Aiyub Khan: July 2020

Monday, July 27, 2020

Food Industry (Flour) in Bangladesh

Since there is little domestic production of wheat the flour industry fully depends on the imported raw materials from the different countries. Most of the flour mill concerns procured from bulk importers of the domestic market which parties import bulk amount wheat from the international market as a result wheat price depends on the price movements in the International market; foreign currency fluctuations, as well as order size, impact the prices. For this reason, flour mills and traders in Bangladesh are exposed to foreign currency risk. Moderate entry and exit barriers also create a highly competitive market scenario. All the flour mills in Bangladesh have to pay the full amount in advance during wheat procurement but the situation is different in the case of sales resulting in accounts receivables which creates stress on working capital. The huge fund is also required to maintain the minimum level of inventory to avoid the risk arising from import as well as to mitigate the seasonal consequences of wheat production.

Many competitors compete with the company in the Feni region. Close competitors of the Company are Ahmadia Rice and flour mills, Saudia flour, and Dollar flour of Taher Food Industries in the Chittagong region. Other competitors are Star Line Flour, Mohammedia Flour, Hamidia Flour, Bilder Flour, Sakura Flour, Rajib Flour, Fresh Flour, City Group’s Teer, and Sena Kalyan Songstha’s Horse Flour, etc in the Feni region.

The price movement of wheat in the international market also a vital factor to impact industry growth and profitability. Wheat prices in the international market were showing a downtrend from 2014 to 2016. Wheat Production last year was 735.59 million tons. This year’s 748.24 estimated million tons could represent an increase of 12.65 million tons or 1.72% in wheat production around the world.

Logistics Business Prospectus in Bangladesh

The local logistics sector, particularly the transport service, is continuing to grow significantly, keeping pace with the rapid expansion of trade and economic activities in the country. This sector has been playing a crucial role in facilitating the growth of every sector of the country’s economy including industrialization, agriculture, infrastructure, and trade, and commercial activities. Recently, around 150,000 covered vans, trucks, pickups, and prime mover are engaged across the country for transportation of goods including those of export-import items, construction materials, agro-produce, industrial products, and essential items. The numbers of covered vans, trucks, pickups, and prime movers are thus increasing by leaps and bounds as these are the only means of inland transport for ensuring smooth operation related to manufacturing and goods movement. Every day about 90 percent of vehicles constantly carry freights across the country and a small number of these remain stuck due to mechanical or other problems. The fare is not fixed; it is determined through negotiation and it varies from time to time. The average fare of a truck running from Dhaka to Chittagong is Tk 12,000 to Tk 15,000. Around 75 percent of their trips are made for the RMG (readymade garment) sector and thus transport service is constantly playing a crucial role to ensure a competitive edge for the sector. The main highways, especially Dhaka-Chittagong, Dhaka-Mymensingh and Dhaka-Tangail, through which RMG products and the raw materials are transported from factories to the port, are being widened (from two lanes to four lanes) facilitating the transport sector to grow.

However, sometimes owners of the vehicles often face various obstacles including extortion, robbery of vehicles, and harassments by traffic police and political groups especially at different points of the highway. Besides, they also face problems in parking as space is scarce at different parking points where they also have to confront harassment. They often fall victim to forced payment of tolls at many points and sometimes driver and helper of the vehicles are wounded due to attack of robbers. There is none to look after the matter. Even in the name of checking documents highway police claim illegal money though they have valid documents. Growth of the transport sector there has been importing of different types of vehicles which have marked a significant rise over the years; most of such vehicles are imported from India. On the other hand, a significant number of age-old trucks and oil tankers are also plying the roads posing a threat to accidents and causing increased air pollution.

However, Bangladesh's transport and logistics sectors offer immense opportunities for investors, as the country is found most wanting in the area. Given the country's growth forecasts, there is huge scope for investments in infrastructure. A modern multimodal transport system is a must to improve Bangladesh's competitiveness in the global economy and to increase access to goods at reasonable prices. The upgrading of the logistics workforce and technology systems is also needed for ensuring that the transport system is scalable and sustainable. In particular, the road and rail freight transportation companies can set up partnerships with internal shipping lines or logistics providers to increase trade with multinational companies. New modes of transport such as barge services for transporting containers between Chittagong and Dhaka instead of trucking by the road can also help improve logistics. Improvements in ports, road, rail, and air services are all essential for a country that is in the midst of historic growth. Streamlining of government procedures is also needed. Bangladesh specifically needs improvement in customs, infrastructure, the competence of logistics service providers, and tracking and tracing.

Project Requirement to establish Drinking water plant

Implementation risk is moderate due to the scarcity of funding. Any Company was incorporated in a specific year. In the one and half years of its construction period, the Company has procured the last portion of machinery. The entrepreneurs do not fully depend on a bank loan for local machinery.

The management does not have sufficient experience in the mineral water industry. The Directors are new in this business arena. It observes the shortfall in the management planning of the project. It also observes the management did not make detailed homework for the project. The management might need to hire a competent human resource for successful operation. Moreover, the labor shortage is observed in Sitakunda region for the related industry, which may affect the production.

