Rod prices not going down

The prices of rods that sprang up amid speculation of 15 percent uniform VAT from July 1 have stayed at that level though the government has backtracked on its decision to implement the new law from fiscal 2017-18.

Some millers said the prices are unlikely to decline owing to a spiral in the prices of scrap, the raw material for steel, and the imposition of 5 percent regulatory duty on it from this fiscal year.

But some said the increased supply when all mills will start production in full swing in 10 days to 15 days may cause the prices of steel to decline marginally.

Rod prices began increasing in the last week of May, ahead of the announcement of fiscal 2017-18’s budget on June 1, amid increased demand from a section of traders and contractors over speculation of a price hike.

For instance, the price of a tonne of 60-grade rod, which sold at Tk 52,000-Tk 53,000 in the third week of May, gradually went up to Tk 53,500-Tk 54,500 per tonne mainly because of speculation ahead of the placement of the budget in parliament. The budget had announced the implementation of the new VAT law from July 1.

The prices have remained at that level since, according to data from the Trading Corporation of Bangladesh.

At some places, each tonne of the same grade of rod is being sold as high as Tk 56,000, said Mohammad Mintu Mia, manager of Janata Trading at Farmgate.

“We have been informed by some millers that prices may decline. But, that may take some time.” Mintu said one of their regular customers had enquired about the possibility of a price fall since the government has shelved its plan to implement the new VAT law for two years.

The VAT and Supplementary Duty Act 2012 seeks to apply an uniform 15 percent VAT rate on most goods and services. At present, each tonne of rod priced at Tk 50,000 is subjected to VAT of Tk 900.

Bangladesh Auto Re-Rolling and Steel Mills Association (BARSMA) at a press briefing in the middle of last month warned that customers would have to pay as much as Tk 7,800 as VAT for each tonne of rod if the uniform rate was applied.

The trade body also warned that the growth of the sector, which manufactures 50 lakh tonnes of steel a year, would tumble because of a slump in demand as a result of the price hike.

The prices would go higher than the existing prices had the 15 percent rate been imposed across the board, said Anamul Hoq Iqbal, vice-president of the BARSMA.

“People bought rod at higher prices in the last two weeks. But I can assure you that the prices will become normal because of high competition among mills,” he added.

Tapan Sengupta, executive director of BSRM Group, one of the leading steelmakers, however, said the prices are unlikely to fall as scrap vessels that are used to make billet have become dearer in the global market.

The prices of rod were less than the current rates as there was old stock of raw materials. Now, raw materials are being imported at higher prices. Besides, a 5 percent regulatory duty has been imposed on scrap, he said.

“So, the prices are unlikely to decline,” Sengupta said, adding that the prices have increased because of a spike in production cost and not because of VAT. Mohammed Jahangir Alam, managing director of GPH Ispat, however, expects the prices to drop once supply rises after production starts in full swing in mills.

The workers of many mills have gone for Eid vacations. “It will take 10-15 days for mills to go to full production,” he added.

On the issue of the imposition of 5 percent regulatory duty on scrap vessels and other items such as pig iron, ferrous waste and scrap, an official of the National Board of Revenue said it was an error on their part.

“We are working to issue a notification to withdraw the regulatory duty on raw materials for steel products where specific duties have been slapped,” he said.

The government imposed the specific duty on the raw materials for steel industry during the passage of the budget for fiscal 2017-18.

Source: The Daily Star