Some Asian flat steel cargoes that were originally headed to the Middle East are being held at Indian ports owing to shipping disruptions stemming from the ongoing US-Israel war with Iran, market sources told Argus.
Several hot-rolled coil (HRC) cargoes from countries including China and Japan are currently on hold at Mumbai, industry participants said. These include three vessels containing an estimated 100,000t of Japan-origin HRC.
Shipping disruptions through the strait of Hormuz are persisting and show little sign of abating, as the war enters its third week. Major shipping companies have served end-of-voyage notices to receivers in the Middle East, making diversions likely, sources said.
It will be challenging to sell diverted cargoes to Indian buyers. Chinese mills do not have the required licences from the Bureau of Indian Standards to clear their HRC through Indian customs. And safeguard duties have increased the landed price of Indian imports.
"The cargoes will wait at Indian ports for a subsequent transfer plan, or the buyer will think of another method to pick up their cargoes from India themselves," according to a Chinese trading firm that unloaded some of its cargoes in India.
Trading firms may attempt to sell the diverted cargoes to neighboring countries such as Sri Lanka and Pakistan, market participants said.
A Japanese steel trading firm said it had no plans to sell its diverted stocks to other destinations, but would hold the material at free trade zones.
The cargoes are being discharged as transshipments and sellers will likely explore other ways to deliver them to their original destinations, a Middle Eastern re-roller said.
Some cargoes, particularly those sold to Saudi Arabia, could be shipped through the Red Sea and then transported by road, thereby avoiding the strait of Hormuz. One Chinese supplier said it unloaded its UAE-destined cargoes at ports outside the strait of Hormuz, without naming the ports. Relying on Red Sea ports such as Jeddah for material that was originally meant to transit through the strait of Hormuz adds an inland journey of more than 1,500km, which will further increase logistics costs, a market participant said.
Sellers in China are reportedly unwilling to take new orders from Middle Eastern buyers. China shipped about 16.3mn t of steel to the Middle East last year, accounting for 13pc of China's overall steel exports, data from Global Trade Tracker show.
