Escalating conflict between the US and Iran has led shipowners to avoid the strait of Hormuz, creating freight uncertainty that has slowed spot business across steelmaking raw materials.
Traders across Asia, India and the Middle East said offers had thinned since the weekend, with some suppliers struggling to secure tonnage for April as routing through the Gulf becomes harder to confirm.
No producer of direct-reduced iron (DRI) or hot-briquetted iron (HBI) in the Gulf has issued a force majeure notice and shipments were understood to be moving, but traders expect longer transit times and possible delays if carriers keep avoiding the region.
Indian buyers said thermal coal imports from South Africa were arriving as normal, but expected higher imported feedstock costs for ore, scrap and DRI if freight rises. Some Indian DRI plants that recently imported Iranian material may also face tighter sanctions checks, market participants said.
Pellet and iron ore flows exposed to Gulf or Suez routing also face disruption risks. Traders said material moving from Gulf producers into Europe or north Africa could face longer voyages or higher freight costs, while southeast Asian buyers of Middle Eastern pellets may also see delays if avoidance of Hormuz continues. Producers are still expected to meet contract volumes, but shipping windows could widen if conditions persist, market participants said.
Across Asia and the Middle East, buyers have largely paused new procurement, with participants reporting almost non-existent fresh activity. Suppliers said they were unwilling to offer without vessel availability, and buyers held back until freight becomes clearer. "Everything keeps moving, but no one wants to commit to new tonnes until freight settles," one supplier said.
Pig iron suppliers in the Asia-Pacific have had difficulty locking down vessels because freight brokers have paused negotiations, market participants said. Some buyers may face supply shortages as a result but, for now, traders say market fundamentals are largely unchanged and prices are unlikely to skyrocket.
"Freight rates may go up," a European trader said today. "[But] I am not sure if the steel situation will improve materially so that markets will pay more."
Suppliers will avoid the Suez Canal but shipping through the Cape of Good Hope in Africa should stay workable, market participants said. Traders in Brazil and Ukraine have little exposure to the Suez but the markets in Russia and the Asia-Pacific could see bigger disruptions. Russian suppliers use the canal to ship to the Asia-Pacific and will likely change their routes with limited effect. But suppliers in India, who ship through the canal to Italian mills, would have to charter much longer voyages and their buyers may find Brazilian or Ukrainian material more attractive.
Chinese trading firms supplying billet and slab into the Middle East have also suspended export offers, and contacts said they were reviewing the status of cargoes already sold, with some vessels en route holding outside the Gulf until routing and insurance are confirmed.
