The flames of the US-Israel-Iran conflict have recently spread from the energy sector to the core of industrial manufacturing. Key infrastructure, including two major Iranian steel plants and a global aluminum giant in the UAE, has been hit by precision strikes. A 5-million-ton steel export shortfall, damage to 4% of global aluminum production capacity, and surging shipping costs… This “industrial warfare” is reshaping the global steel trade landscape. Against the backdrop of recovering demand during the traditional “golden March and silver April” period, the Chinese market faces the dual of boosted external demand and logistics risks.
I. Event Recap: Serial Attacks on Industrial Facilities
From March 27 to 29, heavy industrial facilities in the Middle East were subjected to systematic attacks, escalating the conflict from missile exchanges to precision strikes targeting industrial chains:
March 27: The US and Israel launched airstrikes on Iran’s Mobarakeh Steel Company (annual capacity 11.8 million tons, Iran’s only full-process flat steel producer, accounting for over 60% of flat steel exports) and Khuzestan Steel Company (annual capacity 3.6 million tons, accounting for over 40% of billet and long steel exports). Both major steel mills ceased production entirely.
March 28: Iran announced it would target industrial facilities in Israel and six Gulf nations in retaliation. Six steel plants, including Saudi Arabia’s Hadeed and the UAE’s Emirates Steel Arkan, were placed on the strike list.
March 29: Iran attacked Emirates Global Aluminium (EGA) in the UAE (annual production 1.6 million tons of cast aluminum, accounting for 4% of global capacity) and Aluminium Bahrain (Alba). Smelters and refineries were damaged, and workers were injured.
US Secretary of State Marco Rubio stated on the 27th that military operations against Iran were expected to last “2 to 4 weeks,” suggesting that threats to industrial facilities will not be resolved quickly.
II. Chain Reaction: Global Steel Supply Pattern Reshaped
Direct Impact on Production Capacity and Exports: The shutdown of Iran’s two major steel mills has caused monthly steel exports to plummet from 900,000 tons to an estimated 350,000-450,000 tons, with an expected annual export shortfall of 5-5.5 million tons. This gap directly impacts countries reliant on Iranian steel, such as Iraq (80% import dependence on Iran, with 70% of its construction long steel sourced from Khuzestan Steel) and Southeast Asia (a major buyer of Iranian steel billets, facing bullish billet premiums).
Potential Risk to Gulf Production Capacity: Iran has listed industrial facilities in five countries, including Saudi Arabia, the UAE, and Qatar, as targets. These nations collectively produce over 30 million tons of crude steel annually. Should any of these steel plants be attacked, global steel supply would tighten further, potentially accelerating trade flow shifts toward China, India, and Russia.
III. Chinese Market: The Balancing Act Between Boosted External Demand and Logistics Risks
Minimal Direct Trade Shock: In 2025, China’s direct steel exports to Iran amounted to only 266,700 tons (0.22% of total exports), while iron ore imports from Iran were 5.7 million tons (0.45% of total imports). The short-term supply and demand fundamentals remain stable. Currently, the average daily hot metal output of 247 surveyed Chinese steel mills is 2.3109 million tons (up 29,400 tons month-on-month), with blast furnace restarts progressing. The profit margin stands at 43.29% (up 0.87 percentage points month-on-month), indicating that production enthusiasm has not been significantly dampened.
Indirect Impact: A Double-Edged Sword
Opportunity: Rigid steel supply gaps are emerging in the Middle East and Southeast Asia. Leveraging its annual export volume exceeding 13 million tons to the seven Gulf nations, China could capture incremental orders of 1.5-2 million tons per year, enhancing its competitiveness in exporting hot-rolled coils, billets, and rebar.
Risks: Attacks on industrial facilities in Gulf nations threaten ports and logistics in China’s key export destinations (Saudi Arabia, UAE, Qatar). Exports, potentially exceeding 13 million tons to these regions, face risks of rising freight costs, vessel delays, and sudden demand drops. Furthermore, restricted shipping in the Strait of Hormuz pushes up international energy and raw material prices: since March, freight rates on the West Australia-Qingdao route have risen 11% (to $11.65/ton), and the Tubarao-Qingdao route has risen 27% (to $30.55/ton); the Platts iron ore index is up 9% (to $112.55/ton); coking coal and coke prices are also rising, squeezing steel mill margins.
IV. Outlook: Short-Term High-Level Fluctuations, Medium-Term Depends on Conflict Intensity
Short-Term (1-3 months): Cost support strengthens, export window opens. The prospect of resuming production at Iranian mills is uncertain. The 5-million-ton export shortfall is expected to push up steel prices in the Middle East and Southeast Asia, creating a temporary opportunity for Chinese steel exports. Simultaneously, Iran’s threats against Gulf nations elevate risk premiums. Shipping insurance costs and freight rates may rise further. Coupled with recovering domestic demand during the “golden March and silver April” period and inventory destocking, steel prices are expected to maintain high-level fluctuations.
Medium-Term (3-12 months): Key variables are production resumption and retaliation intensity. If the shutdown of Iranian steel mills is prolonged and the retaliation list expands, the global supply gap will persist. Rising aluminum prices could also indirectly support steel prices through substitution effects. Overall, the intensity and duration of the conflict will be crucial in determining whether steel prices can reach “new highs.” Uncertainty itself has become the market’s greatest certainty.
The Middle East conflict has evolved from an “energy crisis” into an “industrial crisis,” exposing the fragility of the steel industry chain. For the market, this presents both an opportunity to seize export market share and a challenge to navigate logistics and cost risks. As fundamentals intertwine with geopolitical conflict, market participants must closely monitor conflict developments and production resumption progress, adjusting strategies flexibly.
Reprinted from steel.com
