+
EPC contractors to seek fixed-price contracts from steel companies
Steel

EPC contractors to seek fixed-price contracts from steel companies

To protect themselves from the volatility of steel prices, a few highway Engineering, Procurement, and Construction (EPC) companies have begun negotiating fixed-price annual contracts with domestic steel companies.

Concerned about rising raw material costs, some have asked the Ministry of Road Transport and Highway (MoRTH) to consider including cost escalation clauses in projects awarded before FY21, according to India Ratings.

In FY21, average domestic steel prices increased by 26% y-o-y, and by 23.5 % in Q1 FY21. Prices peaked at Rs 56,000 per million tonne (mt) in May 2021 before falling to Rs 52,000 per mt in June 2021.

The EPC sector is concerned about the rise in steel prices, which has already seen a 10-12% drop in earnings before interest, taxes, depreciation, and amortisation (Ebitda) in the previous fiscal year, owing to a drop in revenue combined with an increase in manpower management costs and commodity prices.

According to the rating agency, EPC players with a large number of uncompleted orders before FY21 and low ratings are more vulnerable to steel price fluctuations and may see significant margin erosion, weakening their credit profiles in the short to medium term.

India Ratings said that EPC players typically try to factor in increases in raw material prices in their bids by estimating fluctuations based on historical trends, making them vulnerable to price spikes. The recent rise in steel prices is causing greater concern for players who have a significant amount of unexecuted order book that was awarded prior to FY21.

Image Source


Also read: Stressed steel plants bought under IBC witness faster returns: CRISIL

To protect themselves from the volatility of steel prices, a few highway Engineering, Procurement, and Construction (EPC) companies have begun negotiating fixed-price annual contracts with domestic steel companies. Concerned about rising raw material costs, some have asked the Ministry of Road Transport and Highway (MoRTH) to consider including cost escalation clauses in projects awarded before FY21, according to India Ratings. In FY21, average domestic steel prices increased by 26% y-o-y, and by 23.5 % in Q1 FY21. Prices peaked at Rs 56,000 per million tonne (mt) in May 2021 before falling to Rs 52,000 per mt in June 2021. The EPC sector is concerned about the rise in steel prices, which has already seen a 10-12% drop in earnings before interest, taxes, depreciation, and amortisation (Ebitda) in the previous fiscal year, owing to a drop in revenue combined with an increase in manpower management costs and commodity prices. According to the rating agency, EPC players with a large number of uncompleted orders before FY21 and low ratings are more vulnerable to steel price fluctuations and may see significant margin erosion, weakening their credit profiles in the short to medium term. India Ratings said that EPC players typically try to factor in increases in raw material prices in their bids by estimating fluctuations based on historical trends, making them vulnerable to price spikes. The recent rise in steel prices is causing greater concern for players who have a significant amount of unexecuted order book that was awarded prior to FY21. Image Source Also read: Stressed steel plants bought under IBC witness faster returns: CRISIL

Related Stories

Gold Stories

Next Story
Infrastructure Urban

NABARD Holds Seminar on Vigilance, Integrity and Good Governance

National Bank for Agriculture and Rural Development (NABARD) organised a seminar on “Vigilance: Strengthening Integrity and Good Governance” on 25 August 2026 at its Head Office in Mumbai as part of the ongoing Vigilance Awareness Campaign 2026 being observed from 17 August to 16 November 2026, with the theme “Probity for Prosperity."" The seminar was graced by Suresh N Patel, Former Central Vigilance Commissioner, Government of India, as the chief guest and keynote speaker.  The programme was attended by G S Rawat, Deputy Managing Director, Dr Ajay K Sood, Deputy Managing Dire..

Next Story
Equipment

XCMG Unveils World's First 14,000-Ton Ring Crane for Heavy Lifting

XCMG has announced that the first main unit of the world's first 14,000-ton ring crane has rolled off the production line, marking a historic breakthrough in ultra-heavy lifting technology. Jointly developed by XCMG and Sinopec Heavy Lifting & Transportation Co., Ltd., the crane will be the largest-capacity ring crane ever built, setting a new benchmark for major construction projects worldwide.The crane features a modular configuration comprising two main units that work in tandem. The first main unit has completed final assembly and can independently perform lifting operations. Once both..

Next Story
Infrastructure Urban

Thriveni Logistics orders 200 tip trailers from Jagdamba trailers

Jagdamba Trailers (JTPL), one of India’s growing trailer manufacturers, has secured a significant order for 200 Tip Trailers from Thriveni Transport and Logistics Pvt. Ltd., a leading mining and logistics company serving operations across India and overseas.The order, placed for iron ore transportation, is a major milestone for JTPL, particularly as the company secured the business after competing with more than 10 established trailer manufacturers. It also strengthens an already successful relationship between the two companies. Approximately one and a half years ago, Thriveni Transport and..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

SPECIAL OFFER
QR Code