- Rupee weakens to INR 94/$, raising import costs for scrap, LNG and raw materials
- Elevated oil prices and freight risks sustain cost pressures despite weak steel demand
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:
The Indian rupee has weakened to around INR 94 against the US dollar, increasing the cost of imports across energy, raw materials and metals. The depreciation comes amid continued uncertainty around US-Iran tensions and elevated crude prices, which are sustaining pressure on the currency.
Brent crude is currently trading near $102/bbl, reflecting persistent supply risk premiums linked to disruptions in the Strait of Hormuz and attacks on regional energy infrastructure. Higher oil prices are feeding into inflation expectations and increasing import costs across the commodity complex.
The weaker currency is amplifying the impact of already elevated freight rates and bunker fuel costs. Prices of very low sulphur fuel oil remain elevated, keeping shipping costs high and raising landed costs for bulk commodities including scrap and coal.
LNG markets remain tight, with elevated prices and logistical risks continuing to constrain supply. This is reinforcing gas availability concerns in India, where industrial users are already facing restricted access due to allocation prioritisation.
Steel
Currency depreciation is raising input costs across India’s steel value chain, particularly through higher input costs and weaker import viability. Domestic steel markets remain subdued, with weak finished steel demand and cautious procurement limiting price movement. Mills are facing rising input costs from energy, freight and raw materials, but are unable to pass these on fully due to soft demand conditions.
The divergence between elevated costs and stable-to-soft finished steel prices is compressing margins across secondary steel producers.
Export activity remains constrained. Rising freight costs, higher war-risk insurance premiums and continued uncertainty around Gulf shipping routes are reducing competitiveness, with overseas shipments subdued and buyers delaying bookings. The Gulf remains a key destination for Indian steel exports, making shipping disruptions particularly relevant for trade flows.
Ferrous scrap
The rupee depreciation is directly affecting imported scrap markets by increasing landed costs and reducing buying interest. HMS (80:20) import prices are heard around $365-370/t CFR, but the weaker currency is making imports largely unviable for many buyers, forcing them to stay on the sidelines, according to media reports.
Global scrap markets remain firm due to higher freight and energy costs, even as buying interest weakens across South Asia. Elevated bunker fuel prices and disrupted trade routes are keeping offers supported.
Domestic scrap markets are showing mixed trends, with some firming in northern regions while other markets remain stable. Tighter gas availability is also affecting scrap processing and ship-breaking activity, adding to supply-side constraints.
Non-ferrous metals
Aluminium prices are holding near $3,215/t as of 23 March, down around 2% day-on-day, while inventories have declined slightly to around 429,675 tonnes. Despite the correction on LME, both imported and domestic scrap markets remain under pressure.
Fuel supply disruptions linked to the West Asia conflict are affecting aluminium extrusion units in India, with LPG shortages and rising input costs reducing output and forcing some units to shut down, according to media reports.
Copper prices have declined to around $11,843/t, down 1% day-on-day, as a stronger US dollar and rising inventories weigh on demand. The broader risk-off sentiment driven by geopolitical uncertainty and higher oil prices is also pressuring industrial metals, according to media reports.
Zinc markets are being affected by LPG shortages impacting galvanizing operations, with higher fuel costs and constrained availability expected to weigh on downstream demand.
Coal and energy
Higher oil prices and currency depreciation are feeding directly into raw material costs across the metals sector.
Coking coal prices remain supported by elevated freight costs, while thermal coal and petcoke markets are firm amid rising import costs and steady demand.
Freight and logistics
Freight markets remain under pressure due to elevated bunker fuel prices and continued shipping disruptions in the Gulf. Attacks on vessels and heightened geopolitical risks are increasing war-risk insurance premiums and forcing shipowners to reassess routing decisions.
Longer voyage distances and tighter vessel availability are increasing transit times and pushing up logistics costs across bulk commodity supply chains.
The combined impact of rupee depreciation, elevated energy prices and shipping disruptions is raising input costs while demand remains weak.
Looking ahead, if the rupee remains under pressure and oil prices stay elevated, higher import costs and constrained scrap availability could begin to support domestic steel prices, even as demand conditions remain subdued in the near term.
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