Bonnishikha Chowdhury, MBR Team
MBR: How do you see the impact of pandemic on the industry and how are you planning on overcoming the damages caused by this?
Mr. Sheikh Masadul Alam: I think the COVID-19 pandemic is a prolonged case of difficulty similar to that of other crisis such as natural disasters. When the sudden lockdown was announced we tried to reduce the impact by continuing production and keeping workers within factory boundaries. However, we were unable to make sales which resulted in higher stocks and financial bearings. Now that things are slowly moving towards normalcy, and markets are opening up, the companies that had continued production are now able to reap the benefits. Some financial institutions such as IDLC Finance Limited has helped contribute to bringing stability within the organization. Still many parts of the world are under lockdown or going into lockdown again. Bangladesh being a strong nation has been able to build good adaptation strategies which they will follow to be competent ahead into the future. I think with the support of the government, companies, especially in the private sector, can successfully go ahead. As per the budget of FY2020- 21, measures have been taken to help the private sectors abundantly. I believe there are strong takeaways from the hardship faced. The pandemic sweep has induced a sense of empathy towards everybody within the hierarchy of the organization. This coupled with their strong will, will be the driving force for the future.
MBR: How do you see the contribution of your company in the growth process of the industry and what are the goals you want to achieve in future?
Mr. Sheikh Masadul Alam: I consider SSRM to be one of the impactful organizations within the industry. I think our company is doing great and also helping this industry in full swing. I believe we have been able to contribute to the industry by being employees in SSRM.
MBR: What challenges do you think Bangladesh needs to overcome to compete the top producers like China?
Mr. Sheikh Masadul Alam: I believe tackling the following areas will help Bangladesh to be more competitive:
i) Simplifying and easing the taxation procedure.
ii)Maintain a proper level playing field for both foreign and local companies.
However, ensuring there is not a rise of a form of unhealthy competition created by bias towards foreign investors. The government needs to take this into account very strongly.
MBR: As most of our productions are used to meet the domestic needs, what are the upcoming major development projects by government might require a boost in steel production?
Mr. Sheikh Masadul Alam: The ones that have been approved have still not started full scale construction. The ongoing projects are categorized on need basis priority and the government is allocating fund according to that category hierarchy. This is because of the financial shortcomings faced by the government which is why they are unable to supply all projects with their required fund at a time. Once the construction of these projects start operation fully, the pace of growth the steel industry is lacking now will be back. Private sector projects such as real estate projects will be included among projects that create demand for our products.
MBR: In case of exporting, how do you see the potentiality of Bangladesh to play a significant role?
Mr. Sheikh Masadul Alam: I strongly believe in Bangladesh’s ability to be export oriented. I think the steel market as being “volatile.” There are many challenges that come with exporting steel owing to the weight of the product. To overcome these challenges, the things that are needed are:
i) A reduction in the finance cost
ii)Improving the quality of utilities. There is a factor of increasing utility prices but we are still not getting access to efficient utility such as electricity, gas etc.
iii)Redesigning the incentives provided to the steel industry to facilitate export.
Many countries have been known to cut business ties with China which has opened a wide range of opportunities out for grabs. Bangladeshi companies need to act fast in order to avail those opportunities. China has export restrictions in their country which they tend to overcome by investing in foreign countries without strict trade barriers. If local companies are given proper facilities, they can operate efficiently and fulfill the gap without needing too many foreign investors. Bangladesh is currently using 70 lakh tons of steel and has a capacity to produce almost 90 lakh tons. The progress made in this sector in the last 10 years make me strongly believe in Bangladesh’s capability to perform better in the future.
MBR: Due to the fall of billet or other raw material prices in the international market, the price of finished goods has also dropped. On the other hand, the raw materials of your inventory which was collected before pandemic might have cost high. How are you managing this situation?
Mr. Sheikh Masadul Alam: The dilemma in the market had arisen as soon as the market opened after lockdown. Prices in the international market had initially dropped since the there was an imbalance in the number of buyers and suppliers. However, over a
span of 7-8 months, it has adjusted itself and prices are currently on the rise again. The local market in Bangladesh is seeing an imbalance with high production- meaning high production but less demand. The penetration of a new company is being a competitive barrier but I believe we will be able to overcome it soon.
MBR: What kind of supports does steel industry sought or expect from the government after this pandemic?
Mr. Sheikh Masadul Alam: To begin, we and our peers in the industry, to mention BSRM, have expanded our capacities to our capabilities. You will be able to tell by the way the production capacity has increased over the years from around 40 lakh tons to almost 90 lakh tons now. We have taken actions to increase capacity keeping in mind the current demand and the potential demand of steel in our country as attested by the government on account of a rise in the construction of mega projects. Now, if the government can ensure these projects are running properly ahead, we believe we won’t be facing difficulties with our current production and stock level. Also, we are being taxed every step of the way. Not to speak against but to request the government to take steps in order to establish transparent and easy regulations to tax us. In difficult times as now, we feel a huge financial burden – especially on our working capital. It would be best if the government could keep these factors in mind and take necessary steps to solve the problems.
Steel and Re-Rolling industry: fast paced recovery from pandemic on the cards
The Steel and Re-rolling industry, one of the prominent growth drivers of Bangladesh, has had its fair share of hit by the Covid-19 pandemic. This has been reflected on numbers as world crude steel production recorded a 3.2% decline compared to figures recorded in the same time period last year. As a developing nation with increased focus on to infrastructural development and lined up mega projects, Bangladesh sees massive growth potential in the Steel industry. With a market size of around BDT 450 billion the local Steel market employs nearly 1 (one) million people directly or indirectly across the country. The market has been growing at a rate of 15%- 20% for the past 2 years and contributes largely to the country’s GDP. However, the market for steel is turning into a perfectly competitive one from an oligopolistic structure as small players are now gaining efficiency and reaching competitive levels of their larger peers such as AKS, BSRM, KSRM etc. With the growth of the smaller companies, it is safe to say that the challenges that come with surviving in the Steel industry – such as, abundant supply of power and gas, availability of raw materials etc. are being well taken care of.
The Steel industry strategically runs on overcapacity. It is seen that the utilization is around 75% of total capacity which came down to 40% due to the pandemic wave. The prices of raw materials and finished goods are also seen to fall. However, as a resilient nation, Bangladesh is adapting fast to the new challenges that came with the pandemic. And, as we look towards a new normal, companies in the Steel industry must work in collaboration with regulators in order to sustain the growth and maintain the level of efficiency reached prior to the pandemic.
IDLC Finance Limited