TMT Steel Price Surge Puts Pressure on Construction Sector Margins

TMT steel prices have surged nearly 20 percent in Coimbatore over the past month, triggering fresh concerns within the construction sector about rising project costs and margin pressures. According to local builders, steel prices have increased from around Rs 62,000 per tonne to nearly Rs 72,000 per tonne, marking a sharp month on month escalation.

The increase of Rs 10 to Rs 12 per kilogram has significantly altered cost calculations for ongoing and upcoming projects. Industry representatives estimate that the spike translates to an additional burden of nearly Rs 50 per square foot, forcing developers to revise original project estimates. While there has been no major movement in cement and brick prices, the steep rise in steel rates has disrupted overall budgeting.

N Maruthachalam, a Coimbatore based builder and engineer, said smaller construction firms are particularly vulnerable to such fluctuations. He noted that companies operating with limited financial buffers find it difficult to absorb sudden cost increases, especially when contracts are finalised at fixed rates. If steel prices rise after bidding, justifying the revised cost to clients becomes challenging, he added.

For instance, in a 1,000 square foot project requiring around three tonnes of steel, a price increase of Rs 30,000 may appear manageable in isolation. However, when similar adjustments occur across multiple projects, it could lead to a cumulative loss of nearly Rs 1 lakh, directly impacting profitability and execution timelines.

Ramyaa R Senthil, President of the Coimbatore Builders and Contractors Association, said ongoing projects under fixed price contracts are bearing the brunt of the escalation. She added that sustained price volatility could lead to contract renegotiations, inclusion of escalation clauses and a marginal rise in property prices in the long term.

Builders have also reiterated the need for a regulatory mechanism to monitor raw material pricing and reduce unpredictability. With steel being a core structural input, the industry is closely tracking price trends, wary that continued increases could slow construction momentum in the region.

News Source: Times of India