The inconclusive outcome of US-Iran nuclear negotiations has driven a phased increase in precious metal and oil & gas prices. With the escalation of the Israel-Iran conflict, prices of related commodities are expected to see an instantaneous spike. Should the conflict persist, it could trigger a broad-based price surge, starting with gold and crude oil and spreading to precious metals, energy, and critical minerals. What specific impacts could this have on the stainless steel industry?

1. Status of China's Stainless Steel Exports to the Middle Eastern Market

Government procurement for infrastructure projects in Middle Eastern markets, such as Saudi Arabia's NEOM city and projects in Iran, has increased, leading to a surge in demand for stainless steel. Concurrently, in an effort to reduce dependence on oil, countries in the region are vigorously developing petrochemicals, seawater desalination, and other industries, creating strong demand for corrosion-resistant stainless steel pipes.

Leveraging its unique geographical advantage as a hub connecting Asia and Europe, and driven by active regional trade agreements, Chinese stainless steel enterprises are actively exploring emerging markets along the Belt and Road Initiative. In the past two years, China's stainless steel export volume to the Middle East has shown a significant upward trend.

In 2024, this export volume reached approximately 772,800 tons (accounting for about 15.4% of China's total stainless steel exports), a year-on-year increase of 176,700 tons or 29.7%. In 2025, the volume was about 764,000 tons (approximately 15.2% of China's total exports), a year-on-year decrease of 8,500 tons or 1.1%.

The Strait of Hormuz holds a critical geographical position. It is not only an important passageway for the Persian Gulf but also a key hub for Chinese stainless steel shipments to Saudi Arabia, the UAE, Iraq, Kuwait, and other countries. If the strait is restricted, the direct shipping routes for Chinese stainless steel exports will be directly disrupted, potentially leading to a direct increase in export freight costs and weakening export competitiveness.

The northeastern shore of the Persian Gulf is Iran, while the southwestern shore hosts, in sequence, Iraq, Kuwait, Saudi Arabia, Bahrain, Qatar, the UAE, and Oman. Shipping to China from these countries must pass through the Strait of Hormuz. In 2025, China's stainless steel exports to these specific regions amounted to approximately 382,700 tons, accounting for about 7.6% of China's total stainless steel exports.

2. Weakened Export Competitiveness, Potential Order Delays or Reductions

A blockade of the Strait of Hormuz would first drive up oil tanker freight rates, subsequently triggering an increase in fuel surcharges across the entire shipping and logistics chain.

Stainless steel is typically transported via container shipping routes. Diverting vessels via the Cape of Good Hope would increase voyage distances, extend shipping schedules, and directly raise the logistics cost per ton of steel.

It is reported that MSC has suspended all global freight bookings destined for the Middle East until further notice.

CMA CGM notification: All vessels located inside or heading towards the Gulf have been instructed to seek immediate safety. Transit through the Suez Canal is suspended, and vessels will be rerouted via the Cape of Good Hope.

Maersk notification: All MECL and ME11 services will be rerouted around Africa, no longer using the Suez Canal route.

Disruption in Gulf shipping may lead to congestion in some ports. The continuous rise in freight rates and extended shipping schedules could undermine the price competitiveness of Chinese stainless steel products in destination markets, potentially leading buyers to source materials locally. This may result in delays or reductions in overseas orders.

3. Rising Domestic Oil Prices Increase Logistics Costs

The Strait of Hormuz handles approximately 20%-30% of the world's seaborne oil transportation, with crude oil exports from major Middle Eastern producers being almost entirely dependent on this route. This situation directly pushes up oil prices, increases shipping costs, disrupts the global energy supply chain, and significantly impacts the global oil industry. Rising oil prices directly elevate various logistics costs within China, further increasing the transportation costs for the Chinese stainless steel industry.

4. Rising Prices of Raw Materials Like Nickel and Chromium Increase Production Costs

The direct impact on nickel is limited, but there is potential for indirect financial sentiment transmission. Following the outbreak of the conflict, a significant influx of safe-haven and speculative funds entered the non-ferrous metals sector. Coupled with ongoing tightness in Indonesian nickel ore quotas, this has jointly pushed nickel prices higher.

The impact on chromium is primarily manifested in freight and logistics aspects. The main production area for chromium ore is South Africa. Although it does not involve passage through the Strait of Hormuz, regional shipping diversions caused by the conflict would significantly lengthen voyage distances and times. Elevated maritime freight rates and potential insurance surcharges would ultimately be passed on as increased import costs for chromium ore. Exports from secondary chromium ore sources like Iran and Oman could be directly disrupted by a strait blockade.

Due to the rise in energy and alloy prices, costs related to stainless steel smelting will further increase, leading to an overall rise in production costs.

In summary, the impact of this event on the stainless steel industry is substantial. Due to increased shipping freight rates and extended shipping schedules, the competitive advantage of Chinese stainless steel exports is weakening. According to market research, orders for Chinese stainless steel exports to the Middle East have already begun to experience a suspension of new bookings. For the Chinese domestic market, rising oil prices directly push up domestic stainless steel transportation costs. Simultaneously, there is an expectation of rising raw material prices. If the increase in finished stainless steel prices fails to keep pace with the increase in production costs, steel mills will face the risk of squeezed profit margins.