Because you specified --no-binary :all:, pip only downloads sdists for the packages and does not download any wheels. However, pip still needs each package in wheel form when it comes time to install, and so pip install tries to build a wheel for each package from the sdist, and this step requires setuptools, wheel, and anything listed in the package's setup_requires. I don't know why your environment doesn't have setuptools, but any healthy Python environment should have both it and wheel installed when the environment is created.

Unfortunately for you, packages listed in setup_requires are installed by setuptools itself rather than by pip, so pip download has no way to capture these requirements. If you insist on using --no-binary :all:, then the only solution is to manually compile a list of packages that are missing when pip install runs, download them, and then either install the missing packages before the ones that depend on them or else . Fortunately, the list will likely be rather short (probably just pytest-runner and setuptools_scm).