The country’s top export product attracts more investors
Rajesh Rai | Phuentsholing
With 11 ferrosilicon industries in operation, three under construction, six new constructions approved and 10 new candidates, Bhutan will have more ferrosilicon industries in the coming years.
While Pasakha Industrial Estate (PIE) has no space, the new factories will be located in Motanga Industrial Park (MIP) in Samdrupjongkhar and Jigmeling Industrial Park (JIP) in Sarpang.
Of the 11 existing ferrosilicon industries, 10 are in Pasakha and one in Motanga. Of these, only one, Ugen Ferro Alloys, is a Foreign Direct Investment (FDI).
Is it doable?
Ferrosilicon is now Bhutan’s main export product. In 2021, Bhutan exported ferrosilicon with a value of Nu 15B, the highest to date. In 2020, Bhutan exported Nu 7B worth of ferrosilicon, Nu 9B in 2019, Nu 13B in 2018 and Nu 9B in 2017.
In 2020, records show that India imported the largest share of ferrosilicon from Bhutan at 16.6% worth $101 million. India also imported ferrosilicon from China, Indonesia and Malaysia.
Observers said the lucrative nature of the business and record price as high as Nu 280,000 per metric ton (MT) in 2021 has attracted investors.
Although there are concerns if too many people are venturing into the business, investors are positive.
The proponent of Chukha Ferro Alloys Private Limited (CFAPL) said the talk going around the region’s steel and ferrous industries is that if Bhutan cannot produce ferrosilicon or energy-intensive products, no other country cannot produce it.
“Another issue is the Russian-Ukrainian war, which will see the demand for steel in the coming years coupled with the post-pandemic plans of developing countries. Ferrosilicon industries will do well,” he said.
The CFPL is a Foreign Direct Investment (FDI) and its construction is currently underway in Motanga. It will take another 15 months before the factory starts production.
Meanwhile, Economic Affairs Minister Lyonpo Loknath Sharma said he had discussed upcoming ferrosilicon industries and markets with India during his recent visit.
“They say it’s promising as India tries to increase its steel production. They say their steel production is improving and could be increased 300 times in 10 to 15 years. So, the ferrosilicon market could be there.
He, however, said the problem is with raw materials such as coal and semi-coke as both are mainly imported from India and China.
“Additionally, our electricity tariff will gradually increase and the same tariff as today may not be feasible,” Lyonpo Loknath Sharma said. “Furthermore, if India does not achieve what it aims for, then the market is closed.”
He said they advise all promoters to properly consider these factors. India, Nepal and others could also come with large alloy factories, he added.
Lyonpo Loknath Sharma said the government cannot distort and disrupt where private investors want to put their money, but they should do their homework properly rather than putting everything in one sector.
He said investors might think of windfall profits looking at the recent past during the Covid-19 pandemic.
“But it was because the whole transport and value chain was disrupted that Bhutan had the opportunity to export to India.”
The Ministry of Economic Affairs has also carried out a study on the global ferrosilicon industry in relation to Bhutan.
The report states that with the current production of 120 million MT of crude steel in India, the consumption of ferrosilicon is estimated at 600,000 MT. India imports about 125,000 tonnes of ferrosilicon from Bhutan and the rest from Malaysia, China and other countries.