The conflict in the Middle East has disrupted shipping through the Strait of Hormuz, triggering a سلسلة of chain reactions: global shipping costs have surged sharply, and war risk insurance premiums for vessels have also risen rapidly. Moreover, shipping companies must also weigh freight rate factors. According to industry insiders, current freight rates have already skyrocketed to 11-12 times their original level.

Recent Middle East conflicts have disrupted the region's booming energy storage market, a major destination for Chinese exports. To assess the real impact on Chinese supply chains and project deliveries, we must analyze baseline demand amidst these geopolitical uncertainties.

[SMM Analysis] Persian Gulf Shutdown? The Impact of the U.S.-Iran Conflict on Global Steel Trade On February 28, 2026, the conflict between the United States and Iran escalated into a full-scale outbreak, causing a sudden spike in Middle Eastern geopolitical tensions. As a global chokepoint for energy and bulk commodity maritime transport, the Strait of Hormuz has seen shipping disrupted and routes tightened, directly impacting the nerves of the global supply chain. This "Golden Waterway" is not only a lifeline for oil but also a critical strategic corridor for the global steel import and export trade . Once passage is restricted, it will deliver a comprehensive shock to the international steel trade landscape. Amidst the turmoil of war, what disruptions and restructuring will the global steel trade face? SMM's latest research provides an in-depth analysis. In the short term, the U.S.-Iran conflict poses a risk of stalling steel imports and exports in the Persian Gulf region, putting pressure on China's steel exports. Multiple disruptions along Gulf shipping routes have caused significant delays in exporters' orders. According to SMM research, the current Middle East situation has disrupted multiple ports in the Gulf region. Bahrain has suspended port activities, including pilotage services. Jebel Ali Port has halted all operations due to a fire caused by intercepting airstrike debris. Qatar's Ras Laffan and Messaid ports remain operational but with reduced traffic, GPS signal interference, and the government closure of its airspace. Similarly, new orders and shipments for Chinese exporters have also been significantly hindered. Data Source:SMM Impact Assessment of Core Ports within the Strait of Hormuz Should a physical blockade occur at this strategic chokepoint, the five most directly affected key inner-bay ports experiencing “instant logistics paralysis” would be: Port of Bandar Abbas, Port of Khomeini, Port of Jebel Ali, Port of Khalifa, and King Abdullah Port. Simultaneously, a Strait blockade would threaten to disrupt approximately 10% of global seaborne steel trade (primarily semi-finished products and specialty ores) . Iran's production of direct reduced iron (DRI) also holds significant weight in global supply; any disruption could drive up costs for electric arc furnace steelmaking in the Middle East. Data Source: SMM Ferrous Metal Shipping After the blockade, will goods become completely impossible to transport? While maritime routes will indeed come to a near standstill, the flow of goods won't cease entirely. It will simply become extremely costly, slow, and require complex overland transshipment. For instance, strategic alternative ports outside the strait include Sohar Port, Chabahar Port, and Gwadar Port. Data Source: Compiled by SMM based on publicly available information Trade Chokehold Triggered by Insurance Withdrawals Equally severe as the strait blockade is the withdrawal of war risk insurance. Marine insurers Skuld and Gard have announced they will cancel war risk coverage due to escalating tensions in the Middle East. Local feedback from the UAE indicates most insurers refuse to underwrite war risk insurance for the Red Sea. This means traders must bear multiple uncontrollable factors and assume all consequences, which will significantly impact new orders. Summary: The Hormuz Crisis's “Hedging Effect” on China's Steel Market Leads to Short-Term Export Pressure Short-Term Negative Impact (Suppression of Demand and Logistics): The sudden halt in Gulf shipping routes will cause China's total exports to Middle Eastern countries like Saudi Arabia and the UAE to plummet dramatically. Export disruptions may even force resources to flow back into the domestic market, intensifying supply pressure and exerting downward pressure on steel prices. Data Source: SMM, GACC Mid-term outlook: As a major steel supplier, Iran's halted exports will trigger tightening supply of steel billets in Southeast and South Asia. From Construction to Industry: Iran's Steel Export Structure Transformation and the Peak Era Dominated by “Billet” According to data released by the Iranian Steel Producers Association (ISPA), 2025 marked the “peak era” for Iran's steel exports, with its export structure exhibiting an extremely aggressive trend: ① Absolute Dominance of Semi-Finished Products: From March to December 2025, Iran's billet exports reached 4.58 million tons (+37.7% YoY), while slab exports hit 1.54 million tons (+44.6% YoY). This confirms the earlier observation that the current strait blockade will trigger significant “slab panic” among downstream steel mills in Southeast Asia and the Middle East. ② Structural Leap in Flat Products: Finished flat product exports surged from 307,000 tons in the same period last year to 1.03 million tons. Notably, the significant increase in hot-rolled coil (867,000 tons) and coated steel (up 76.7% YoY) indicates Iran's gradual transition from a “construction steel supplier” to an “industrial raw material supplier.” ③ Weakness and contraction in long products: In contrast, exports of finished long products (rebar, wire rod) declined by 9.9%, while structural steel exports plummeted by 27.7%. This trend of “reducing long products while increasing flat products” has, against the backdrop of stalled infrastructure projects, actually heightened the risk of inventory buildup for finished goods. Data Source: ISPA Mid-term positive factors: Cost and substitution support Iran's steel export shortfall of nearly 11 million tons will trigger regional supply tightness, forcing some Southeast Asian and South Asian buyers to shift procurement to China, creating “substitution-driven incremental demand.” Simultaneously, rising crude oil prices may push up costs across the entire industrial chain, providing bottom-up support for steel prices. Although logistics disruptions and project suspensions will suppress export performance in the short term, the reshuffling of the global supply landscape is expected to partially offset the