[🇧🇩] Steel Industry in Bangladesh

[Saif]

IFC to finance first climate-smart steel plant in country

The International Finance Corporation (IFC), a member of the World Bank Group, has partnered with Meghna Re-Rolling & Steel Mills Limited (MRSL), a sister concern of Meghna Group of Industries (MGI), to establish Bangladesh's first climate-smart steel plant. This state-of-the-art facility will pro

thefinancialexpress.com.bd

IFC to finance first climate-smart steel plant in country
FE REPORT
Published :
Dec 24, 2024 10:06
Updated :
Dec 24, 2024 10:06

The International Finance Corporation (IFC), a member of the World Bank Group, has partnered with Meghna Re-Rolling & Steel Mills Limited (MRSL), a sister concern of Meghna Group of Industries (MGI), to establish Bangladesh's first climate-smart steel plant.

This state-of-the-art facility will produce 1.5 million tonnes of steel annually - which represents around 20 per cent of Bangladesh's current annual demand - using 100 per cent recycled scrap, supporting the country's economic growth while tackling climate challenges, according to an IFC statement.

Supported by a financing package of $100 million, this transformative project is set to deliver significant economic, environmental, and social benefits, it added.

By leveraging advanced technology, it will reduce carbon emissions compared to traditional steel production, while creating over 20,000 direct and indirect jobs across the value chain, driving growth and sustainability.

"Bangladesh's steel industry is critical for building infrastructure that drives sustainable growth," said Martin Holtmann, IFC's Country Manager for Bangladesh, Bhutan and Nepal.

"This project represents a major leap forward, not only in climate-smart manufacturing but also in job creation and industrial advancement. We are excited to contribute to the transformation of Bangladesh's industrial landscape, supporting the nation's journey towards a greener, more resilient future."

It also said this project marks a major milestone for Bangladesh's steel industry, aligning with the Paris Agreement and meeting the criteria for 100 per cent climate finance under global climate tracking principles.

Additionally, IFC and MRSL are collaborating to develop a comprehensive decarbonisation roadmap, setting a new benchmark for sustainability in the country's industrial sector.

MGI Chairman and Managing Director Mostafa Kamal said, "We are thrilled to partner with IFC on this groundbreaking project that will reshape the future of Bangladesh's steel industry. This investment not only strengthens our capacity to produce high-quality, climate-smart steel but also represents a significant milestone for our country's economic and industrial growth."

The investment also aligns with the World Bank Group's vision for the green, resilient, and inclusive development (GRID), promoting climate-smart infrastructure, economic diversification, and industrial competitiveness, according to the statement.​

 

[Saif]

GPH Ispat to raise $150 million by listing on the Hong Kong Stock Exchange

The decision to pursue the listing was approved during a board meeting held on January 23, according to a press release issued yesterday

www.thedailystar.net

GPH Ispat to raise $150 million by listing on the Hong Kong Stock Exchange

GPH Ispat Limited, one of Bangladesh's leading listed steel producers, has announced its intention to raise $150 million through an initial public offering (IPO) on the Hong Kong Stock Exchange to finance a new project aimed at expanding its production capacity.

The decision to pursue the listing was approved during a board meeting held on January 23, according to a press release issued yesterday.

"This strategic move aligns with GPH Ispat's vision to expand its market footprint and enhance its corporate presence on a global scale," the company said.

To facilitate the process, GPH Ispat has appointed PricewaterhouseCoopers Ltd, Hong Kong, and Price Waterhouse & Co. Chartered Accountants LLP, India, for advisory services.

As part of this initiative, a high-level delegation from GPH Ispat Ltd is expected to visit Hong Kong this week. The delegation will be led by GPH Group Chairman Mohammed Jahangir Alam.

During the visit, the delegation will hold joint discussions with key stakeholders, including officials from The Stock Exchange of Hong Kong Ltd, Altus Capital Ltd (Merchant Bank/Issue Manager for capital raising), and Lego Corporate Finance Ltd (Underwriter).

A potential listing on HKEX will not only strengthen the company's position in the international financial market but also open new avenues for growth and investment by expanding the export basket of Bangladesh, the company hopes.

Contacted, Jahangir Alam said the funds will be used to set up a new plant with an annual production capacity of 500,000 tonnes of billet and 500,000 tonnes of rod.
The estimated cost of the project is $185 million, of which $150 million will be raised through the listing in Hong Kong, he said.

Alam said the listing process is still in its early stages and could take between six months to a year to complete.
"We are just going to start initial discussions. If the meeting is fruitful, then it will proceed, and they may seek some documents," he said.

However, Alam is optimistic about raising funds through the Hong Kong Stock Exchange, as their past dividend payment record has been strong.

GPH Ispat provided a 10 percent dividend in 2024 and a 5 percent dividend in 2023.

Alam said local stock exchanges lack the capacity to raise such a large sum.

"The Hong Kong stock market is around 100 times bigger than Bangladesh's, so it is easier for the market to absorb us," he said.

