Military action in the region could cause a correction in the base metals and steel market, according to market sources. However, the global impact is limited due to the region’s low share in most metals markets.
Iran has traditionally supplied iron ore and semi-finished steel products, mainly to China. However, any shortfall in supplies to China from Iran could easily be offset by increased utilization of Chinese steelmaking capacity, which has been reduced in recent years. As a result, market sources expect only a moderate and insignificant impact on the market.
Tensions in the region significantly increase the risks for ships passing through the Red Sea. Some carriers transporting metals from Asia to Europe will likely change course and sail around Africa, increasing delivery time to European ports. However, market sources indicate that sufficient inventory exist in the market and longer delivery times are unlikely to trigger heightened demand and higher metal prices in March.
It is important to note that the Middle East region produces about 9% of global primary aluminum supply. The suspension of shipping in the Strait of Hormuz and the Red Sea could significantly disrupt logistics, sources state.
In this case, participants suggest that the global aluminum market, which is already in a state of deficit, could face even greater reductions in supply. Moreover, market players point out that an escalation of the conflict could lead to production stoppages, which would result in a fundamental reduction in supply.
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March 03 | 3:30PM GMT
Written by Artem Segen
