Chinese traders are increasingly offering hot-rolled coil (HRC) to UAE buyers on a cfr Jebel Ali basis as more Chinese-owned vessels start crossing the strait of Hormuz, industry sources said.
This has provided an attractive alternative for buyers facing months-long delays, hefty demurrage charges and road transportation costs linked to cargoes discharged at the ports of Fujairah and Oman.
An increasing number of Chinese vessels carrying steel products are reaching Jebel Ali, sources said. Only two or three vessels were reported to have crossed the strait of Hormuz last month, but four or five have already made the transit so far in November, according to market estimates.
News that Tehran exempted countries including India and China from restrictions on shipping through the strait may be encouraging more vessel owners to undertake the transit, a trading firm said.
Apart from China, no other origins were reported to offer shipments on a cfr Jebel Ali basis. Indian suppliers have withdrawn from the Mideast Gulf market in recent months, favouring domestic sales after Indian HRC prices reached multi-year highs. Japanese and South Korean suppliers were also not active in the Middle East market, but continued to favour Fujairah and other regional ports over direct deliveries through the strait of Hormuz, sources said.
The renewed flow of cfr Jebel Ali offers is currently being led primarily by trading firms, with quoted freight rates varying widely, depending on the vessel owner and contract terms. Some suppliers are charging an additional $30-50/t to account for the risks associated with transiting the strait of Hormuz, sources said.
Freight from China to the UAE was around $40/t before the conflict, but has since risen to around $80-85/t for standard shipments, with detention costs charged separately. Some freight indications are as high as $140-150/t on an all-inclusive basis for cargoes delivered directly to Jebel Ali, sources said.
Buyers appear willing to accept higher charges for Hormuz shipments, preferring deliveries to Jebel Ali over alternative ports such as Fujairah, where congestion has pushed waiting times beyond 90 days in some cases.
Some importers were incurring hefty demurrage costs on previously booked cargoes after vessel waiting times exceeded the assumed 30-day period at Fujairah.
"It's always better to pay an extra $50/t freight than waiting indefinitely at Fujairah," an importer said.
Deliveries through Sohar in Oman entail additional trucking costs and vehicle shortages for onward land transport into the UAE, making direct deliveries to Jebel Ali increasingly attractive, sources said. As Jebel Ali was largely inactive during much of the conflict, berthing was heard to be readily available once vessels arrived.
If competing origins continue steering clear of cfr Jebel Ali offers, Chinese HRC sellers have a distinct advantage in the Middle East, which could potentially boost their market share in the region.
Already, UAE importers were heard to have booked a combined volume of around 50,000t of Chinese HRC over the past few weeks, with transaction prices differing, depending on delivery terms and whether cargoes were discharged at Jebel Ali via the strait of Hormuz.
