Israel-Iran conflict continues to escalate global stainless steel export market facing supply chain and cost pressure

Recently, the tensions between Israel and Iran continue to ferment, the regional conflict affects the key shipping channels and energy supply, the global stainless steel industry chain has been significantly impacted. As an important industrial base material, the export trade of stainless steel is facing multiple challenges such as logistics disruption, raw material price increase and demand volatility.

1. Soaring energy and raw material costs

Iran is one of the world’s important producers of nickel and ferrochrome (note: chromium is a key raw material for stainless steel), while the Middle East accounts for 30% of the global oil supply. The conflict has led to increased volatility in international oil prices, and energy costs are transmitted to the stainless steel smelting process. London Metal Exchange (LME) data show that since April nickel prices rose 12% year-on-year, ferrochrome offer also climbed 8%, pushing up stainless steel production costs. China, India and other major exporting countries, steel mills have raised 304 cold rolled stainless steel export prices, some European buyers to wait and see.

2. Red Sea shipping blocked Delivery cycle extended

Houthi attacks on the Strait of Mandeb forced a large number of freighters to bypass the Cape of Good Hope, the freight rate of the Asia-Europe route soared 120%. China Wuxi Stainless Steel Exchange report shows that the Middle East and Europe order logistics cycle extended by an average of 15-20 days, part of the contract due to force majeure clause facing renegotiation. Turkey as the Middle East stainless steel transit hub, exports fell 9% from the first quarter.

3. Regional demand differentiation Alternative market game intensified

By the direct impact of the conflict, the Middle East construction and manufacturing demand shrinks, the UAE Dubai Commodity Exchange stainless steel futures positions fell 14%. At the same time, North America and Southeast Asia market has become a new growth point, Vietnam, Mexico and other countries to increase the procurement of Chinese stainless steel to fill the supply chain gap. Industry analysis points out that if the situation is prolonged, Russia and Indonesia may further seize the market share by virtue of energy and resource advantages.

Industry Response and Outlook

More than one headline companies activated their contingency plans:

– China’s TISCO Stainless accelerated the layout of its African warehouse and shortened delivery time to Africa;

– Germany’s ThyssenKrupp considers increasing capacity of its North American plant to avoid route risks;

– India’s Jindal plans to sign a long-term ferrochrome supply agreement with Iranian mining companies to stabilize raw material sources.

“In the short term, the impact of the conflict on stainless steel exports is more reflected in the cost side and logistics efficiency,” Li Ming, S&P Global Commodity Analyst, pointed out, “If the situation worsens and leads to the closure of the Strait of Hormuz, the global stainless steel trade pattern may be ushered in a more profound adjustment.”