India Biannual Construction Market Report 1Q/2Q FY2025
Price trends
Amidst robust demand and under the assumption of favourable supply dynamics, Gleeds has projected a construction inflation rate ranging from 4.5% to 6% for the year 2024. This estimate is contingent upon prevailing headline trends and global geopolitical factors, with fluctuations in commodity prices, notably basic metals and crude oil, serving as key drivers.
From the Gleeds market survey, nearly 80% of respondents anticipate price increases. These findings underscore a prevailing sentiment among industry stakeholders regarding the likelihood of inflationary pressures within the construction sector.
Steel
Source: SAIL
Note: The above rates represent basic rates (excluding taxes, transportation, and any abnormal costs) for a Fe 550D 16 mm diameter rebar as published on the manufacturer’s monthly price list.
As per Gleeds observation, typically, as part of the final buyout, Grade A steel products are generally procured with a discount of 10 to 12% from the listed price.
India is a bright spot in the global steel sector, with demand expanding by 7.7% in 2024, compared to a worldwide growth of 1.9%, according to The World Steel Association's short-range outlook.
Government infrastructure spending and investment in schemes like PM Gati Shakti and UDAN, as well as the promotion of urban transformation via metro rail and NaMo Bharat, will create sustainable demand for the sector. Adequate market demand is also expected in the automobile sector.
Rebar/steel prices have started exhibiting early signs of a hike from their dropping pattern since the start of FY2025. In August and September 2023, prices plummeted to INR 63/kg due to seasonal considerations and planned annual maintenance of steel mills.
From October 2023, the prices went back to half yearly average of INR INR 65/kg with a slight downward bias on a month-on-month basis, although recording a marginal upward trend in contrast to the other global steel markets. This increase is attributed to raised offer levels from secondary producers despite the largely sluggish market demand due to the country's upcoming general elections. For the past three months, structural steel rates have hovered around INR 67000/MT.
The rise in raw material prices and coking coal prices globally poses an upward risk to input costs. Except for the election season slowdown in demand, the flourishing domestic market from the infrastructure push is expected to increase domestic prices further in the upcoming quarter.
Cement
Source: Gleeds internal database
When cement pricing hit a peak in October 2023 up to INR 335 per bag, the prospects for cost hikes in FY2024 seemed likely. But appreciably, the price corrected in the next five consecutive months due to heightened competition and expansion in capacity, closing at INR 295 per 50kg bag as of March 2024, thus averaging the yearly prices at INR 325/bag.
Moderated raw material and fuel prices prevailed in the market, which helped manufacturing companies maintain profitability. These caused a dip of 8.0% in cement prices during the second half of the financial year FY2024. As of March 2024, the approximate cost of 50kg cement bags is circa 12% less than April 2023.
Starting from April 2024, a temporary decline in demand is seen due to a lack of new projects amid the model code of conduct for the upcoming elections. Cement prices are expected to increase once the demand heightens after the monsoon season.
Crude oil
Source: Country Economy
Note: All year prices are averaged for the month of March, rates excluding taxes.
Oil prices decreased despite tensions in the Middle East. After breaking $95/barrel in late September, oil prices fell by 4.2% between August 2023 and February 2024 to a monthly average of $80.70.
On the demand side, the prospects for global demand growth have been dampened, contributing to the downward pressure on prices. On the supply side, the actions of OPEC+ (the Organisation of Petroleum Exporting nations plus selected non-member nations, including Russia) have been instrumental. Despite their output limitations, the market was flooded with oil due to robust output growth in Iran and non-OPEC countries, leading to a further decrease in prices.
As Russia is India's primary oil supplier, the Red Sea tensions have had only a minor impact on oil prices. The recent escalation of tensions between Iran and Israel sent shockwaves through global oil markets, with crude oil prices once again edging towards the $100/barrel threshold in 2Q FY2025 based on the current scenario.
