USGS) indicate Bangladesh still is not importing sufficient aluminum or red metal scrap to be included in the USGS scrap export tables for those nonferrous metals.

In the ferrous sector, however, Bangladesh started the year behind only Turkey as a large-scale buyer of scrap exported from the U.S.

As of July, the USGS has published data only on the first two months of this year, which coincide with a pace of business as yet unaffected by Russia’s invasion of Ukraine and resulting energy and commodities turmoil.

In January and February of this year, however, Bangladesh brought in 344,000 metric tons of U.S. ferrous scrap. That was well behind the 660,000 metric tons Turkey purchased from the U.S., but it outpaced neighboring India (74,000 metric tons) and fellow Indian subcontinent nation Pakistan (107,000 metric tons).

USGS does not break down which grades are shipped to specific nations. It does portray export grades overall in a given time frame, however.

In the first two months of this year, when Bangladesh was a heavy buyer, the most heavily exported grades by far were ferrous shred and No. 1 HMS.

Of the 2.27 million metric tons leaving ports in the U.S, 903,000 metric tons (39.8 percent) were shred and 833,000 metric tons (36.7 percent) were No. 1 HMS. Well behind in third and fourth place were No. 2 HMS (124,000 metric tons) and cut plate and structural steel (119,000 metric tons).

Ferrous scrap exporters who already have a relationship with Bangladeshi buyers, per the trade group official’s suggestion, could be making “a lot of money” already.

The profit margins of trading steel scrap with Bangladesh now or aluminum and copper scrap in the future are a transaction-by-transaction matter. What seems clear is that Bangladesh as an export destination is worthy of attention.

The author is senior editor with the Recycling Today Media Group and can be contacted at btaylor@gie.net.