Domestic steel prices rise on scrap tightness even as freight, coal ease amid weak trade flows – A 360-degree view

• Steel prices gain on strong bookings and scrap-driven cost pressures despite stalled exports
• Freight rates and coal prices soften, signalling weaker trade flows and easing logistics constraints

How will the ongoing conflict in the Middle East affect global metals markets? As the US-Israel and Iran war escalates, BigMint presents a sharp update on the implications for steel, aluminium and energy supply chains:

Ongoing developments across the Middle East continue to reinforce supply-side risks for metals and energy markets. Repeated strikes on Iranian steel facilities have disrupted operations and exposed vulnerabilities in supporting infrastructure, while continued threats of escalation across Gulf countries are keeping regional production at risk, according to media reports and previous BigMint analysis. Around 16 mnt of crude steel capacity across key Middle East facilities remains exposed to potential disruption. Aluminium supply chains are also under pressure, with disruptions affecting major producers in a region that accounts for roughly 9 percent of global aluminium output.

Brent crude is holding near $107/bbl as supply concerns persist alongside ongoing disruption to shipping routes through the Strait of Hormuz. Risks now extend across both the Strait of Hormuz and Red Sea shipping corridors, sustaining uncertainty across global commodity flows. At the same time, there are early signs of easing in India’s gas supply situation, with increased tanker arrivals improving LPG availability and stabilising domestic supply conditions after earlier disruptions.

However, the broader impact of elevated energy and logistics costs continues to build across commodities. Higher fuel costs are weighing on industrial activity and trade flows, particularly across energy-intensive sectors such as steel and aluminium, compressing margins and prompting more cautious procurement. At the same time, softer freight activity is beginning to signal that trade flows themselves are slowing under the weight of higher costs and uncertainty.

Shipping markets remain volatile. Prices of very low sulphur fuel oil in Singapore are currently around $867/t, down sharply from recent highs near $1,120/t, indicating weaker bunker demand even as crude prices remain elevated. This divergence suggests that shipping activity is not keeping pace with fuel cost increases.

Freight markets are reinforcing this trend. Coal and iron ore vessel rates have softened week-on-week amid limited fixture activity and cautious sentiment, pointing to reduced cargo movement despite ongoing geopolitical risks. Improved vessel availability and increased cargo arrivals have also started to weigh on portside coal markets. South African RB2 (5,500 NAR) prices at Paradip have declined by around INR 350/t week-on-week to INR 11,550/t, reflecting easing logistics constraints and improved supply conditions.

The impact on steel markets is becoming more pronounced. Export activity remains largely stalled, with no firm offers reported amid elevated freight uncertainty, vessel diversions and limited visibility, according to media reports. Slower shipping activity and higher logistics costs are reducing export viability, while subdued demand continues to limit mills’ ability to pass through rising costs.

At the same time, domestic markets are showing a stronger price response. Billet, rebar and scrap prices have moved higher over the past week, supported by strong bookings, tightening raw material availability and aggressive mill procurement, even as export markets remain inactive. This is beginning to create a cost floor in steel markets, where rising input costs are supporting prices despite weak demand conditions.

Scrap markets are emerging as the key driver. Imported scrap activity remains subdued due to high landed costs and currency pressure, while domestic scrap prices have strengthened sharply in key regions amid tightening availability. At the same time, buyer resistance at elevated levels is beginning to emerge, reflecting the broader slowdown in trade activity seen across freight markets.

Aluminium markets continue to see a supply-driven price response. LME aluminium is holding near $3,495/t, supported by disruptions affecting Middle East producers and declining inventories. However, physical demand remains cautious despite higher prices, consistent with weaker trade signals across bulk shipping markets.

A weaker rupee near 95 against the dollar is further increasing procurement costs for Indian mills and smelters, adding to overall cost pressures.

The market is now entering a phase of divergence. Domestic steel prices are rising on supply tightness and scrap-driven cost pressures, while easing freight rates, softer coal prices and stalled export activity point to underlying demand weakness. While prices may remain supported in the near term, sustainability will depend on a recovery in trade flows and end-use demand rather than continued cost support.