The escalating Israel-Iran conflict could lead to a shortage of steel and steelmaking raw materials in the Mena region because of potential logistical disruptions and a surge in freight prices.
Tensions have risen after the killing of the leader of Iran-backed Hezbollah militia Hassan Nasrallah, by Israel on 27 September, which sparked retaliation from Iran. This has seen an increase in attacks on vessels in the Red Sea by Yemen's Iran-backed Houthis, disrupting trade routes. The conflict could adversely affect construction and steel demand in the Mena region, which remains a key export outlet for long steel products, as well as billets.
"The attacks are highly likely to increase and imports from Asia to Turkey will be negatively impacted due to high freight and therefore, high steel prices," said a Turkish integrated producer whose steel cargo was targeted by Houthi missiles a few months ago. An international iron ore trader echoed this, expecting freight prices to increase.
Over the past few years, Israel and Yemen were important rebar export destinations for Turkey. But in April, Turkey imposed a trade ban on Israel. Turkish rebar exports to Yemen have sharply dropped owing to risks to shipments.
Currently steel trading activity with Lebanon is on hold. Lebanon typically purchases high volumes of long steel, particularly rebar, from Egypt, Algeria and Libya.
Market participants in the UAE, a major producer and consumer in the Gulf Co-operation Council (GCC), had previously anticipated a strong final quarter of the year, because of expected increases in construction activity from large-scale projects. But should the situation escalates, projects could be on hold and demand will shrink, a producer warned.
Trading in Oman faces greater risk compared with other GCC countries because of its shared border with Yemen.
The conflict could also negatively impact the flat steel industry in north Africa, as many re-rollers import hot-rolled coils (HRC) for re-rolling or coating, often finding it more feasible to use supply from Asia rather than local material. "HRC imports to Algeria will be endangered and this will increase prices of cold-rolled coils (CRC) and galvanised steel prices," a market participant commented.
