India Biannual Construction Review 3Q/4Q 2023
Price trends
Despite ongoing geopolitical tensions and rising climatic concerns, materials prices stabilised due to reduced global demand and input costs. Our survey respondents share the same sentiment, with 84% claiming that material prices have begun to settle since the start of this fiscal year in April 2023.
Steel
Source: Price lists from various manufacturers.
Note: As published on the manufacturers' monthly price list, the above rates represent basic rates (excluding taxes, transportation and any abnormal costs) for Fe550D 16mm diameter rebars. As per Gleeds observation, as part of the final buyout, grade A steel products are typically procured with a discount of 10 to 12% from the listed price.
Steel prices have started showing early signs of an increase from their declining trend since February 2023. From April to August 2023, India was a net exporter. India exported 2.6 million tonnes, a 62% increase from last year, whereas it imported 2 million tonnes of finished steel, a 23% yearly increase.
Average Steel prices in India are in the range of INR 63–66 per kg as of September 2023. Structural steel rates hover around INR 62000/MT.
Domestic steel production remained commendable for the last fiscal quarter at 11.5% growth over the previous year. Consumption also grew to the same levels, especially with the government’s interest in infrastructure and capital spending.
The rise in raw material prices and coking coal prices globally poses an upward risk to input costs. Given the flourishing domestic demand due to infrastructure push and recent production cuts from China — the world’s largest and competitively priced steel market — domestic prices are expected to increase further as we approach the upcoming quarter.
Cement
Note: All rates provided are exclusive of taxes
With market reports indicating that infrastructure projects currently account for 30% of the total cement consumption, cement demand is anticipated to intensify in the coming quarters.
Moderated raw material and fuel prices prevailed in the market; the first half of the fiscal year also witnessed monsoon-related seasonal weakness. These caused a dip of 5.5% in the cement prices during the past quarter of the financial year compared to 1Q FY2024. As of August 2023, the approximate cost of 50kg cement bags ranged between INR 300–335 per 50 kg bag, while they were at INR 320–345 in April 2023.
With the recent increase in input costs, including electricity duty revisions and Certain Goods Carried by Road (CGCR) tax revisions, price increases will be implemented from the beginning of September 2023.
Having seen meagre pricing growth recently, the sector will embrace the demand, and a 3-10% price surge is likely.
Survey feedback for cement and steel pricing
Nearly 40% of our survey respondents stated that the price of cement increased by 1%-5% from 1Q FY2024 to 2Q FY2024.
Almost 30% of our survey respondents stated that the price of steel increased by 1%-5% from 1Q FY2024 to 2Q FY2024.
Crude oil
Note: The prices for FY2024 are until the month of September.
Expectations are that the Brent crude oil market will remain tight and volatile for the remainder of 2023, with elevated prices likely to persist, particularly with the onset of Israel-Hamas military tension.
The financial year started with a sharp cut in crude oil prices from $84.64 per barrel in April 2023 to $75.47 in May 2023, acknowledging increasing global demand and competitive discounts from Russian imports.
However, in June, OPEC announced its agreement to extend production cuts through to the end of 2024, earlier set to expire by December 2023. Saudi Arabia and Russia, the world’s two largest oil-producing nations, have agreed to continue with voluntary oil supply cuts of 1.3 million barrels per day or more than 1% of global demand.
The reduced raw material availability increased the price by 10.57% between the last two quarters of FY2024. As of September 2023, the crude oil rates stood at $93.62 per barrel, spiking again in October following the start of the Israel-Hamas war.
India is purchasing Russian oil at an increased premium as a result of ongoing foreign exchange rate pressures and Russia’s discount reduction. India's crude oil imports slipped to a 10-month low of 18.73 million tonnes in August 2023, a circa 4% decrease from the previous month on imports, while the prices have increased by INR 644 (9%) per barrel.
This combined influence of reduced raw material availability, a possible slowdown in global economic activity from Middle East tensions and expected autumn refinery maintenance has led to elevated prices.
Diesel
Note: All annual prices are averaged for the month of March and rates exclude taxes. FY 2024 prices are till September.
Fuel prices remain essentially unchanged in 2023. The last recorded change in countrywide fluctuations was in May 2022, when the centre cut the excise duty.
Even though it is a volatile commodity linked to a global index and could be adjusted every 15 days, the government implemented informal price controls on petrol and diesel due to public sentiment and to combat inflation.
In August 2023, domestic sales of petrol and diesel increased by 3% and 5%, respectively, compared to the same month of the previous year. Diesel consumption has been lower since May 2023 due to reduced demands due to ongoing monsoons that slow economic activities.
Aluminium and copper
Note: All annual prices are averaged for the month of March and rates exclude taxes. The prices for FY2024 are until the month of September.
Aluminium prices have been volatile since the start of 2023, with a general downward trend. The average market price for aluminium in global markets for this financial year is $2215/t, a 21.9% decrease from the same period last year.
The International Aluminium Institute reports that the global output in August 2023 had increased by 5.79% from last April, with China driving the rise in production. European aluminium production continues to be hampered by elevated energy costs: prices average between $2,500 and $3,000/t this year.
Copper, like aluminium, had been rising at the start of the year on the expectation that China’s property market would strengthen, but disappointing economic releases have weighed on the price. The rates took a downward turn from May 2023, leading to an overall decrease of 7.2% from January 2023 to August 2023 whilst maintaining a 10.9% year-on-year increase. With high inventories and a strong dollar performance balancing each other out, copper prices are expected to average $8,500/t in 2023.
Polyvinyl chloride (PVC)
Note: All annual prices are averaged for the month of March and rates exclude taxes. The prices for FY2024 are until the month of September.
The PVC market in India is growing steadily, driven by strong demand from key end-use sectors such as construction, packaging, and electrical & electronics. Rising urbanization, the growth of electric vehicles, 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 112/kg in the period 1Q/2Q of FY2023, while it has reduced to INR 84/kg in FY2024. With the pick-up in construction activities post-monsoon, it is predicted that PVC pipes and fittings prices will regain momentum, given reduced competition from imports and elevated crude oil pricing in the global market.
Contractor’s overheads and profits
When asked what the overall cost impact from 1Q FY2024 to 2Q FY2024 on contractor’s overheads and profits percentages, 38% of the respondents stated that there was no change, while 22% witnessed an increase of 1–5%.
Table 01: Typical material costs
As per Gleeds research, the prices are as of September 2023. All prices are indicative supply-only and exclude GST, transportation, and other abnormal costs.
