Steelmaker up for expansion as demand rises

BSRM Steels Ltd is set to expand its production capacity to meet growing local demand.

The company's capacity to make steel will be raised to five lakh tonnes a year from its present capacity of 3.56 lakh tonnes.

"The main reason behind the plan to go for expansion is the increasing demand for 500-grade rods in the local market. It will increase further when the government starts construction works by early 2011," said Ashiqur Rahman, the financial analyst of the company.

The company is likely to start expansion work in August on hopes of completing it by year-end, he said.

"We have completed almost all the primary groundwork, including finalising the cost of the new venture," he said.

"We plan to set up new rolling machines at our present plant to increase the production capacity by an addition 1.5 lakh tonnes annually," he said, adding that the machinery will be imported from Italy.

Initially, BSRM, the country's only 500-grade steel rod maker, plans to invest Tk 53 crore to expand the capacity at its present factory in Nasirabad, Chittagong.

Of the total cost, Agrani Bank will finance Tk 32 crore, and the company itself will finance the rest, Rahman said.

Currently, the local demand for steel rod stands at 25 lakh tonnes a year in a market of around Tk 12,000 crore, estimates industry insiders.

Five such companies produce rods and meet more than 95 percent of local demand.

Meanwhile, BSRM, the market leader in iron and steel manufacturing in Bangladesh, was placed in the A category, rising from the Z category, in the stock exchange on June 15, as the company gave 15 percent stock dividend to shareholders for 2009.

The company recorded profits worth Tk 57 crore in 2009, while annual turnover stood at Tk 1584.35 crore, said Rahman.

"We were able to enjoy profits last year because of price stability in both the local and international markets, and higher production," said the BSRM official.

"We had to work really hard to overcome the Tk 189 crore loss we incurred in 2008. The main reason behind the loss was the price of raw materials, mainly billets, which was much higher in the international market, compared to the local prices set by the caretaker government," he said.

Rahman said BSRM Steels, a concern of Bangladesh Steel Re-Rolling Mills Group of Companies, also has plans to export 500-grade rods to regional countries.

"But the entire plan depends on government approval. If the government okays it tomorrow, we can start immediately," he said.

The BSRM Group of Companies started its operations in 1952 in Chittagong, and BSRM Steels Ltd started commercial operations in April 2008.

BSRM Steels was listed on the capital market in January 2009.

Source: The Daily Star, July 23, 2010