negative impact. Chinese steel may play a key role in filling the global gap. Long-term outlook: Iran's ceasefire may temporarily impact the global steel market Hoarding effect under blockade: Iran's sharply rising mill and port inventory pressures According to the latest global steel statistics report released by the World Steel Association (WSA), Iran's cumulative crude steel production reached 31.8 million tons in 2025, marking a year-on-year increase of approximately 1.4% compared to 2024 and solidifying its position as the world's tenth-largest steel producer. In December 2025, Iran's monthly crude steel output hit 3 million tons, a significant year-on-year increase of 16.2%. This indicates that Iranian steel mills were operating at peak capacity just before the conflict erupted. In January 2026, its crude steel output reached approximately 2.6 million tons, marking a 15.1% year-on-year increase. Against the backdrop of a 6.5% year-on-year decline in global crude steel production during January, Iran demonstrated an “independent trend.” According to SMM research, the high production levels from earlier periods have led to severe inventory backlogs at domestic steel mills. The logistics blockade that began in late February prevented the full shipment of steel produced during this high-output phase out of the Persian Gulf. Consequently, ports and mill warehouses are now stockpiling large quantities of slabs and billets originally intended for export. Once the situation eases, this “low-priced inventory” could flood the market at dumping prices. However, considering Iran's post-ceasefire reconstruction needs and the actual release of these supplies, SMM will continue to monitor developments closely. Copyright and Intellectual Property Statement: This report is independently created or compiled by SMM Information & Technology Co., Ltd. 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SMM March 2nd Report: On February 28, 2026, the US and Israel launched a large-scale military strike on Iran, which promptly announced the closure of the Strait of Hormuz. The geopolitical situation in the Middle East escalated sharply and fell into sustained turmoil. As a critical "chokepoint" for global energy transportation, the Strait of Hormuz handles about 30% of global seaborne oil trade. Its blockade directly led to a severe physical disruption in the global energy supply chain, causing international oil prices to surge dramatically, with shipping costs and insurance fees skyrocketing, significantly increasing uncertainty in the energy market. As a key raw material for prebaked anodes used in aluminum production, petcoke is expected to enter a state of supply tightens, cost surges, and quality disturbances under the influence of the geopolitical situation. This change will directly impact the stability of China's petcoke import system, while also substantially raising domestic prebaked anode production costs, creating a chain reaction in the downstream aluminum industry. In terms of the overall distribution of import sources, in 2025, regions and countries with high petcoke import dependency in China showed a tiered characteristic. The first tier, centered around the US and Russia, saw the US accounting for 31%, making it the largest source of petcoke imports for China; Russia followed closely with 17%, together contributing nearly half of the total imports. The second tier was the Middle East, collectively accounting for 15%, serving as an important supplementary segment for China's petcoke imports. Other import sources were more dispersed, with Canada and Brazil each at 5%, and Argentina, Colombia, and Taiwan, China, each at 4%. This diversification of smaller sources enriched China's petcoke import supply system, but the influence of individual entities remained relatively limited. Notably, as a key supplementary sector for China's petcoke imports, the highly concentrated internal supply structure of the Middle East became the core reason for the impact of the deteriorating geopolitical situation on China's import market. In detail, the supply landscape of the Middle East exhibited a "dominance by one, supplemented by a few" feature: Saudi Arabia, with a 64% share, held an absolute dominant position, being the core exporter of petcoke from the Middle East to China; Oman ranked second with 22%; Kuwait accounted for 12%, with other regions providing only minor supplements. In terms of imported product specifications, petcoke from the Middle East mainly consisted of medium- to high-sulfur varieties, with different source countries focusing on specific types: petcoke from Saudi Arabia primarily included high-sulfur sponge coke and high-sulfur shot coke, from Oman mainly shot coke, and from Kuwait mainly medium-sulfur sponge coke. These types of petcoke are primarily used for blending in the production of prebaked anodes, serving as a crucial raw material supplement for the domestic prebaked anode industry. The blockade of the Strait of Hormuz has a multi-dimensional impact on the petroleum coke market: On one hand, the blockade leads to a complete halt in the export of Middle Eastern petroleum coke, significantly reducing the international circulation of petroleum coke. The arrival cycle for petroleum coke imported by China from the Middle East is notably extended, directly exacerbating the tightness of domestic import supply. On the other hand, some refineries in the region are affected by military conflicts, limiting their production activities and further contracting the overall supply of petroleum coke, creating a dual squeeze on the supply side. Meanwhile, the surge in international oil prices drives up the production costs of petroleum coke from refinery delayed coking units, providing a solid bottom support for petroleum coke prices. Coupled with the sharp rise in international shipping freight and war risk insurance premiums, these factors collectively push petroleum coke prices into a more likely to rise than fall trajectory. In summary, this geopolitical conflict in the Middle East is a significant external shock to the 2026 petroleum coke-prebaked anode-aluminum industry chain. The triple pressures of supply tightening, cost surges, and quality disruptions will continue to be passed down: Petroleum coke prices will keep rising, pushing up the production costs of prebaked anodes, which in turn will elevate the production costs of aluminum. If the blockade of the Strait of Hormuz persists, the entire industry chain will gradually enter a phase characterized by high costs, low inventory, and strong fluctuations. Ensuring supply chain security and controlling enterprise costs will become the core challenges facing the industry.