The minimum amount of product portfolio. Revenue of the Company based on only different sizes of mineral water bottles which may create a business risk in case of ensuring a stable profit margin during the operation period. Since it has to defend only one product. If it can maintain a combined product portfolio it may ensure its stable business operation and profitability.

Has a moderate backward linkage may stable the profit margin. The Company has a backward linkage for providing an uninterrupted water supply to the product line. It plans to procure raw materials from different places of the country and outside of the Country. Since the Company has an established backward linkage, the profitability may not shrink due to little value addition of the product line.

The low brand may increase the ramp-up period. The company is in the initial stage of its branding preparation. It also has a plan to introduce its products in the name of the “Fresh Drinking Water” brand. In its developing stage, the Company may face huge completion from the known brands of the same product lines . The company has low competitive advantages over known brand products. Product quality and quality control are crucial for the success of the business.

Timely raw material procurement is crucial for smooth production. The Company has planned to procure raw materials from different international producers and local importers of the country. The Company does not have any plan of making a contract with raw material suppliers or local importers. The raw material crisis and price hike may affect the smooth operation, company turnover, and profitability.

A proper distribution channel is crucial for expected selling. Management of the Company has not yet planned to establish its distribution channel but has a plan to make a distributor channel with monitoring an effective marketing team. Since proper distribution channel and good collection team is crucial for the smooth operation of the Company.

Financial risk is high due to a high credit burden i.e. financial leverage. Company ABC has already availed loan approximately BDT 24.12 million for purchasing PET bottle, cork, label production, and wrapping machines. The Company has also taken a loan from shareholders to develop its land, civil construction, and procuring machinery from the local market which will have to be paid within several years. Bank finance is near about BDT 26.31 million including IDCP for six months grace period that may impact the Company's profitability.

The Real Estate Business in Bangladesh

The Building, Construction, and real estate industries encompass a broad spectrum of interests. These include the traditional players such as owners, investors, developers, lenders, and engineering and construction firms as well as non-traditional players, such as banks, insurance companies, and special servicers. From the early 1980 the real estate business started to flourish and showed robust growth. By 1990 the REHAB established and in 1991 there were listed members was 11. At present, more than 1,500 companies are active in the real estate sector with 1,191 of them registered with REHAB. In the last two decades, private developers have supplied more than 100,000 units of apartments to the nation will be supplying 25,000 more units in the next three years. The approximate turnover of the real-estate sector is BDT 28, 000.0 million.

With a rising population and increasing housing demand, apartment culture has grown up in Divisional regions such as Dhaka, Chittagong, etc. sharply. The growth in this sector is also facilitated fast growth in many linkage industries like the glass industry, bricks industry, cement industry, ceramic industry, iron industry, steel industry, etc. over the last decade. Such consistent growth in the real estate sector is mainly due to a consistent demand at the customer end High charge in the financial sector has also increased the cost of business. The real estate sector is often used as an indicator to measure a nation's economic growth. The housing industry in Bangladesh, especially in Dhaka and Chittagong, has made remarkable progress in the last ten years. Real estate industry growth has been slowed down by various risks and challenges faced by all players in the industry due to Bangladesh’s economic and policy-related issues. The major risk and challenges that our real estate industry facing today include- Non-availability of utility connection, Lack of urban planning policy, high rate of the cost of debt finance, the Price hike of land, and rising material and labor cost, etc. Amid today’s turbulent economic landscape, all players in the real estate industry face increasingly complex challenges. Thus, to maintain a competitive edge company need to ensure they are taking calculated risks and seizing the right opportunities.

Paper Industry in Bangladesh

Production of paper in Bangladesh is moderately lesser than the average production of Asia. The utilization of paper in Bangladesh is around 5 kg for each individual on a usual. This figure is much lower than the average of Asia per capita paper consumption which is 30 kg. An increase in universities, an increase of education rate, offices, newspapers, increased pressure from the environmentalists of banning polythene packaging materials, increased social and environmental awareness –all of these indicate a worthy sign of a future increase in paper demand. In addition, the use of electronic and online media as a substitute for paper is less popular which indicates a constant positive growth in the industry demand.

Given this promising and profitable scenario, the presence of few paper mills in Bangladesh has led to increased demand for importing paper and paper-related materials. The major obstacles in entering the sector are the lack of easy availability of resources like gas, water, electricity, raw materials. As a result, the major portion of domestic demand either is filled up by imported papers or not met at all. However, the presence of the recycling industry provides a portion of the pulp, the raw material of paper, which meets some of the domestic demand in newsprint and white print paper.

The major players in the paper and pulp industry have been set up in Dhaka and Chittagong region. The aggregate production capacity of this industry is around 500,000 MT to 600,000 MT per year. At present, 80 paper mills are running throughout the country, but only Karnaphuli Paper Mills Limited has an integrated paper and pulp production capacity of 30,000 MT per year. Other than the Karnaphuli Paper Mill Limited, all others use imported pulp and/or recycled fiber. However, the prospect of the industry is high but the acute crisis of energy, raw materials and trained human resources are the major reasons for non-utilization of maximum production capacity.

