Construction Sector In India To Face Major Setbacks

Steel, cement, and aggregates are prerequisites for any construction-related activity. With assumptions of a surge in prices of these commodities, it is estimated that the construction cost will remain high in India.

Steel Prices

Prices of steel are likely to surge as the major Indian steel mills remain bullish in terms of price movements of flat or long steel products. Be it major government, semi-government, or private construction works, the primary mills are the sole suppliers of steel due to the required quality and quantity of construction materials.

Since the Indian government has abolished the export duties on raw materials required for making steel and finished steel products, the steel prices in the Indian market continued to surge and rose by Rs 5,000-7,000 / ton varying upon location. It is reported, that a few steel mills have raised offers further for the second half of January 2023 orders. With improved exports and rising coking coal and iron ore prices, the mills continue to keep the prices higher. With the favourable season for construction activities, the mills are already packed for January 2023 orders. Once they received a good response for February 2023, the mills will react accordingly for the next orders.

Cement and Aggregates

Cement consumption is at its peak in India since Infra sites are running at full capacity. 3 months- January 2023, February 2023 and March 2023 are crucial for the cement market. For instance- in January 2023, Rajasthan consumed 22,000 tons of cement in 15 days. For the past 8 months, this used to be the monthly consumption of cement in Rajasthan.

The sudden suspension of operations at two Adani Group-owned cement plants in Himachal Pradesh has affected supply and brought development works in the hill state to a halt. In addition, Karnataka aggregate strike is still in place, making it hard for the contractors to meet the deadline for road projects.

Insight

Following the strong demand and shortage in supply, Indian cement companies are likely to raise their prices due to the peak construction season in India. Supply has been severely hampered especially of OPC43/53 cement due to a shortage of clinker. To counter the clinker crisis and rising prices of raw materials, the Cement Association has decided to increase rates by Rs 10-15 by the end of January 2023. Although, the supply of previously (advanced) booked material will be supplied.

Read more: Indian Steel Prices Change During The Second Week of 2023 On Active Demand And Upcoming Price Trends