Steelmakers in major exporting countries are switching from cost and freight (cfr) to free on board (fob) offers as the US-Israel war with Iran pushes up ocean freight and disrupts shipping routes.
Many Asian and Turkish mills are reluctant to offer flat steel on a cfr basis because uncertain delivery times and higher freight costs threaten margins, industry participants said. Offers on fob terms — which make the buyer responsible for all costs after the goods are loaded at the port of departure — are now increasingly common, buyers in the Middle East and Europe said.
"I think all exporting mills are scared to offer cfr in the Middle East. They will probably be okay with fob, and even that with caution," a UAE-based importer said.
The strait of Hormuz remains effectively closed, with no clear resolution in sight after US-Iran peace talks failed over the weekend of 11-12 April. Sellers have been exploring alternative routes, such as shipping material to the Jeddah in Saudi Arabia or Sohar in Oman ports and then transporting it to the UAE and other markets by road, sources said, but volumes remained limited because of elevated freight costs and uncertain transit times.
Indian hot-rolled coil (HRC) offers to the Gulf Co-operation Council (GCC) region were suspended after the war began at the end of February. An Indian mill was forced to postpone its March shipments to the region because of the war. It has now converted some prior bookings to fob from cfr, making the buyer responsible for transportation to the destination market.
India's finished steel exports to the GCC region accounted for about 12pc of its overall steel exports over the past 11 months, government data show.
GCC domestic flat steel prices have also risen as imports slowed and raw material supply was disrupted. Saudi producer Hadeed increased HRC offers for June shipment, while a major UAE galvanised coil producer was heard facing supply disruption that limited export availability and reduced spot sales to the domestic market, traders said.
In the European import market, challenges in fixing freight rates and uncertainty surrounding margins have also prompted a move to fob offers.
An Indian mill said it was scaling back HRC exports to Europe because of a sharp rise in shipping costs. Freight rates from India to Europe for volumes of 25,000-40,000t have risen to about $80/t or more, from $50-60/t earlier.
The mill has also cautioned its European buyers that delivery of cargoes booked in January and February was likely to be delayed owing to vessel shortages.
