- Shipping delays may raise input costs from ore to finished steel
- Ceasefire offers relief, but structural power shortages remain key hurdle
Iranian steelmakers were already grappling with chronic electricity shortage even before the recent conflict with Israel erupted. In 2024, Iran’s semi-finished steel exports averaged around 6.6-6.7 mnt, down by 15% from 7.8 mnt in 2023.
As per market insiders, recent hostilities between Israel and Iran, now reportedly paused under a tentative ceasefire–have had a noticeable impact on Iran’s steel sector.
As per a steel mill source, “Steel exports and domestic demand both declined during the period, with commercial activity slowing due to heightened security risks and logistical constraints.”
The 12-day escalation further curtailed production, particularly among smaller mills. Larger integrated plants, however, managed to sustain operations, consistent with their resilience in previous crises, he added.
Strait of Hormuz tensions spark industry-wide caution
The Strait of Hormuz–through which nearly one-third of the world’s oil supply flows daily–has re-emerged as a potential flashpoint amid rising geopolitical tensions in the Middle East.
A recent statement by an Iranian parliamentary official suggesting the waterway could be closed has triggered alarm across global markets, particularly for energy-intensive sectors like iron and steel.
Risks looming
While no formal action has been taken, the threat alone is enough to rattle markets. The final decision rests with Iran’s Supreme National Security Council, but the underlying message is clear: the risk of disruption is real, and industries are preparing for the possibility.
Energy market sensitivity
If the strait’s flow is obstructed, analysts warn that oil prices could spike past $100/barrel. For steelmakers, this would mean significantly higher electricity and natural gas costs–impacting both electric arc furnace (EAF) and blast furnace operations. The margin squeeze could prompt a re-evaluation of operating strategies across the board.
While nothing is confirmed, companies aren’t waiting. Several are expected to explore energy efficiency measures, renewable power options, and revised supply contracts. Countries like Turkiye and EU members may also accelerate plans to diversify their energy supply routes.
Shipping costs and delays on radar
Should ships be rerouted around the Cape of Good Hope, freight times could increase by about one to one and a half weeks.
This extended transit, combined with higher fuel and insurance costs, could drive up the landed prices of raw materials like iron ore and scrap–and even finished steel–adding fresh volatility to pricing.
Staying agile amid uncertainty
The biggest challenge is unpredictability. Investment timelines, cost planning, and supply chain strategies are all under review. For now, industry players are watching developments closely, running scenarios, and preparing for what could be a turbulent stretch ahead.
The Strait of Hormuz hasn’t closed, but the iron and steel sector knows it can’t afford to be unprepared if it does.
Outlook
Market participants expect that if the ceasefire holds, operations may resume to normal levels relatively soon. However, insiders caution that persistent power shortages continue to be a structural barrier to full-scale recovery. Thankfully, no major damage has been reported to steel assets or civil infrastructure during the conflict.
Freight rates have softened slightly this week, and discussions with market participants suggest limited immediate impact. Easing oil prices have also helped cap shipping costs for now. However, no firm price indications or export offers for billets and slabs from Iran have emerged over the past week amid ongoing uncertainty in the region.
Leave a Reply