Bangladesh’s steel rod market has turned volatile after manufacturers began raising prices in anticipation of a proposed increase in value-added tax (VAT) at the production stage of mild steel rods in the FY2026–27 national budget, triggering immediate cost pass-through across the supply chain, according to traders and industry officials in Chattogram.
The adjustment followed Finance Minister Amir Khasru Mahmud Chowdhury’s 11 June budget speech in Parliament, where he proposed a modest rise in the specific VAT on MS rod production, prompting manufacturers and dealers to revise prices upward amid concerns over rising production costs and weakening margins in the construction-linked steel sector.
Major steel producers increased rod prices by Tk500–Tk1,000 per tonne over the past week in response to the proposal, with further increases expected as fiscal details are finalised and cost pressures build across inputs and logistics.
SM Arifuzzaman, a rod trader in Chattogram’s Kadamtali area, said BSRM raised prices from Tk92,000 to Tk93,000 per tonne last week, KSRM from Tk90,500 to Tk91,000, and AKS from Tk91,000 to Tk92,000 per tonne.
“Many other rod manufacturers have also increased prices by Tk500 to Tk1,000 per tonne. We expect greater clarity within the next couple of days, but manufacturers have already indicated that prices could rise further,” he said.
Industry participants said the VAT adjustment would add pressure on already thin margins, with producers likely to pass the additional burden on to end-users due to limited capacity to absorb costs.
They estimate the VAT change alone could justify an increase of around Tk700 per tonne, while higher financing, transport and operating costs could push total increases to Tk800–Tk1,000 per tonne.
Tapan Sengupta, deputy managing director of BSRM Group, said VAT at the production stage previously stood at about Tk2,700 per tonne and would rise to roughly Tk3,400 per tonne under the new proposal, adding Tk700 per tonne in tax burden.
“But VAT is not the only issue. Duty and VAT on refractory raw materials used in rod production have also increased. Electricity tariffs have gone up, and Chattogram Port charges have recently been revised upward. Taken together, the production cost of rods has increased by nearly Tk5,000 per tonne,” he said.
He added that it was difficult to specify a timeline for further price adjustments, but stressed that manufacturers could not continue operations while absorbing rising costs.
Market analysts warned that sustained increases in rod prices could significantly raise construction costs across residential, industrial and public infrastructure projects, affecting investment decisions and housing affordability.
According to the Bangladesh Steel Manufacturers Association, the country has more than 200 steel plants, including around 40 large-scale producers, with annual production capacity of about 11 million tonnes against domestic demand of roughly 7.5 million tonnes. The sector has attracted nearly Tk75,000 crore in investment and generates annual trade worth about Tk70,000 crore.
Industry estimates suggest production costs have already risen by Tk6,000–Tk6,500 per tonne due to higher electricity tariffs and proposed fiscal measures.
Organising director of the ad hoc committee of the Bangladesh Steel Manufacturers Association and managing director of Metrosem Ispat Md Shahidullah said electricity price increases alone have added about Tk3,000 per tonne to production costs.
He said the budget also proposes raising VAT on MS rods and imposing a 5 per cent regulatory duty on chemicals and refractory materials, which could add a further Tk2,500–Tk3,500 per tonne.
“The cost of production of rods is increasing significantly due to higher electricity prices and new taxes and VAT in the budget. In total, there will be an additional cost of about Tk6,500 per tonne. But the market situation is such that we are not able to adjust this cost,” he said.
He added that weak demand was deepening pressure, with housing sector recession and slow government infrastructure execution cutting rod consumption by nearly 50 per cent compared with normal levels.
Shahidullah also noted that steel producers were increasingly unable to absorb cost shocks due to shrinking margins and subdued demand conditions.
The Bangladesh Steel Manufacturers Association plans to hold a press conference soon to highlight the sector’s concerns and meet the National Board of Revenue chairman to seek reconsideration of the proposed VAT and duty measures.
Golden Ispat Ltd director Mohammad Sarwar Alam said rod prices could rise by up to Tk2,000 per tonne in the coming week due to the VAT impact.
