India Biannual Construction Market Report 3Q/4Q FY2025
Price trends
Amidst robust demand and favourable supply dynamics, the demand for construction projects has increased. Over 90% of our survey respondents share this sentiment.
Gleeds has projected a construction inflation rate of 3% to 5% for 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.
Nearly 40% (39%) of our survey respondents think construction costs will increase by 5% to 10% in the current fiscal year compared to FY 2024, whilst a quarter see an increase of more than 10%. 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 steel bar as published on the manufacturer’s monthly price list.
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.
Prices for rebar and structural steel in India fluctuated during the first half of FY2025. Prices that had risen before the elections began to fall in early June 2024. Rebar prices began at ₹65,000 per metric tonne in April, increased slightly, then dropped to ₹63,500 by August 2024. Various factors caused the variation, including changes in supply and demand dynamics, capacity expansions, raw material pricing, strong Chinese exports and seasonal factors.
Prices for structural steel also saw a similar trend. In April, the prices of other structural steel products like beams and plates were around ₹68,000 per metric tonne and increased to about ₹68,500 per metric tonne by the end of August 2024.
With the global steel market facing continued pressure from oversupply and uneven demand growth, alongside declining raw material prices, steel prices are expected to remain subdued in the coming quarters. However, the upcoming enforcement of a mining cess, which could raise production costs by 5% to 15%, is likely to place further strain on producers' margins. This cess could counterbalance any downward pressure on prices by pushing production costs higher, potentially leading to a divergence between raw material price trends and output prices.
Cement
Note: All figures are basic prices (excluding taxes) and averages of the respective quarters.
Cement output and consumption in India have remained stable over the last six months, aided by an upward trend in infrastructure spending and a boost in housing demand.
Cement volumes are anticipated to increase by 7 to 8% from 440 million metric tonnes to 455–460 million metric tonnes in FY2025, with the eastern and southern areas of India leading the way (38–40 million metric tonne per annum increment, split evenly between the two regions). On account of this buoyant demand and externalities related to raw materials availability kept in check, cement costs in this region are likely to grow softer for consumers.
On the other hand, utilisation is expected to remain moderate at around 71% in FY2025, on an expanded basis. The reduction in raw material prices such as coal, pet coke, and diesel (42%, 11% and 2%, respectively, on a year-on-year basis) and competitive intensity combined to drive the average pan-India cement prices down by circa 9.5% to Rs.298/bag from INR 330/bag in the previous year same period.
With the recent rate per 50kg bag of cement in August 2024 standing at INR 290 per bag and expectations of a rebound of demand post-monsoon, Gleeds anticipates a modest increase to this observed price to range between INR 295 and INR 305 per bag in 3Q and 4Q FY2025.
Client C – Gleeds provided cost management services for commercial fit-out project
Brent crude oil
Source: Country Economy
Note: All figures are basic prices (excluding taxes) and averages of the respective quarters.
Over the past six months, crude oil prices have experienced significant fluctuations. At the beginning of this period, crude oil prices declined, influenced by factors such as reduced demand forecasts from OPEC and lower crude oil imports from China.
Prices began to recover around mid-year, driven by various market dynamics, including geopolitical tensions and supply.
In the last couple of months, prices have risen again. This increase is partly due to the Israel-Hamas conflict and the Red Sea crisis, which have disrupted supply chains and increased transportation costs.
As of September 2024, crude oil prices are hovering around $67.3 per barrel for WTI crude and $70.9 per barrel for Brent crude. With sufficient supply in the recent months easing the geopolitical risk premium and the probability of unwinding the OPEC+ production cuts by the end of 2024, Brent Crude prices are now expected to average $81.52 per barrel this year.
Diesel
Source: MyPetrolPrice
Note: All figures are basic prices (excluding taxes) and averages of the respective quarters.
India's vulnerability to fluctuations in global oil prices is evident in the direct link between international crude oil prices and the retail prices of petrol and diesel in the country.
Diesel prices remained relatively stable in the early period of FY2025. However, from June onwards, prices began to rise significantly. This was primarily due to the increase in global crude oil prices, which saw a sharp uptick due to geopolitical tensions, including the Israel-Hamas conflict and the Red Sea crisis. With the easing of the former, the diesel prices also stabilised.
The monsoon season typically sees higher diesel consumption for agricultural activities, which can drive up prices, but adequate global supply of crude oil helps balance the risk. As of September 2024, diesel prices in major cities were averaging around ₹91.00 per litre.
Aluminium and copper
Source: World Bank
Note: All figures are basic prices (excluding taxes) and averages of the respective quarters.
From April to September 2024, aluminium prices experienced notable fluctuations. Prices started at $2,506 per tonne in April, peaked at $2,564 per tonne in May, and then saw a gradual decline, reaching around $2,430 per tonne by September. Compared to the same period in 2023, prices were generally higher in 2024, reflecting a recovery from the previous year’s lower levels.
A key factor influencing the pricing is decreased Chinese demand due to lower manufacturing output. Rising costs associated with aluminium smelting, including energy and raw materials, have also contributed to supply-side pressures.
Looking ahead, aluminium prices are expected to potentially rise to $2,604 per tonne over the next year due to tighter supply outlooks and possible supply disruptions.
From April to September 2024, copper prices showed significant fluctuations. Prices started at around $9,464 per tonne in April, peaked at $10,139 per tonne in May, and then gradually declined, reaching approximately $8,972 per tonne by August.
Similar factors affecting aluminium pricing are also at play for copper, in addition to recent supply increases from Chile and Peru. Copper prices finished the quarter at $9,237 per tonne and are expected to remain around $9,000 per tonne over the next year.
Polyvinyl chloride (PVC)
Source: Reliance, Mumbai
Note: All figures are basic prices (excluding taxes) and averages of the respective quarters.
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 electric vehicles and the government's promotion of PVC as an alternative packaging material all contribute to this demand.
The annual average price of PVC was INR 85.3/kg in the period 1Q FY2025, while it increased to INR 87/kg in 3Q FY2024 primarily due to rises in raw material prices and demand in the retail sector.
Prices will continue upward with an annual variation of 3.5% to 5% compared to the previous year for the next quarter. They may stabilise in the 4Q FY2025 based on Gleeds' forecast, which is supported by Business Analytiq PVC Price index.
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