Saturday, July 25, 2020

Salt Industry prospectus in Bangladesh

Salt Industry is established for producing salt from saline water of the sea in the coastal areas of Bangladesh especially in Chattogram and Cox's Bazar region. Salt is produced seasonally from December to Mid of May. Recently salt cultivation has also started in the coastal belts of Khulna and Satkhira.

The Government has decided on 5th July 2017 to again temporarily suspend the prohibition set on the import of salt in the country's import policy and authorize the import of 500 K metric tons of crude salt in order to meet the domestic demand. Estimates made by the ministry of Industries stated that demand for salt in the Country this year stands at 1.58 million tons in 2019. Present salt production is 1.36 million tons, a deficit of demand was about 0.21 million tons during the period. It pushed up the market price of local salt to TK 40.0 per KG. The government makes the decision in order to meet the demand-supply gap by importing a deficit amount of salt in the year. In this way government also controls the market inflation of the goods.

Traditionally, salt was produced by vaporizing seawater by fire heat or sunlight. From 2000-2001 salt was produced in a different way known as the polythene process, in which salt can be produced 17.25 metric ton per acre. While initiating a new cultivation method to produce salt, it can help to produce near about 21.00 metric tons of standard quality salt than traditional salt production per acre.

Bangladesh's available assessed yearly prerequisite is around 2.00 million Metric tons which are expanding at a pace of 5% for each year with the expanding of populace and extension of businesses where salt is required as crude materials, for example, tannery, fishery and horticulture part, and sub-segments Chemical ventures and so forth. The crude materials – crude or foul salt specifically produced by using brackish water is accessible in the nation from indigenous sources at some specific areas in the southernmost locale of Bangladesh: Cox’s Bazar – containing the world’s longest 117 km uninterrupted sea beach. In spite of the fact that Bangladesh's aggregate length of the seaside line is more than one thousand km – from the Indian outskirt in the eastern part (Khulna) toward the south-east part bordering Myanmar. But due to some scientific reason, the raw salt production process is suitable in the lone district area of Cox’s Bazar as economic viability to make raw salt depends on the chemical composition and salinity of brine – seawater: the minimum level is to be 2.50% which is available only in some selected areas on the coastline of Cox’s Bazar. Salinity in brine in the rest of the country’s coastline contains below this minimum 2.50% mark: around 1.70% only.

With the increase of population, cattle heads, and growers of industries, the demand for salt is also showing a rising trend. To meet the growing demands of salt and to achieve self-sufficiency in salt production.

During the surveillance period, a huge amount of crude salt imported from India and Myanmar for meeting up the shortage of our local production and adjusting salt price at a sustainable level. Since import crude slat price lower than local procured crude salt.

Automobiles industry in Bangladesh

Bangladesh is making an enormous improvement in almost every sector that would contribute to its economic and political growth, including the manufacture of world-class electronics, steel, and glass. The one sector where Bangladesh is almost entirely sluggish is the automotive sector.

Present the scenario of Bangladesh Automobile Industry, sales of Toyota cars, imported from Japan, is constantly increasing in Bangladesh. Even for commercial vehicles, this is still the most used brand. Even though there is a lack of local car manufacturers, a state-run company named Pragati Industries Limited has been manufacturing vehicles for Japanese company Mitsubishi at a low rate. The country is currently assembling the Mitsubishi Pajero Sport, Hino bus, and also the Tata bus and motorcycles. The market of Bangladesh is alluring to investors at home and abroad and has the potentiality of making a significant profit. There are foreign companies that are showing interest in investing in the automobile industry in Bangladesh. Many big companies like Tata Motors have come forward with investment initiatives. Tata Motors, in partnership with Bangladesh-based Nitol Motors launched its Prima range of heavy commercial vehicles (CVs) in Bangladesh. Then again, a Swedish automobile giant Volvo Group will market new generation trucks in Bangladesh, in a joint venture with Indian Eicher Motors. With the launch, the Eicher brand enters a new phase of growth and consolidation in the commercial vehicle market. The distributorship of Eicher Trucks in Bangladesh is managed by Runner Motors Limited, an arm of Runner Group.

Moreover, a domestic company of Bangladesh PHP, a business conglomerate based in Chittagong signed a deal with Malaysian automobile manufacturer Proton to set up an industry with a capacity of manufacturing 1,200 cars per year. The company is investing BDT 4,000 million in the project employing several hundreds of workers with 50 engineers. Even the Society of Indian Manufacturers (SIAM), an apex industry body representing leading vehicle and vehicular engine manufacturers in India is forwarding their helping hand towards Bangladesh to strengthen their automobile manufacturing base. SIAM hosted the first-ever three days Indo-Bangladesh Automotive Show in the city to unite the automotive industries of both countries.

