This has not only directly blocked regional steel transportation but also triggered a sharp rise in energy prices, exerting a multi-dimensional impact on the global steel supply chain. The industry's supply-demand pattern and cost system are facing significant disturbances.
Middle East Shipping Disrupted, Steel Deliveries Face Widespread Delays
On March 6th, Jindal Stainless, India's largest stainless steel producer, officially issued a warning. Affected by the continuous escalation of the war in the Middle East, the smooth passage of the two core shipping lanes—the Red Sea and the Persian Gulf—has been hindered, leading to widespread delivery delays for the company's stainless steel and various steel products shipped to the Middle East.
Abhyuday Jindal, Managing Director of Jindal Stainless, stated in an interview that the deterioration of the situation has directly lengthened the transportation time of some international shipping routes and airspace, and the arrival of goods will be significantly affected in the short term. However, it is too early to comment on whether surcharges will be imposed on the affected goods. The company is closely monitoring the situation and making every effort to reduce supply chain and operational disruptions. At the same time, the company is also focusing on the supply of raw materials such as industrial gases, limestone, and dolomite purchased from the Middle East. Currently, the inventory is sufficient, and preparations have been made to activate alternative procurement channels to avoid impacts on production.
As an important crude steel producer and exporter in the Middle East, Iran's steel industry has been more directly impacted by the conflict. It is reported that Iran's annual crude steel production capacity is about 31 million tons, with an annual export volume of 11 million tons, occupying an important position in global steel trade. Its export products are mainly semi-finished products such as billets and slabs, and it is also upgrading to the export of finished flat steel. However, after the outbreak of the conflict, Iran's major ports were closed, communications were interrupted, steel transactions basically came to a standstill, and steel mill production was indirectly impacted. Small-scale steel mills suspended production significantly, while large integrated steel mills maintained operations but with limited capacity, eventually leading to a complete suspension of Iran's steel exports.
The suspension of Iran's exports has directly exacerbated the steel supply gap in the Middle East. According to industry estimates, the current gap in construction steel in the Middle East has expanded by 10%-15%. Under the imbalance between supply and demand, steel prices in the region have risen simultaneously, further increasing the construction costs of local infrastructure projects. In addition, a large number of billets and slabs originally intended for export have accumulated in Iran's ports and steel mill warehouses, forming an inventory "weir". If the situation eases and the blockade is lifted in the future, this batch of low-priced inventory may impact the regional market.
Soaring Energy Prices, Global Steel Mills Face Sharp Cost Pressures
The continuous fermentation of the Middle East conflict has also triggered violent fluctuations in the international energy market, with international oil prices soaring sharply, directly pushing up the energy costs of global steel enterprises and becoming the core driver of the recent global steel price increase.
Affected by factors such as the blockade of the Strait of Hormuz and the forced production cuts by Middle Eastern oil-producing countries, international oil prices once surged. On the morning of March 9th, the price of WTI crude oil futures rose by more than 30% at one point, reaching a high of over $118 per barrel, the highest level since June 2022. The price of Brent crude oil futures also rose by 25%. At the same time, tanker freight rose to $14 per barrel, the spot premium in the Middle East climbed sharply, and the Brent crude oil spot spread exceeded $8.50 per barrel, hitting the highest level since 2013, with a "rush for spot crude oil" in the market.
Steel production is a high-energy-consuming industry, and energy costs account for a relatively high proportion of steel mill production costs. Especially steel mills relying on natural gas, crude oil and other energy sources are more significantly affected by this oil price surge. Taking India's steel industry as an example, affected by the reduction in natural gas supply caused by the Middle East conflict, India's Adani Total Gas Limited has significantly increased the gas supply price for industrial customers, forcing many local steel enterprises to prepare to pay higher natural gas costs, further compressing profit margins. Globally, the sharp increase in energy costs of steel mills is gradually transmitted to the steel product end, driving the overall upward trend of global steel prices.
G7 Emergency Consultations, Short-Term Relief from Energy Cost Concerns
Faced with the global economic pressure brought by the soaring oil prices, on March 9th, the finance ministers of the Group of Seven (G7) held an emergency video conference with the International Energy Agency, focusing on discussing response measures such as the joint release of oil reserves to stabilize the soaring international oil prices and ease market concerns about energy costs.
During the meeting, all participating parties reached a broad consensus, believing that there is no shortage of global crude oil supply at present, and it is "not yet time to take action". Therefore, they decided not to release strategic oil reserves for the time being, but clearly stated that they are ready to take "necessary measures" to support global energy supply, including releasing inventories. In addition, US President Trump stated on the same day that the United States is temporarily lifting some oil-related sanctions to ensure sufficient oil supply and reduce prices until the Strait of Hormuz returns to normal.
Affected by the above news, international oil prices fell back. WTI crude oil plummeted by more than 31% from its daily high, down 7% from the previous Friday's close, and Brent crude oil fell by 4.67%, temporarily easing the energy cost pressure on global steel mills. However, industry insiders said that the situation of the Middle East conflict still has high uncertainty. Factors such as the passage of the Strait of Hormuz and the scale of production cuts by Middle Eastern oil-producing countries will continue to affect international energy prices, thereby exerting long-term disturbances on the global steel supply chain.