Moreover, bank loans for the project are not feasible due to high interest rates of at least 15 to 16 percent and short repayment tenures of five to six years, he added.

While foreign banks offer longer tenures of up to 12 years, repayments in foreign currency pose a significant risk given the current economic climate, he stated.

"We need equity funding, which is why we are turning to the Hong Kong Stock Exchange," he said.

He added that the annual capacity of GPH is 10 lakh tonnes, and it needs to increase to ensure business sustainability. For this reason, it is necessary to increase investment to expand manufacturing to 15 lakh tonnes.

The steelmaker, which debuted on the Dhaka Stock Exchange in 2012, reported a profit of Tk 28.75 crore in the October-December period of 2024, down from Tk 36 crore in the same period a year ago.​

 

[Saif]

https://www.thedailystar.net/business/economy/news/steelmakers-struggle-against-growing-headwinds-3864326

Steelmakers struggle against growing headwinds
Says BSRM MD as finger pointed at weak demand, uncertainty

Local steel industry is enduring a turbulent phase, grappling with subdued demand due to sluggish government spending and wavering private sector confidence, driven largely by political uncertainty.

Adding to the strain, the sector – already weighed down by high operating costs and regulatory inefficiencies – now faces an additional blow with the proposed gas price hike, according to Aameir Alihussain, managing director of BSRM, the country's leading steel manufacturer based in Chattogram.

In an interview with The Daily Star, Alihussain advocated for increased development spending by the government and a clear political direction to restore confidence among private investors.

BSRM recently completed a major expansion project, setting up its third re-rolling plant in Mirsharai. This raised its combined annual production capacity of rods and billets to 24 lakh tonnes.

Similarly, by adding a second unit, Chattogram-based Abul Khair Steel expanded its annual long steel production capacity to 30 lakh tonnes.

Alihussain said industry people took these expansion decisions three to four years ago based on certain momentum of the economy. "But that momentum has suddenly gone down."

"Since the political changeover in August last year, the steel market has seen very slow demand, a trend that persisted through November," he said.

Though there was a modest uptick in December and January, the steelmaker said that the sales spike was merely due to "pent-up demand" – a temporary rebound after months of stagnation.

"The dry season is usually the peak period for construction, but we are not seeing that usual activity," he added.

For the sales slowdown, he pointed the finger at reduced public expenditure.

Government projects account for 60–70 percent of total steel demand, and any contraction in this area hits the sector directly, said the BSRM MD.

"There are a few major projects underway in Dhaka, such as metro rail constructions and the elevated expressway, but there is a stalemate in mid and lower-tier construction, especially in upazilas and unions," he said.

He said that the interim government may face limitations in new development projects, but previously approved ones should continue. "If a project is found unsuitable, the government should replace it with a better one instead of halting development altogether."

Alihussain recognised the government's attempts to blunt the stubbornly high inflationary curve through spending cuts, but argued that economic momentum must be maintained in parallel.

"To sustain the economy, we have to keep up spending, while also managing inflation and macroeconomic risks," he said.

The BSRM chief called for a complete overhaul of the taxation system to both widen the tax net and reduce rates.

"Our VAT rate has been increased to 15 percent, and income tax to 30 percent. These should be lowered to 5 percent and 15 percent, respectively," he said. "This will initially reduce government revenue, but within two years, as the tax base expands, revenue will shoot up."

Expressing concern over the proposed gas price hike, Alihussain said it would deal a fresh blow to the steel industry.

"If gas prices suddenly jump, product prices will rise. That would hit demand because many customers simply won't be able to afford the increase," he said, suggesting subsidies as an alternative.

He pointed to ongoing political uncertainty as a major deterrent to private investment.

"Before making decisions, investors are waiting to see a clear political roadmap," he said.

While appreciating the interim government's initiatives toward political reform, he expressed disappointment over red tapes and other bureaucratic hurdles in doing business.

"Businesses are still stuck with the same old problems – waiting endlessly for approvals, chasing files, dealing with centralised decision-making in Dhaka. If you send a letter to a government office, you rarely get a response unless you follow up in person."

"From an individual citizen's perspective or a business one – we haven't seen any real change," he said, urging policymakers to take bold and transformative steps.

"If we keep going as we are, nothing will change. We need strong leadership to reform taxation, improve ease of doing business and control macroeconomic risks. Otherwise, FDI will remain a distant dream."

On an optimistic note, he commended the Bangladesh Bank for its role in stabilising the exchange rate.

"Macroeconomic stability is important. As GDP grows, consumption and imports will rise. But if exports don't grow at the same pace, we'll be stuck," he said, calling for export diversification and a more competitive business environment.

"If tax and interest rates are reduced, energy and logistics costs lowered, and policies simplified – we can attract foreign investment and grow exports," he added.

As for BSRM's own strategy in this uncertain period, Alihussain said the company would prioritise financial stability and cost control over fresh investments.

"Our strategy is to keep our costs and loans in check. Interest rates are too high to justify new investments in existing plants. Instead, we will maintain our cash flow and sustain the business," he commented.​