In Bangladesh, few large car plants assemble the Mitsubishi Pajero Sport, Hino bus, Tata bus & motorcycles, etc. Some top automobile assembling & manufacturing companies in the Country are Uttara Motors Ltd, Nitol Motors Ltd., S.R Motors Ltd., Akij Motors, Pragati, Bangladesh Machine Tools Factory, Aftab Automobiles, TVS Auto Bangladesh Limited, HS Enterprise, TATA Motors Bangladesh (Joint Venture with Nitol- Niloy Motors Ltd), Atlas Bangladesh Ltd., Walton Hi-Tech Industries Limited, Runner Automobiles, Singer Bangladesh Limited, Bangladesh Honda Private Limited, Rangs Motor's Ltd., Rahimafrooz Global Limited, Chisti Engineering & Mechanical Works, Jonata Auto Mobile Parts, Ifad Autos Limited, and HNS Automobiles Ltd.

From an international perspective, in 2016, there has been growth in the sales of cars which has been led by China, the largest growing economy in the world, which gained 13 percent sales with 3.2 million additional vehicles. Among other major economies, the European Union and US market gained 1.1 million or 7 percent and 70,000 or 0.4 percent sales, respectively. The overall sales of vehicles have increased from 90 million in 2015 to 94 million in 2016. According to the world cars brand ranking 2017, it has been found that Toyota, the market leader, achieved 1.35 million units’ sales (+8.7 percent) along with 9.5 percent global market share in the first two months of 2017, followed by Volkswagen with 1.036 million sales (+2.1 percent) and Ford 896,000 sales (-2.9 percent).

Bangladesh, around 80% of the cars are imported from Japan. In Bangladesh, as the vehicle moves on the left-hand side of the road, so, imported vehicles should be right-handed driven. According to the regulation of the Bangladesh government, import of used cars, jeeps, microbus, minibus including other old vehicles & tractors are allowed. In Bangladesh, an imported vehicle should not be more than four years old. It should be JAAI (Japan Auto Appraisal Institute) certified. In Bangladesh, used vehicle taxes are levied on vehicles when imported. Only Diplomats get duty free import of one used vehicle in Bangladesh.

In Bangladesh, most of the cars have been imported. Present supplementary duties for imported regular & hybrid car are given below:

The motorcycle assembling & manufacturing companies have to pay 20 percent supplementary duty on imported parts & components. It will help motorcycle assemblers to integrate backward more easily. The importers of Human Hauler have to pay 25 percent customs duties & 30 percent supplementary duty.

Thursday, July 23, 2020

Oil Tank Terminal industry in Bangladesh

Tank terminal related to the industry is involving for storing oil and or petrochemical products and from which these products are generally transported to end customers or in addition storage centers. A tank terminal normally has tankage, above either ground or underground, and gantries (framework) for the discharge of products into street tankers or different vehicles or pipelines. Oil depots are generally located near to oil refineries or in locations wherein marine tankers containing products can discharge their shipment. A few depots are connected to pipelines from which they draw their resources and depots also can be fed through rail, through barge and by using road tankers. Maximum oil tank terminals or oil depots have street tankers running from their grounds and these automobiles shipping products to petrol stations or different customers. An oil depot is a relatively unsophisticated facility in that there is no processing or different transformation on site. The products, which attain the depot (from a refinery), are in their very last form appropriate for transport to customers. In some instances, components may be injected into products in tanks; however, there is generally no production plant on site. At present tank terminals contain identical varieties of tankage, pipelines, and gantries as those in the past and although there is an extra diploma of automation on site, there have been few large adjustments in depot operational activities through the years. One of the key imperatives issues are health, safety, and environment (HSE) and the operators of a depot ought to ensure that products are competently stored and handled. It is an important fact that any leakages must not accept which may damage the soil or the water desk. Crude oil, edible oil, and petrochemical product terminals usually employ above ground piping structures, consisting of pipelines, hoses/loading arms, valves, instrumentation connections, meters, and pumps. Terminals concerning taker ships have wonderful loading and unloading concerns and equipment. Terminal operations especially consist of loading/unloading the products from supply links (e.g. vessels, pipelines, rail, and truck tankers) to storage tanks and onward to distribution links, generally rail and truck tankers. Concerned authorities always clean and inspect the oil tankers consistently.

A major consumable oil product in our Country is the edible oil including sunflower oil, palm oil, rice burn oil and soybean oil, etc. but soybean oil is the preferred cooking medium in Bangladesh with per capita oil consumption standing at 9.2 Kg per annum. According to MGI’s internal research, per capita consumption is highest in the EU (61 Kg), while Bangladesh’s consumption per capita (9.9 Kg) is much lower than the global average (25.2 Kg).

Demand for edible oil is set to increase in the coming decade with demand from developing countries set to surpass that of developed ones. Particular mention has been made about the economies of China, India, and Bangladesh, where edible oil is a basic commodity with growing demand.

According to a recent FAO report, global oilseed production is expected to grow by 23% by 2020 with the US remaining as the main producer, followed by Brazil, China, Argentina, India, etc. Total production is expected to be within 505 million metric tons (M MT). Global vegetable oil production is set to reach 186 M MT within 2020 with output growth of 30%. Malaysia and Indonesia will jointly constitute 45% of raw material sourced, while the majority of the rest will be catered by China, Argentina, and Brazil. Bangladesh mostly imports raw materials from Indonesia, Malaysia, and Brazil. A look into the import level indicates a fall in 2008, followed by increasing imports in the following years.

