Impact of Rising TMT Bar Prices on the Construction Industry

Impact of Rising TMT Bar Prices on the Construction Industry

Despite an unstable year, replete with unexpected surprises, the price of steel continued to increase throughout the last quarter of 2020. Lesser supply, coupled with high demand can be accounted for the boost. The development has presented itself as a big shock to the already tenuous construction industry of India. Lurching in the abyss of slow down for the past several years, the construction industry had begun to show some signs of revival, post-COVID lockdown. However, a sharp rise in the TMT bar price has limped its march towards normalcy.

As compared to pre-COVID times, the TMT bar price has increased by almost 30-40%. TMT bar price today starts at 37,500/MT and this makes the developers worried about the decrease in their profit margins which is expected to reduce by 4-6%. This compromise on profit margin is pretty high and unnerving. Let’s understand the reasons that led to this price rise, its impact, and the way forward: Price on the Rise Construction is a sector that consumes most of the steel and accounts for about 50% of the world demand, as per the World Steel Association.

External forces are more responsible for this price elevation than internal ones. There has been a sharp increase in steel demand from across the globe, including China- one of the biggest steel consumers. This has led to a surge in the price of iron ore which is a dominant raw material, used in the production of steel and in turn TMT steel price. The rise in demand, combined with unmatched mining or iron ore had led to a shortage and inflation. Another reason why the TMT rate today is high is believed to be the emphasis on the ‘Make in India’ initiative by the Indian government.

The increase in import duty on steel, in an attempt to deter importers from importing steel and going for domestic steel instead, has further led domestic steel manufacturers to increase the TMT bar price as they look at it as a prospect to make extra profits.

Impact on the Construction Industry TMT steel price is one of the most important factors affecting the bottom line. An increase in the price will directly lead to a rise in upfront costs you require for the completion of a project. Higher steel prices also make it expensive and tough to bid and secure new projects. Besides construction projects becoming less profitable and construction businesses bringing in lower revenue, your business might also run into cash flow issues. Due to an impact on your budget and other expenses,

you might also face issues managing the purchase of other materials, employee salaries, and equipment repairs, etc. A delay or an abrupt halt to the projects can be expected due to cash flow issues. These obstacles may result in unhappy clients.

Conclusion If the TMT price is not brought under control, experts believe that the investment in real estate can be severely hit. This will majorly affect the construction costs of projects across India and will have a major impact on the affordable housing segment as well.

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