- Higher LPG and processing costs disrupt scrap flows, squeeze secondary steel margins
- Hormuz-linked freight and supply disruptions tighten raw material availability
How will the ongoing conflict in the Middle East affect the global metals markets? As the US-Israel and Iran war escalates, BigMint presents a lowdown of the impact of this geopolitical conflict on the Indian metals, raw materials and energy markets:
Rising gas costs and tightening scrap availability are squeezing India’s secondary steel value chain, as the impact of Middle East tensions moves beyond energy markets into physical raw material flows.
The escalation in attacks on Gulf energy infrastructure has increased risks across key shipping corridors, disrupting tanker movement and raising insurance and freight costs. These disruptions are now feeding directly into India’s metals supply chains through higher energy prices, tighter scrap availability and elevated logistics costs.
Prices of very low sulphur fuel oil in Singapore, a key marine bunker benchmark, stood at $1,076.50/t on 17 March, reflecting sustained fuel cost pressures and elevated risk premiums linked to shipping disruptions.
At the same time, domestic gas dynamics are compounding the pressure. LPG prices have risen by around 15-20% in recent weeks to roughly INR 1,100-1,200 per cylinder, while oxygen costs have increased by about 10%, pushing up scrap processing expenses by INR 200-300/t.
The combined effect is now visible across scrap processing centres, where higher input costs and constrained gas availability are tightening margins, particularly for smaller processors.
Steel
Gas and energy cost pressures are increasingly feeding into the steel value chain, particularly in secondary steelmaking, where scrap availability and processing costs play a critical role.
Market participants report that rising LPG and oxygen costs are squeezing scrap processors, leading to slower arrivals and tighter availability across key markets. Scrap inflows in hubs such as Mandi Gobindgarh have declined in recent weeks, while processors are raising offers to offset higher cutting costs.
At the same time, reduced ship-breaking activity at Alang and disruptions to alternative metallic flows, including Iran-origin HBI, are further tightening supply.
India’s induction furnace steel market continues to show mixed trends. Sponge iron prices have declined by around INR 100-300/t across several regions, while billet and rebar prices remain largely range-bound amid cautious buying.
The divergence between relatively stable finished steel prices and rising raw material and processing costs is pointing to growing margin compression across secondary steel producers.
Export markets have also come under pressure. Shipping disruptions across the Red Sea and Strait of Hormuz have led to vessel rerouting, extending transit times by 15-20 days and increasing freight and insurance costs. As a result, Indian mills have adopted a wait-and-watch approach, with export activity slowing amid logistical uncertainty.
The Gulf remains a major destination for Indian steel exports, making disruptions in regional shipping lanes particularly relevant for trade flows.
Ferrous scrap
Ferrous scrap markets are reflecting a combination of weaker buying sentiment and tightening supply visibility. Imported scrap demand in India remains subdued, with buyers targeting $370-375/t CFR for shredded scrap despite rising freight and bunker costs. Limited trades and discounted offers indicate cautious sentiment, while suppliers have adjusted prices to stimulate buying.
Indicative levels stand near $360/t for HMS (80:20), $370/t for HMS 1 and $380/t for shredded scrap, while markets such as Bangladesh remain firmer on stronger demand.
The disruption in the Strait of Hormuz has directly affected vessel movement and cargo flows, tightening supply visibility and raising freight costs. Reduced availability of alternative metallics, particularly from Iran, has added to the supply constraint.
Domestic scrap markets show diverging regional trends. Prices in north India have increased, with HMS (80:20) in Mandi Gobindgarh rising by around INR 300/t to INR 35,500/t, supported by tighter availability and improved buying interest. In contrast, western markets such as Mumbai remain stable near INR 33,700/t, reflecting relatively balanced conditions.
At the same time, rising processing costs and lower scrap generation are reinforcing supply tightness, particularly for smaller processors operating under margin pressure.
Non-ferrous metals
Aluminium
Aluminium markets remain sensitive to developments in the Middle East, with the region accounting for roughly 9% of global output. LME aluminium prices hovered around $3,420/t on 17 March, while inventories declined to approximately 442,825 tonnes, indicating tightening supply conditions.
Domestic markets remain firm, with ingot prices around INR 350,000-352,000/t ex-Delhi and elevated scrap prices across key regions.
Aluminium Bahrain has shut multiple smelting lines, reinforcing concerns that prolonged disruptions could begin to affect global supply availability.
Copper
Copper prices rose to around $12,855/t, supported by improved sentiment and stable demand expectations, although the conflict continues to have limited direct impact on fundamentals.
Higher freight costs and war-risk premiums are influencing trade flows and keeping market participants cautious.
Coal and energy
Energy markets remain the primary transmission channel through which Middle East tensions are affecting Indian commodities. Premium hard coking coal prices remain supported by higher freight costs and tighter vessel availability. Thermal coal prices have shown some correction after recent gains, with RB2 levels near INR 12,100/t as buyer resistance emerges.
Indonesian coal markets remain subdued, partly due to reduced industrial demand in segments affected by fuel shortages.
Petcoke prices continue to move higher, with producers raising prices in response to tightening global supply and stronger energy market conditions.
Freight and logistics
Freight markets remain volatile as shipping disruptions and security risks continue to reshape global trade flows. Dry bulk freight rates have increased week-on-week, supported by stronger capesize sentiment, although overall activity remains cautious.
Tanker disruptions, rerouting and elevated bunker fuel costs are extending voyage times and tightening vessel availability across key routes.
The combined impact of rising gas costs, tightening scrap supply and ongoing shipping disruptions is now feeding into multiple layers of India’s metals value chain.
If disruptions persist, elevated processing costs, constrained scrap availability and freight volatility could continue to shape pricing, margins and trade flows across the steel and metals sectors in the coming weeks.
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