The demand for edible oil in the domestic market is influenced by several factors. Edible oil like soybean is a crucial part of the local cuisine, over that, changes in the income band, rural to urban migration, awareness towards health-conscious lifestyle, and socio-economic conditions also, play a vital role in shaping the demand for the edible oil. As per industry estimates, there are at present 80 registered edible oil refineries with an annual refining capacity of 2.90 million MT, with the market being dominated by top 9 major players which cumulatively account for 75% of the refining capacity which is 2.17 million MT. The major players operating at an average capacity utilization of 50% with larger participants operating at the capacity of 65-70%.

Palm oil is the dominating edible oil market since 2003. In 2012, palm oil occupied about 64 percent market share among the three major edible oils. Palm oil is imported both in crude and refined forms. Crude palm oil (CPO) and crude palm olein (CPL) are refined in local refineries for marketing the refined products. Imported refined palm oil and refined palm olein are used by vanaspati manufacturers and food processing industries. Its import and consumption quantity has now exceeded one million tons, which is likely to grow further to 1.5 million tons in the near future. Malaysia and Indonesia are the two major supply sources of palm oil for the Bangladesh market. During January-August 2013, the total import of palm oil was 875,809 tons of which 357,228 tons or about 41 percent was Malaysian palm oil (MPO) and 518,581 tons or about 59 percent was Indonesian palm oil. The import quantity of Malaysian palm oil during the January-August period of 2013 was higher by 95.62 percent compared to January-August period of 2012. This increase in import of Malaysian palm oil in 2013 has been due to the active presence of MPO suppliers in Bangladesh market and shifting of supply sources from Indonesia to Malaysia by some of the Singapore-based trading houses, which are active in Bangladesh market, also contributing to increasing of Malaysian palm oil’s import share in the country in 2013.’

The existing annual demand for petroleum products in the country is 3,300,000 tons. The total storage capacity of petroleum products inside the country is 687,500 tons, of which the storage capability at eastern Refinery limited is 365,000 tons. In the primary installations of 3 oil-marketing companies of ERL in Chattogram (Padma Oil company Ltd, Jamuna Oil company Ltd, Meghna Petroleum Ltd) total storage capability is 205,600 tons. 82% of total petroleum products are transported through the river (coastal tanker), 6% by Railway (Tank wagon or container wagon), 10% by road (Tank lorry/truck) and 2% in the different local manner (boat, pushcart or van, and so forth). There are 72 coastal tankers (850-1,200 tons capacity each) for transportation of petroleum products from Chattogram to Godenail, Fatullah, Daulatpur, Barisal, Jhalokati, Chandpur, Ashuganj, and Bhairab depots. There are 33 shallow Draft Tankers (400-450 tons capability each) for transportation of products from Godenail or Fatullah to Baghabari, Chilmari, Balashi, and Chandpur depots. There are about 1,000 railway tank wagons (meter gauge and wide gauge). From Chattogram, products are sent to Sylhet, Sreemangal, Rangpur, and Dhaka oil depots through rail through the meter-gauge railway. From Daulatpur products are sent to Natore, Parbatipur, Harian, and Rajshahi depots through rail thru a broad-gauge railway. There are 759 filling stations, 37 customer pumps, 1,480 agents/distributors, 1273 LPG (LIQUEFIED PETROLEUM gas) dealers, and 305 Packed point dealers appointed by 3 oil-marketing companies in the country for retail trading. There are more than 6,000 tank Lorries owned by using dealers/vendors for transportation of petroleum products from oil enterprise depots to their promoting factors. Crude oil and petroleum product terminals are designed to get hold of and dispatch bulk shipments of gasoline, middle distillates, aviation fuel, lube oil, compressed natural gasoline (CNG), liquid petroleum gas (LPG), and specialty merchandise from pipelines, ships, railcars, and vans. Crude oil and petroleum product terminals are frequently located at the ocean coast however can also be located inland.

Among the others, Van Omeran Tank Terminal Ltd (VOTT), Mohammad Elias Brothers (Pvt) Ltd (MEB), Karnafully Tank Terminal Ltd (KTT), and Eastern Fisheries Ltd (EFL) are mentionable. From January 2010 to June, 2011total storage quantity was 1.94 million MT out of which SETTL stored 31.2%, VOTT stored 20.9%, MEB stored 28.9%, KTT stored (14.4%) and EFL stored 4.6%.

Steel Re-Rolling Industry in BD

The use of steel in the world gradually increases day by day. Now each and every part of civil constructions is made by a steel structure. due to the availability of scrap value or salvage value men are interested to build their own construction with steel structure. It is certain to increase steel and related products with steel enhance in the future.

