'Syndicated' hike in scrap metal prices
Wednesday, 22 October 2008
THE construction sector has been in a downbeat mood for sometime for a variety of reasons. The anti-graft drive launched by the incumbent caretaker government soon after its coming to power has had some negative impact, though an unintended one, on the sector which had been growing at a rate around 8.0 per cent a year. But the main factor that has slowed down the pace of growth, both in the private and public sectors, has been the soaring costs of construction materials, particularly that of mild steel (MS) rod. Over the last four to five years, the prices of the item have gone up between 200 and 300 per cent, making it beyond the reach of the middleclass people seeking to build their own houses. Similarly, the prices of residential flats sold by home builders in major cities and towns have also increased abnormally.
The increase in prices of MS rod and other construction materials has not been unique in case of Bangladesh. Until recently, the prices of the same sky-rocketed in the international market, mainly due to higher demand from emerging economies such as China and India and from the oil-rich countries of the Middle East. However, the overheated global commodity and oil markets have eased substantially during the last couple of months with a marked slowdown in the growth of the emerging economies amid recession gripping the developed countries. The latest global financial market turmoil, which is feared to hit both the developed and developing economies across the globe, would in all likelihood lead to further drop in demand for various commodities, including steel products.
In line with the decline in the commodity prices in the global market, the prices of steel products, including scrap metals, have also gone down. A scrap vessel in the international market now costs between US$ 350 and US$ 400 per tonne. A few months back, the same used to be priced 60 to 70 per cent more. Following a decline in the demand for scrap vessels from high-growth economies like China and India, the prices of the same have dropped internationally. The local ship-breakers have, reportedly, imported a large number of scrap vessels taking advantage of the situation and, consequently, the prices of MS rod produced by local re-rolling mills from scrap metal have recorded a marginal decline. But, according to a newspaper report, the local ship-breakers have allegedly through syndication suddenly hiked the prices of scrap metal by about Tk.10, 000 a tonne.
The re-rolling mill owners have decried the ship-breakers decision to hike scrap metal prices claiming that such an illogical hike would force many mills to close down their operation since MS rod, if imported from neighbouring India, would be cheaper than what they produced locally. Though the government is not supposed to control commodity prices in the local market, it cannot be just an onlooker if importers or traders resort to foul play to make windfall profits. The construction sector which employs, directly and indirectly, more than 3.0 million people, is an important one in the context of the national economy and the government should not allow it to be a hostage to the greed of a few businessmen. The ministries of finance and commerce should seek cooperation of the apex trade promotion body and the Chittagong chamber to compel the ship-breakers to bring down the prices of scrap metal in line with the global market trend.
The increase in prices of MS rod and other construction materials has not been unique in case of Bangladesh. Until recently, the prices of the same sky-rocketed in the international market, mainly due to higher demand from emerging economies such as China and India and from the oil-rich countries of the Middle East. However, the overheated global commodity and oil markets have eased substantially during the last couple of months with a marked slowdown in the growth of the emerging economies amid recession gripping the developed countries. The latest global financial market turmoil, which is feared to hit both the developed and developing economies across the globe, would in all likelihood lead to further drop in demand for various commodities, including steel products.
In line with the decline in the commodity prices in the global market, the prices of steel products, including scrap metals, have also gone down. A scrap vessel in the international market now costs between US$ 350 and US$ 400 per tonne. A few months back, the same used to be priced 60 to 70 per cent more. Following a decline in the demand for scrap vessels from high-growth economies like China and India, the prices of the same have dropped internationally. The local ship-breakers have, reportedly, imported a large number of scrap vessels taking advantage of the situation and, consequently, the prices of MS rod produced by local re-rolling mills from scrap metal have recorded a marginal decline. But, according to a newspaper report, the local ship-breakers have allegedly through syndication suddenly hiked the prices of scrap metal by about Tk.10, 000 a tonne.
The re-rolling mill owners have decried the ship-breakers decision to hike scrap metal prices claiming that such an illogical hike would force many mills to close down their operation since MS rod, if imported from neighbouring India, would be cheaper than what they produced locally. Though the government is not supposed to control commodity prices in the local market, it cannot be just an onlooker if importers or traders resort to foul play to make windfall profits. The construction sector which employs, directly and indirectly, more than 3.0 million people, is an important one in the context of the national economy and the government should not allow it to be a hostage to the greed of a few businessmen. The ministries of finance and commerce should seek cooperation of the apex trade promotion body and the Chittagong chamber to compel the ship-breakers to bring down the prices of scrap metal in line with the global market trend.