Conflict with Iran creates a risk of rising steel prices
The escalation of tensions in the Middle East threatens to increase European steel prices, as the disruption of global trade has far-reaching consequences, according to an analysis by MEPs.
Iran's closure of the Strait of Hormuz on February 28 led to the shutdown of the shipping route, which carries almost 30 million tons of dry cargo trade per month and 20% of global oil and LNG supplies. Kaye Ayoub, head of the European Parliament's price analysis and Forecasts department, said rising energy prices, higher commodity prices and a potential reduction in imports would put upward pressure on steel prices.
"Iran's entry into the conflict poses clear inflationary risks for steel prices, especially in Europe," she said.
The Strait of Hormuz has become a focal point for the escalation of the Middle East conflict, following last week's mixed US-Israeli military operation in Iran. Over the weekend, it was reported that more than 150 vessels were stuck in the strait, and several vessels were damaged.
In recent days, marine insurance premiums have increased by 50% and exceeded 100%. Insurance against military risk on some routes has increased dramatically or been completely canceled. As a result, ships are heading around the South African Cape of Good Hope, as was the case during last year's shipping crisis in the Red Sea. This extends the average transportation route from Asia to Europe by 3,500-4,000 miles, increasing travel time by 10-14 days and reversing the trend towards normalization observed after previous disruptions in transportation in 2022-2024.
Freight rates are already rising. Rising oil prices are putting further upward pressure on the cost of bunker fuel. Brent crude has risen sharply since the escalation began, reflecting concerns about supply disruptions. Rising fuel and insurance prices will directly increase the cost of transporting bulk cargoes such as iron ore and coking coal.
Energy prices are rising, but raw materials remain stable.
So far, the prices of raw materials for steel production have not had a significant impact. The price of iron ore in China remains close to $100 per ton. Prices for coking coal have also not yet shown significant growth. However, if freight rates continue to rise, metallurgists' costs for the supply of raw materials will increase, even if FOB prices remain stable.
Energy markets have reacted more strongly to the conflict in the Middle East. TTF gas prices in the Netherlands rose by 40% between Friday and Monday following reports that Qatar had suspended LNG production at the world's largest export facility. There was further growth at Tuesday's auction. From the beginning