Bangladesh Steel industry is a stable industry as one of the important industrial sectors of the country. It consists of small up to the largest amount of steel melting and re-rolling factories across the country which mostly produce deformed bar rod of different grade (40, 60, and 500), angel, channel, and coil for the construction industry. Although the history of the Steel Industry is not an ancient one it can make a good future. Earlier than 1971 Bangladesh did not have any steel mill and even after the liberation there were only a few steel factories in the country. In the 1990s the tangible progress began in this sector through a revolution. During that period the building construction agencies or developer companies came forward to build modern infrastructure. Then with the increasing demand, new investors started investing in steel or rod production. Now, Bangladesh has more than 400 steel, re-rolling, and auto-re-rolling mills with a combined annual production capacity of 8.00 million tons, against the total demand of only 4.00 tones. The government of the country projects accounts for nearly 40.00% of total steel consumption. Though most of them are manual steel plants, 30 mills among them are automated. Large numbers of steel manufacturing companies have gained a reputation as a brand. Among them, BSRM, KSRM, Anwar Steel, AK steel, Rahim steel, RSRM, Basundhara steel, GPH Ispat, Abul Khair Group are worth mentioning.

Bangladesh is one of the lowest consumers of steel products in the World. Per capita steel consumption in Bangladesh now stands at only 25 kilograms, while it is 55 kilograms in India and 324 kilograms in the developed nations. Though many companies of the industry including BSRM, Abul Khair steel, GPH, RSRM, KSRM, Rahim Steel, and Basundhara Steel is manufacturing ms billet which is used as raw materials. Locally around 1.50 million tons are still imported each year. At present, three large steel producers such as BSRM, Abul Khair, and KSRM supply more than 50.0% of the country’s annual need for 3.50-4.00 million tons of steel, with BRM and AKS set to expand their capacity future. Besides the competition from big parties, the smaller mills are also facing challenges such as price falling in the international steel market and a decline in domestic demand for construction materials, lack of branding and promoting, and absence of advertisement which impact on the turnover and profitability of the small and medium scale companies and forcing them difficult to stay in the market. The overcapacity of the steel industry also indicates enormous export potential, though the option is yet to explore following some bottlenecks in the export process. Because steel demand is derived from other sectors like construction building, roads, consumer durables, and infrastructure, its fortune is dependent on the growth of these user industries. However, the initiation of Padma Bridge construction, acceleration of government’s big infrastructure projects under the annual development program, and revival of the local real estate industry will undoubtedly boots-up the steel consumption locally.

Monday, July 20, 2020

Sportswear Industry in Bangladesh

A pair of footwear is an important part of a pair in human life, anyone can not think without footwear. It may be sponge footwear, sports footwear, casual footwear, slipper, lady’s footwear, gent’s footwear. Everyone wears footwear daily basis for a formal or informal basis. The business model of the Athletic shoes, Direct Injection shoes, Flip-flop, Rubber & PU soles, IMEVA sole/Midsole and EVA Sheet, and exporting to the international market. Today we are going to discuss athletic shoes such as sports footwear industry trends in Bangladesh.

Global Footwear industry analysis; The worldwide footwear industry has been experiencing quick expansion, primarily due to swift demand for new and innovative footwear products worldwide. Due to improvements in manufacturing processes, technology innovation and integration, modern, fashionable, and comfortable shoes are being continuously developed at reasonable prices to keep pace with the growing demand for these products.

Rising sports activity has ominously increased the focus on sportswear globally. Different international brands are merging sportswear with fashion wear nowadays. Besides, there has been a surge in wellbeing and wellness exercises among shoppers around the world, especially in running and different sports. Thus, leading sports brands are continuously involved in the manufacturing of technically sophisticated and innovative products. On account of their changing lifestyles, men and women are wearing sports-inspired footwear in daily life. Versatility, comfort, and style are some of the major factors driving the appeal of sportswear, which in turn is likely to propel the growth of the footwear market globally.

An overall rise in the retail culture is triggering the growth of the global footwear market. Factors such as great diversity in the footwear market and easy availability of products in many retail outlets are anticipated to encourage impulse buying of these products. Different brands, as well as retailers, are re-orienting their focus on this market, which has led to a significant increase in the number of retail outlets worldwide. Moreover, there has been noteworthy growth in the advertising and marketing-related investments made by different brands. Internet retailing is also gaining prominence for the purchase of footwear across different cities. This channel is gaining popularity to shop for women’s footwear as well as sports footwear.

However, increasing the production of counterfeit footwear products by local manufacturers is hindering the growth of the global footwear market. These duplicate products are hampering the distribution channel and are leading to a negative impact on the overall growth of the market.

The market based on product type which includes athletic footwear and non-athletic footwear. The global athletic footwear market is further segmented into running and cross-training/tennis shoes, soccer/football shoes, golf shoes, basketball shoes, hiking shoes, baseball shoes, and others. The global non-athletic footwear market is classified into casual footwear, dress evening footwear, military boots, lite hiking outdoor sandal, and others. Based on gender type, the footwear market is subdivided into men’s footwear, women’s footwear, and kids’ footwear. Furthermore, the global footwear market has been divided by geography into North America, Europe, Asia Pacific, and the rest of the world (RoW).

