- Brent declines to $97/bbl, easing freight and raw material cost pressures
- Coal and iron ore prices weaken amid subdued demand, signalling slowdown in trade flows
How will the ongoing conflict in the Middle East affect global metals markets? As the US-Israel and Iran war evolves, BigMint presents a sharp update on the implications for the Indian metals, raw materials and energy markets:
Attacks on industrial and energy infrastructure across the Middle East continue to disrupt metals and energy supply chains, with damage reported at key steel and aluminium facilities, according to media reports and previous BigMint analysis. Air strikes on major Iranian steelmakers have affected production units and supporting infrastructure, while threats of further retaliatory action across the Gulf keep regional capacity at risk. According to previous BigMint analysis, around 16 mnt of crude steel capacity across key Middle East facilities remains exposed to potential disruption. Aluminium supply chains also remain vulnerable, with disruptions affecting major producers in a region that accounts for roughly 9% of global aluminium output.
The broader macroeconomic outlook is also turning weaker, with the International Monetary Fund expected to lower its global growth forecast due to the energy supply shock from the conflict, according to media reports. Even under optimistic scenarios, growth is likely to be downgraded, reflecting ongoing infrastructure damage, supply disruptions and uncertainty around energy flows.
Brent crude has declined to around $97/bbl following the announcement of a temporary ceasefire, easing immediate energy cost pressures across global markets. Lower oil prices have translated into softer bunker fuel costs, with very low sulphur fuel oil in Singapore declining to around $765/t, reducing fuel cost pressure across shipping.
However, physical disruptions continue to constrain trade flows. Shipping activity across key corridors, including the Strait of Hormuz, remains inconsistent, limiting the pass-through of lower oil prices into logistics costs. This divergence between easing fuel costs and constrained trade flows continues to shape commodity pricing dynamics.
Coal and iron ore markets have begun to reflect this shift. Seaborne South African coal prices declined during the week amid weak enquiries and subdued buying interest, with 5,500 NAR offers falling to around $92-93/t FOB from $97/t previously, while indications near $91/t suggest continued downside pressure. Freight rates also corrected, with Richards Bay-Paradip routes down by around $4.8/t week-on-week, lowering import parity.
At Indian ports, RB2 (5,500 NAR) prices declined by INR 350/t week-on-week to around INR 11,200/t, while RB3 prices also moved lower, reflecting weak buying interest and a shift toward domestic coal due to better availability and pricing. The simultaneous correction in freight and seaborne prices indicates that earlier cost-driven support is easing as demand remains muted.
Iron ore export markets are showing similar trends. India’s low-grade iron ore fines export index declined by $3.5/t week-on-week to around $61/t FOB east coast, with limited trading activity and absence of firm deals creating uncertainty around price direction. Exporters have held back offers, reflecting cautious sentiment and lack of clear demand visibility.
Freight markets are stabilising at lower levels amid limited fixture activity, indicating reduced cargo movement rather than improved supply conditions. Lower bunker costs have not translated into stronger trade flows, reinforcing signs of weakening demand across bulk commodities.
The impact on steel markets remains uneven. Export activity continues to be constrained, with Indian HRC offers to Europe heard at $680-690/t CFR Antwerp, up from pre-conflict levels but with no confirmed bookings during the assessment period, according to media reports. Elevated freight uncertainty, high offer levels and weak demand continue to limit trade execution.
In the domestic market, steel prices remain supported by earlier supply-side constraints, including low inventories and raw material tightness. However, the easing in input costs, particularly across coal and freight, may begin to moderate this support if sustained. Recent price increases are increasingly encountering buyer resistance, with procurement turning more cautious and need-based.
Scrap markets continue to reflect a divergence between costs and demand. Imported scrap offers remain elevated, with HMS heard at $380-385/t CFR and shredded at $410-415/t, while buyers remain below these levels, limiting trade activity. The lack of fresh bookings reflects mills having already secured near-term requirements, while weak downstream demand continues to weigh on sentiment, according to media reports.
Domestic scrap markets show mixed trends, with some regional firming supported by tighter availability, while other markets remain stable to soft. This fragmented pattern reflects the broader imbalance between supply constraints and weak demand.
Aluminium markets remain influenced by supply-side risks linked to disruptions in the Middle East, although demand signals remain cautious. Limited downstream activity and softer trade flows are preventing a stronger price response despite ongoing supply concerns.
The easing in oil and freight costs is beginning to feed into raw material markets, but the absence of a corresponding improvement in demand and trade flows indicates that the current correction is demand-led. If demand does not recover, lower input costs could translate into further downside pressure across steel and raw material markets in the near term.
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