- Iran-linked disruptions create a 2.3 MT billet supply gap in Southeast Asia, redirecting trade
- LNG curbs, elevated bunker fuel and freight risks tighten scrap 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:
Disruptions to Iranian steel exports and shipping constraints through the Strait of Hormuz have created a billet supply gap of over 2.3 million tonnes in Southeast Asia, according to media reports. This is forcing buyers across ASEAN markets to seek alternative supply, redirecting trade flows toward China and India.
Iran’s semi-finished steel exports have been constrained by energy shortages and logistical blockages, while shipping disruptions have affected outbound cargoes. As a result, China has increased exports to fill the gap, while India is also absorbing part of the redirected demand, particularly in billet and hot-rolled coil segments, according to media reports.
Steel cargoes originally destined for the Middle East are being rerouted toward Southeast Asia and domestic markets, while longer voyage routes and vessel diversions are tightening global shipping capacity. This is increasing freight costs and extending delivery timelines across key trade routes.
LNG exports from the Persian Gulf have fallen to around 50,000 tonnes per day over the past five days, equivalent to roughly 12% of normal levels. This has tightened global gas availability and supported higher spot LNG prices into North-East Asia at around $19.14/MMBtu.
European gas markets have also strengthened, with TTF Q2 prices rising to about EUR 60.7/MWh after an intraday spike to EUR 67/MWh, while storage levels remain low at 28.9%. This is increasing competition for LNG cargoes and reinforcing upward pressure on global gas prices.
Brent crude prices have moved above $107/bbl and remain firm near $110/bbl amid continued supply disruption risks. Higher crude prices are feeding into bunker fuel, freight and industrial fuel costs.
Prices of very low sulphur fuel oil in Singapore stood at $1,076.50/t on 17 March. As bunker fuel accounts for a significant share of vessel operating costs, this is pushing freight rates higher across bulk commodity shipments.
Against this backdrop, India’s gas market is tightening, as rising global gas prices and supply constraints, combined with domestic allocation curbs, are reducing availability for industrial users. LPG prices in India have increased by around 15-20% to approximately INR 1,100-1,200 per cylinder, while oxygen costs have risen by about 10%, increasing scrap processing costs by INR 200-300/t.
Steel
The Southeast Asian supply gap is creating additional export opportunities for Indian mills, particularly in semi-finished products. However, logistical disruptions and rising costs are limiting the ability to fully capture this demand.
Higher LPG and oxygen costs are increasing scrap processing expenses, leading to slower scrap inflows and tighter availability. Reduced ship-breaking activity and disruptions to alternative metallic sources are adding to supply constraints.
At the same time, domestic steel prices are showing limited upward movement. Sponge iron prices have declined by around INR 100-300/t across several regions, while billet and rebar prices have softened amid cautious buying.
Stable or declining finished steel prices combined with rising input costs are compressing margins for secondary steel producers.
Export activity remains constrained by shipping risks. Vessel rerouting through longer routes is extending transit times by 15-20 days and increasing freight and insurance costs, reducing competitiveness in export markets despite improved demand from Southeast Asia.
Ferrous scrap
Imported scrap demand in India remains subdued, with buyers resisting higher offers despite rising freight and currency pressures. Limited cargo availability and vessel disruptions are tightening supply visibility.
Indicative prices are near $360/t for HMS (80:20), $370/t for HMS 1 and $380/t for shredded scrap, although trading activity remains limited.
Domestic scrap prices are stable, with north India markets around INR 35,100-35,500/t and western markets near INR 33,700/t. Mills are maintaining need-based procurement, limiting price volatility.
If disruptions persist for another 10-15 days, tighter supply and rising costs could push prices higher. If tensions ease, improved supply flows could lead to price correction.
Non-ferrous metals
Aluminium markets remain exposed to developments in the Middle East, which accounts for roughly 9% of global output. Aluminium Bahrain has shut multiple smelting lines, indicating potential supply disruptions. LME aluminium prices are near $3,420/t, while inventories have declined to around 442,825 tonnes, pointing to tightening availability. Domestic ingot prices remain firm at INR 350,000-352,000/t ex-Delhi.
Copper prices are near $12,855/t and are being driven primarily by demand and macro factors rather than supply disruption, although higher freight costs are affecting trade flows. Zinc value chains are being affected by LPG shortages, increasing costs for galvanizing operations and potentially reducing downstream consumption.
Freight and logistics
Shipping disruptions and security risks in the Gulf are increasing freight costs and reducing vessel availability. Rerouting away from high-risk areas is extending voyage distances and delivery timelines.
War-risk insurance premiums have increased, adding to logistics costs across bulk commodity supply chains. The combination of Southeast Asia’s supply gap, constrained gas availability and shipping disruptions is increasing input costs, tightening raw material availability and compressing margins across India’s metals sector.
If disruptions persist, elevated energy costs, constrained scrap supply and shifting trade flows are likely to continue influencing pricing and trade dynamics in the near term.
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