Key players have also been profiled based on company overview, financial overview, business strategies, and key developments. Major market participants profiled in this report include Nike Inc. (U.S.), Adidas AG (Germany), Puma SE (Germany), New Balance Inc. (U.S.), Asics Corp.(Japan), Bata Limited (Canada), Deichmann SE (Germany), Skechers USA, Inc. (U.S.), The Aldo Group Inc. (Canada), VF Corp.(U.S.), W.L. Gore & Associates, Inc. (U.S.), Jack Wolfskin (Germany), Sympatex Technologies GmbH (Germany), Polartec, LLC (U.S.), Kathmandu Holdings Limited (New Zealand), and Columbia Sportswear Company (U.S.).

Assembly of products; Bangladesh has a host of potential products that can earn substantially large amounts of foreign exchange if only the necessary patronage from the overseas buyers is given for the sake of expanding the country’s export base and thereby reach a sustainable status for the country’s export trade.

Recently, a new opportunity has opened up to further diversify the range of Bangladesh’s export base by including footwear and other leather goods in the list of exports, particularly to the European Union (EU) market.

However, the country has already been exporting finished leather and different kinds of leather products to the overseas markets. These products also enjoyed considerable demand because of their high quality. The main reason for this was the natural advantage of leather that Bangladesh produces. Despite the high quality of local animal hides both in raw and finished form, Bangladesh was still trailing behind Vietnam and China in the export of footwear and other leather products in the European and other markets.

The Export Processing Zones at present has 18 sports shoe and leather shoe factories but there are at least seven large factories under construction, mostly owned by big manufacturers in the shoe world. The factories under construction include Korean company Young one’s footwear complex which is said to be the largest in Asia. The company started construction of its mega shoe complex in Chittagong six months back. The first part of the complex will go into production by the middle of next year, and the company’s executives said they would be able to manufacture about 30 million pairs of shoes by 2013.

Sunday, July 19, 2020

Shipping line business in Bangladesh

One of the possible avenues for diversifying the economy of Bangladesh is the maritime sector. It is a small country with a big coastline in the south. It is through the sea that we will find this new avenue of our economic success. The range of activities that fall within the domain of maritime world can be noted have as follows: ship owning and operation; ship management; ship chartering; sea freight; shipbuilding; ship financing and mortgage; ship breaking; transshipment of goods; offshore activities; and dispute resolution/arbitration and litigation.

Bangladeshis are gifted with 8,533 km of inland waterways and 535 km seacoast. This very gift has allowed industries to transport goods to various divisions of Bangladesh and around the globe. The transportation is handled by cargo ships/vessels transporting different types of goods ranging from food items to oil. They are of four types; general cargo vessels, tankers, dry vessels, and multi-purpose vessels.

The capacities of these vessels range from 20,000 deadweight tons to 550,000 deadweight tons. Inland ports handle is seen to handle nearly 40% of the nation’s foreign trade. There is no other business as international in nature as shipping. Government control and restrictions impede the growth of shipping. There are different types of chartering. Bareboat or demise charter involves taking over the ship (on long lease usually leading to sale) as a virtual owner to manage and operate the ship (including employment of master and crew) for its own business. The bareboat charterer may also register the ship in a flag of his/her choice but cannot raise any capital through mortgage because this information remains tied-up with the original register.

There are a lot of Bangladeshis who want to engage in ship chartering business but cannot do so because of exchange control restrictions. Bangladesh should remove all bureaucratic restrictions and allow its nationals to freely undertake ship chartering business. Such chartering enterprises will not remain confined to national trade but will involve third countries as well.

An analysis of Bangladesh Inland Container Depot.

The feasible risk elements for the off-dock industry will depend on its area of operation in the industry and industry dynamics. The key common risk factors include the degree of competition, international trade volume, port situation, market changes, political risk, and global trade policies. Off-Dock operation is highly established on the effectivity of handling exports and imports by Chattogram Port that generates from the International exchange of the Country. Therefore, any disruption in Chattogram Port operation will have an adverse influence on the trade volume of the Country and have a consequential impact on the business of the Company. Besides the dependency on Chattogram Port, the project is close to the Bay of Bengal and thereby risking the opportunity of being affected by sea driven natural calamities. Some of these companies (Container Yard) was the largest individual ICD in Bangladesh, but after the amalgamation of Summit Alliance Port Ltd. (SAPL), and Ocean Container Ltd. in 2012, SAPL becomes the biggest ICD. Other major ICDs are KDS, BM container Depot, and Port link, etc.

However, recently developed safety embankment by the Bangladesh Water Development Board has reduced this risk greatly. Furthermore, the equal embankment has been earmarked to be a phase of the Asian Super Highway, which should lead to further strengthening of the structure and thereby minimizing any potential risk from sea driven calamities. Finally, all Off-Dock Companies are dependent on renewing permission/clearance from Chattogram Custom House (NBR), Chattogram Port Authority, and different relevant Government Agencies. Delay at any stage can have a consequential effect on the smooth continuation of the operation.

