Does the US-Iran conflict hinder steel exports?

• Logistics disruptions and order freezes (early stages of the war)

After the outbreak of war, the impact of the stagnation of shipping in the Strait of Hormuz on China's steel exports quickly became apparent, mainly in terms of logistics paralysis and order freeze.

On the logistical front, the obstruction of the strait passage, a vital artery for the Persian Gulf, directly jeopardizes China's steel exports to the Gulf region. In 2025, China's steel exports to the seven Persian Gulf countries (Saudi Arabia, the UAE, Iraq, etc.) reached 13.9497 million tons, accounting for 11.72% of total exports, averaging approximately 1.16 million tons per month. The war has led major shipping companies to either impose additional fees or suspend bookings, leaving Chinese exporters facing soaring freight rates and a lack of war insurance. Some vessels already en route have been diverted to alternative ports such as Oman for unloading, based on security clauses, resulting in uncontrollable additional costs.

At the order level, the market has reached a standstill in quoting. Due to shipping companies' inability to provide stable freight rates and guaranteed space, Chinese steel mills face widespread delays or defaults on orders received in March for April and beyond. Middle Eastern buyers have suspended inquiries, and Chinese exporters have been forced to halt quoting prices due to uncertainty about landed costs. While direct exports from China to Iran are negligible at only 270,000 tons per year, the core impact lies in the disruption of indirect exports to Gulf countries. This precipitous logistical disruption could lead to the return of exported steel resources to the domestic market, exacerbating supply pressures on products such as hot-rolled coils.

• Supply Chain Restructuring and Market Share Competition (Mid-War)

If the war continues, the impact will be transmitted from the logistics level to the global supply and demand pattern, showing a dual characteristic of short-term export pressure and medium-term substitution opportunities.

On the one hand, Chinese steel producers face the risk of losing market share. Gulf countries (such as Saudi Arabia and the UAE) still need to import steel for construction purposes, but with supply from China disrupted, they will accelerate their search for alternative sources. The competitiveness of countries like Turkey and India is becoming increasingly apparent: Turkey, with its geographical proximity and Black Sea resources, may seize China's share of steel billet exports to Turkey; India, after its exports slowed due to EU carbon tariffs, is intensifying its efforts to expand into the Middle East market (exports to the UAE increased by 20% in the first three quarters of fiscal year 2025), potentially creating direct competition with China in Southeast Asia and the Middle East. If the strait stagnation lasts for more than 2-3 months and a suitable alternative route cannot be found, Chinese steel mills may face a long-term risk of losing market share.

On the other hand, the supply gap created by the stagnation of Iranian exports presents an opportunity for China to fill the gap. Data shows that Iran exports approximately 10-11 million tons of steel annually, mainly to the Middle East and ASEAN. The war has reduced the operational capacity of Iranian ports to only 10%, leading to widespread delays in previously signed contracts for direct reduced iron and billets. This will trigger regional shortages of semi-finished products (billets)—steel mills in Southeast Asia and South Asia may turn to China for billet purchases (exports have already seen significant growth by 2025). Furthermore, the war has led to rising energy prices, providing cost support for steel prices: rising crude oil prices increase shipping costs and ore extraction costs, and the impact on Qatari natural gas may also raise European energy costs, thus benefiting steel prices from a global marginal cost perspective.

• Demand release (post-war reconstruction period)

After the war ends, the market logic will shift to a game between short-term inventory reduction pressure and long-term reconstruction demand.

In the short term, "low-priced inventory" may impact the market. As the material states, Iran was at the peak of its production capacity release before the outbreak of war (crude steel production increased by 15.1% year-on-year in January 2026), and ports and mill warehouses are expected to have a large amount of slabs and billets originally planned for export stockpiled.

Once the Strait of Hormuz reopens to navigation, this backlog of goods caused by the war may be exported at low prices, creating a temporary impact on international markets, including China. Meanwhile, it will take time for shipping rates to fall, and the release of previously delayed Chinese export orders due to logistical disruptions could trigger short-term price competition.

 In summary, the initial stage of the war (within one month) primarily had a negative impact on China's steel exports, with logistical disruptions leading to order losses. The middle stage (1-3 months) presented both challenges and opportunities, requiring vigilance against market share substitution while seizing opportunities arising from supply gaps in Iran. The post-war phase (after the ceasefire) faced short-term pressure from the release of Iranian inventories, but the medium- to long-term outlook would see substantial benefits from Middle Eastern reconstruction. The core contradiction at each stage gradually shifted from logistical bottlenecks to supply-demand restructuring, ultimately returning to the release of pent-up demand.