However, the IMF, in its recent economic outlook update, has projected a counter view that oil prices will slide by 2.5% year-over-year to average $78.60/barrel in 2024 and will continue to fall to $67.50 in 2029 with hopes of de-escalation of the Middle East conflict and the possibility of a rise in OPEC+ oil supply to regain the market in case of demand growth globally. The potential increase in the renewable energy growth target of 450 MW and a 45% reduction in carbon intensity by 2030 will reduce oil demand. Whether this remains true or not is yet to be seen.
Diesel
Source: My Petrol Price
Note: All year prices are averaged for the month of March, rates excluding taxes.
India's vulnerability to fluctuations in global oil prices is evident in the direct linkage between international crude oil prices and the retail prices of petrol and diesel in the country.
Despite declining crude oil prices in the global market for most of FY2024, fuel prices remained unchanged in 2023, while the beginning of 2024 saw slight price adjustments. The last recorded change in countrywide fluctuations was in March 2024 for a reduction of INR 2/litre ahead of the Lok Sabha election schedule announcement. The pricing revision capped the average price of diesel and petrol at INR 92 & 103/litre, respectively.
Forecasts indicate that oil prices could reach $100 per barrel by September 2024, primarily guided by sustained production cuts by major oil-producing nations like Russia, coupled with geopolitical tensions in the Middle East. With potential talks regarding US sanction relief on Iran, hopes for fuel price cuts spark, but the subsequent surge in global crude oil prices has dimmed those expectations for the near future.
Aluminium and copper
Source: World Bank
Note: All year prices are averaged for the month of March.
Aluminium prices began an upward trend in September 2023, following a continuous decline since the beginning of the year. The average global market price for aluminium stood at $2,190/t in 3Q FY2024 and increased marginally to $2,215/t in 4Q FY2024, representing a net 6% and 8% decrease from the respective previous year's prices.
Western sanctions on Russian metals and dry conditions in China's Yunnan Province have reduced aluminium output and fuelled price increases.
The consequences of the latest announcement of the EU's Carbon Border Adjustment Mechanism (CBAM) are expected to be limited for India's primary aluminium producers to around 2-6% because the focus is on direct emissions. However, if indirect emissions are accounted for, the impact on domestic pricing might be up to 30% more.
Meanwhile, copper prices remained close to 4Q 2021 levels as supply concerns combined with evidence of strong demand. Prices rose to $8,763 per tonne in March 2024, representing a 5.65% month-on-month hike — the highest in FY2024.
According to several market reports, supply disruptions caused by the shutdown of the Cobre Panama project, as well as the tightened availability of raw materials, are expected to drive commodity prices up to $10,000–$12,000 per tonne (monthly average) amid rising demand from EVs, AI power grids, and other green energy transitions.
Polyvinyl chloride (PVC)
Source: Reliance, Mumbai
Note: All year prices are averaged for the month of March, rates excluding taxes.
The PVC market in India is growing steadily, driven by strong demand from key end-use sectors such as construction, packaging and electrical and electronics. Rising urbanisation, the growth of EVs and the government's promotion of PVC as an alternative packaging material are all contributing to this demand.
The annual average price of PVC was INR 84/kg in the period 1Q/2Q FY2024, while it has reduced to INR 79/kg in 3Q/4Q FY2024 primarily due to overproduction and soft demand in the retail space, causing excessive supply. Prices will continue increasing with an annual variation of 3.5% to 5% compared to 2024 for the next fiscal year based on Gleeds' forecast and supported by the Business Analytique PVC price index.
Contractor overheads and profits
When asked what the overall cost impact from 2Q FY2024 to 4Q FY2024 on contractor’s overheads and profit percentages, 34% witnessed an increase of 1–5%, while 26% of respondents stated that there was no change in the period.
Table 01: Typical material costs
Source: As per Gleeds’ research and the prices are for March 2024. All figures mentioned are indicative supply only prices excluding GST, transportation and any other abnormal costs.