The industry is observing improvement from the regulators part i.e., National Board of Revenue (NBR) and Chattogram Port Authority (CPA) became stricter on giving licenses and has not issued new licenses. It may provide operators with an established record of accomplishment to grab possibilities in the increasing volumes of trade as the government permitting imports to be handled more at Off- Dock Facilities combined with the opening up of transit trade between Bangladesh and India, Nepal & Bhutan. An increase in export through Shah Amanat International Airport in Chattogram is also likely to fetch more demand for the industry.

For stabilizing the competition, Bangladesh Inland Container Depot Association (BICDA) attempts to rationalize sustainable rates because of the increasing fuel and labor-related costs. There is also an increasing trend towards “just in time shipment” where Buyers will look at avoiding high storage costs at destination countries and instead have the goods prepared at the Off-Dock which can be sent at short notice. Some of these companies are better off in their position as customers choose those off-docks which have area and competitive advantages. two No fixed tariff rate is a major problem in this industry regarding price. If it is fixed by BICDA (Bangladesh Inland Container Depot Association), then some of these companies would be able to generate more revenue due to its capacity. However, the rate is improved during the last surveillance year, as it is not fixed.

Saturday, July 18, 2020

Readymade Garments in Bangladesh

In Bangladesh, Ready Made Garment (RMG) sector earned $34,133.27 million within $40,535.04 million total export revenue in FY18-19, which was $30,614.76 million within $36,668.17 million total export revenue in FY17-18. Export revenue growth was showing a positive trend during the last couple of years 10.55% in FY18-19 in which RMG sector revenue increased 11.49% during the financial year FY18-19.

RMG sector generates its revenue based on two products as Woven and Knit. Both are almost the same during the last 19 years but woven products dominated the RMG sectors during these financial years. A large amount of export revenue is generated from the readymade garment industry from both products (Woven and Knit). During the last couple of years, woven garments slightly increased from Knit garments. It was about 50.52% and 49.48% respectively woven and knit garments in FY18-19 which was 50.39% woven and 49.61% knit garments in FY17-18 and 51.13% woven and 48.87% knit garments in FY16-17. It indicated both products providing an equal contribution to the national economy in the last 19 years.

Total export revenue of the Country increased so far from during the last financial year FY18-19, which was about 10.55% in overall export revenue in which RMG revenue earnings growth was approximately 11.49% in FY18-19 than last year FY17-18. Major RMG product items in the Bangladesh RMG sector are Shirts, Trousers, Jackets, T-Shirt, and Sweater, etc. In FY18-19; all of the above-mentioned products’ export revenue increased from last financial year FY17-18. In FY18-19, all the major products contributed at 9.33%, 27.85%, 17.60%, 28.14%, and 17.08% respectively Shirts, Trousers, Jackets, T-Shirt, and Sweater. The main product contribution was reported (Shirt, Trousers, Jackets, T-Shirt, and Sweater) respectively 9.21%, 28.53%, 17.76%, 28.09% in FY17-18. Total export revenue of Bangladesh RMG the sector is generated from European, USA, Canada, and non-traditional markets. The major portion of export revenue generated from European Countries especially Germany, the United Kingdom, Spain, France, Italy, Belgium, Netherlands, Sweden, the Czech Republic, and Poland, etc. Bangladesh earned 61.91% export revenue from the European union in FY18-19, which was 64.12% of RMG export revenue from European Countries in FY17-18. The second-largest amount of export revenue generated from the USA, Bangladesh garments companies generated 17.97% worth of export revenue from the USA in FY18-19, which was 17.48% in FY17-18. However, the Export volume of Bangladesh gradually increased in European Countries and the non-traditional market.

Month wise overall export revenue from the Woven and Knit sectors increased from the month of last financial year gradually except August 2018 and June 2019; during these two months’ export slow down slightly from the previous one. The largest volume of export growth was occurred in September 2018 (51.65%), October 2018 (36.96), July 2018 (21.72%) and May 2019 (14.88%), overall growth during these years 11.49%, where woven items grew 11.79% and knit items grew 11.19% in FY18-19. But the largest amount of export revenue generated in May 2019, which was $3,243.18 million.

Major challenges faced by the sector is mostly due to the impact of the epidemic COVID-19, which may create a negative impact on the demand-supply gap, the revision in wage rate since December 2014, and continued pressure from the buyer side on the unit price that tightens the margin of the sector incumbents to some extent. Moreover, due to the Rana Plaza collapse and Tazreen Garment's fire incident, the issues related to Compliance escalated the fixed cost requirement of the industries. Additionally, the uninterrupted gas supply is a pre-requirement for the knit-garments industry. However, in recent times, there has been a huge shortfall in the supply of gas, which hampers uninterrupted production. Moreover, labor unrest in the RMG industry is a very alarming issue leading to a high migration rate among RMG workers. Moreover, there are risks associated with foreign currency fluctuations, potential supply disruptions, monitoring of quality standards, changes in fuel & transportation prices, and international trade policies. Nonetheless, according to economists, Bangladesh most likely stands to suffer from the effects of the US-led Trans-Pacific Partnership (TPP) trade deal, especially in terms of export earnings.

Aiyub Khan