Bangladesh budget overhaul raises clinker, steel input costs amid weak demand

Bangladesh's construction sector faces mounting cost pressures after the government announced changes to import duties on key raw materials in its 2025-26 budget, with the shift from fixed to value-based taxation expected to significantly increase expenses for cement and steel producers.

The government plans to replace the flat Taka 700/mt duty on imported clinker with a 25% value-based tax. For manufacturers with in-house clinker facilities, the rate will be 15%.

In contrast, duties on limestone aggregates have been lowered, offering some cost relief.

For steelmakers, raw material imports are also becoming more expensive. The budget removes fixed customs duties on scrap metal, sponge iron, and pig iron in favor of a higher value-added tax. Scrap metal duty is set to increase from Taka 2,000/mt to Taka 2,400/mt, while VAT on rod production rises to Taka 2,700/mt.

The timing of these tax increases coincides with traditionally weak demand conditions, as Bangladesh's construction sector typically slows during the monsoon season and ahead of Eid celebrations.

"Due to the monsoon season, cement manufacturers may struggle to pass on these costs to end-users, which could increase market competition and pressure both FOB and CFR prices," said a trader familiar with the clinker market.

Another buyer added, "The new rule could raise taxes by around Taka 300/mt, but we're still awaiting more clarity on how the slabs will be structured."

Clinker demand in Bangladesh remains weak ahead of Eid and the rainy season. Indicative CFR prices for early July shipments stand at $46.50/mt.