The MS rod price fiasco in Bangladesh

The rod price fiasco in Bangladesh

The prices of mild steel (MS) iron rods used for construction have gone up drastically over a period of one year and a fresh price hike within the last two months has created a huge turmoil within the construction sector.

As the situation for the realtors changed drastically after the 1/11 change-over, this latest price chaos has left many construction companies baffled, real estate and housing association of Bangladesh (REHAB) sources said.

The country's construction sector alleges that the causes of this abnormal price hike of mild steel (MS) rod, mainly the 60-grade rod, which is mainly used for the construction of buildings, has hit hard on the local market and the biggest sufferer is the real estate sector.

However, sources from the Bangladesh re-rolling mills association say that this is due to increase in import costs of raw materials, scrap iron, and a price hike in the international market.

According to market sources of English Road, per tonne 60-grade MS rod is selling at Tk 72,700 in Dhaka's retail market, while 40-grade MS rod is selling at Tk 65, 000 as of May 6 this month.

REHAB sources say that the 60-grade MS rod per tonne was previously sold at much cheaper prices. It was Tk 40,000 in 2005, Tk 42,500 in 2006, Tk 47,500 in 2007 and even in January this year, it was Tk 63,000.

This abnormal condition is creating two steps of legal complications – one, where the real estate firms signed agreement with the landowners and two, with the customers, and cannot deliver the buildings on time in both the cases(since the price is going up while the construction is taking place), REHAB sources added.

Engineer Tanveerul Haque Probal, president of REHAB said, ‘almost 30 percent of the cost of construction of a building actually goes behind the cost of MS rods. This is a huge blow for the construction sector’.

‘Any severe problem in this sector therefore has a direct impact on the employment of 25 lacs day labourers, masons, carpenters, other workers associated with this field and almost one crore of their family members and a justified price of 60-grade MS rod should be Tk 60,000. The additional Tk 12,700 is definitely the result of an artificial crisis made by syndicate’ Tanveerul added.

Tanveerul said more that, ‘real estate is the largest sector which uses the highest number of country’s unskilled labour force. For example, the villagers who migrate to Dhaka can take up any work like breaking bricks, putting distemper on buildings up to work while laying foundations starting with dumping of soil. And something alarming would definitely harm this sector which contributes almost 20 percent to the country’s GDP’.

REHAB sources pointed out that due to this abnormal price hike, along with the other problems, Dhaka city’s prevailing accommodation problem will be extreme and house rents will increase drastically. Other linkage business of the construction sector like banks, advertisements, sanitary, paint and other industry would face grave consequences.

Construction sector members and local rod retailers now say that the importing of ships and scrap business is confined within six families with 22 business houses in the country and they are running this syndicated business and they make up the Bangladesh ship breakers association (BSBA) and they do not even let any new companies to become member of the association and only the association members are allowed to import the raw materials of MS rod. Therefore, the construction sector wants immediate abolishment of BSBA.

And therefore, as part of the government efforts, the Army-led Joint Forces, mainly the DGFI launched drives at different steel mills and ship-scrap breaking depots, and fixed the prices of MS rods. But the MS rod retailers in Dhaka and the construction sector people said that such government steps and order was totally ignored.

Later, the commerce ministry formed a high-powered probe committee to find out the reasons why the prices of MS rods kept increasing.

Speaking to one of the committee members, he said, ‘according to our findings, we submitted the report to the commerce ministry and if the suggestions made in our report is followed, then this syndicate buisness will abolish for sure’.

He added, ‘according to our findings and the report, a syndicate business is going on. The prices of melted scrap and ship scrap - raw materials for MS rod, have gone up in the international market but ethically, this price hike in the international market should take effect in our local market after six to eight months. Because, it takes that amount of time to bring in consignments of ships, ship scrap, break them and produce them as raw materials for MS rod’.

‘The syndicate also brought large consignments of ships for breaking but did not produce scrap or even if they did, those materials were not sold to make an artificial crisis. This syndicate is saying that they imported per tonne of melted scrap with prices between US$650 and 700 but that is not true. The scrap was priced around $400 to 450 six months back when they bought them. And 60 percent of the materials in a ship is re-used to make local ships and so 40 percent of each ship is used to make scrap which means the wastage of each ship is only 10 percent, which the members of this syndicate mentioned at much higher percentage’, the committee member added more.

The member then narrated few suggestions made to the government, which is mentioned in the report: tax on per ton of scrap to be declared Tk 900. Tk 1500 flat rate of tax on importing of per ton of rod so that dependency on ships decreases and any businessman can import rods without conditions. Anyone can buy ships for breaking, provided, they have clearance from the Navy and Customs. The district commissioner (DC) should re-structure and refurbish the ship making yard so that new businessmen interested can come in and finally, the chemicals or raw materials used in the re-rolling mills should have a maximum price of Tk 5,000 after rationalizing the structure.


Presently, this price fluctuation is causing many problems. We have already bought MS rods at higher prices and if it is brought down now, we will suffer greatly, said Mizanur Rahman Babul, president of Bangladesh Steel Mill Owners Association.

Both Abu Taher, secretary and Mohammad Nasirullah, general secretary of English Road Iron and Steel Merchants Association told that they are facing difficulties with the steep rise in the international market price of raw materials of MS rod. If they buy at a particular price and if afterwards a price ceiling (below the purchase price) is set, it makes disagreements between them and buyers. No one is conforming to the price fixed by the government and a syndicate is working to raise the price artificially.