Ctg-based large mills move fast on long-steel
The country’s major steel mills, based in Chittagong, have moved very fast in billet manufacturing in a multi-billion taka investment drive that will largely determine who influences most the future of a fast-growing rod market in Bangladesh.
Industry leader Abul Khaer Group triggered the race after it opened its letter of credits (LCs) for machinery import for a US$130 million billet plant at its steel hub in Sitakundu, sources said.
The billet plant will be the largest steel plant in the country, having the capacity to meet all of AK’s 800,000 tonne capacity long-steel making unit.
Billet is an intermediate steel product, mainly produced by melting iron ore. It is melted to make rod or other long steel products. Bangladesh has several small billet plants, accounting for only 10 per cent of its need.
PHP, a leading player in steel sheet and an old rival of AK, joined the investment drive in long steel late last year, buying the country’s first private TMT steel plant at Ghorasal for Taka 800 million.
Kabir Steel started its 400,000 tonne top-grade rod plant last month and has unveiled plan to set up its own billet unit later this year — a move it says is a must to stay competitive in the fast-changing sector.
BSRM, another of the country’s leading rod manufacturer, said it was watching the gas and energy scenario too closely and has put a plan in place to raise capacity of its billet and rod plants.
Industry players said a growing uncertainty over the scrap industry stemming from a slew of law-suits by environmental campaigners against shipbreakers mainly prompted large steel mills to make rapid inroad in long-steel.
“Traditionally, re-rolled scrap irons used to dominate the country’s long-steel market. But it seems they are hit by one problem after another,” said Mohammad Shahjahan, owner of Kabir Steel.
Now the top four-five players alone can make up more than 80 per cent of the country’s three million tonne long-steel market, he said, adding quality of their steel is also far superior to the re-rolled rods.
Kabir Steel, known as KSRM, last month opened its Taka 4.0 billion top-grade 400,000 tonne steel plant at Sitakundu, raising its total capacity to about 600,000 tonnes a year. It is also planning to go big in billet manufacturing.
“Having a billet plant gives you price advantage, makes you competitive over your rivals and hedges you from volatile billet prices in international market,” he said.
Sources said the recent jumpy prices of steel raw materials was the main reason why AK has moved fast to build the country’s largest billet plant with nearly Taka 10 billion investment.
The plant would be the biggest private sector investment by a Bangladeshi group, according to bankers, and it will help the group take a firm grip in $2.0 billion long steel market.
“It’s a clever ploy by the group to move into billet manufacturing with such a massive investment. Their sudden move has left most of their rivals in the lurch,” said a source, who is familiar with AK’s steel ambition.
Experts said the move is a repetation of what AK and its Chittagong-based rival PHP did in corrugated iron (CI) sheet business back in the late 1990s.
PHP set up the country’s first Cold-rolled steel coil plant in 1998, which gave them a large advantage over rival CI sheet manufacturers. CI sheet is known as tin in Bangladesh.
Until then, Bangladeshi CI sheet manufacturers would import CR Coil and slice it into CI sheets. Fearing that the Coil plant will help PHP dictate local tin market, AK soon set up its own coil factory to remain competitive.
“Today’s race for billet manufacturing is similar to what happened in CR Coil in late 1990s and early 2000s. After PHP and AK, others such as KDS and S Alam set up their own coil plants,” said the source.
By going into coil making, big CI sheet manufacturers consolidated their backward linkwage, leading to the deaths of scores of CI sheet makers who failed to build their own CR plant.
AK officials could not be contacted for comments as the firm has always been secretive about investment plan. But a source said AK has set aside worries over gas and power to move ahead in billet manufacturing.
Zahirul Islam, a director of PHP, said the company has taken up a three-year plan to match the main players in long-steel following its acquisition of AMK Steel plant at Ghorasal.
“The market for long-steel has been growing at 10-15 per cent for the last few years. And in the near future we see the market growing even faster,” Mr. Islam told the FE.
The group has renamed the AMK’s 100,000 tonne plant into PHP Espat and is now planning to raise its capacity three-four fold within a couple of years.
“We want to do things in phases. We have just started production at the plant. But obviously, we have to go into billet and raise capacity to stay competitive in the market,” he said.
Amirhussein Akbarali of BSRM, the main top-grade rod player until AK, KSRM and PHP gate-crashed into the scene, said the company would rather wait and see how the situation evolves.
The company has a 25,000 tonne-a-month billet plant, which rougly meets half of the company’s annual need. The Chittagong-based firm plans to raise capacity significantly once the gas and power crisis eases.
“There is no doubt that our long-steel market is poised for a big growth as the construction industry booming fast,” Mr. Amirhussein, the BSRM chief executive officer, told the FE last week,
“But unless the energy situation improve, I don’t see how you can go big in new steel plant. A medium sized billet plant can alone consume 20-30 megawatt power. And that is quite a big amount of power,” he said.
Still, the CEO of BSRM has kept his fingers crossed for further investment in both billet and long-steel in the near future because of the growing apetite for quality steel products in the country.