How has the Iran conflict taken a toll on India's Gulf steel trade? BigMint explains

• Indian steel exports may fall 30-40% in Mar'26, Q2CY'26 to remain muted
  
  
• Indian cargoes being returned from Oman, Far East exports also impacted
  
  
• Opportunity arises for India to emerge as regional transshipment hub
  
  

Morning Brief: India's steel exports to the Gulf regions comprise around 9% of total volumes, with proximity, scale of demand, and established logistics corridors making the region a key export destination. However, this dependence has exposed Indian exporters to heightened risks amid the ongoing US-Iran conflict, highlighted BigMint's latest webinar "Strait-jacketed: Steel Trade Flows and Price Risks in a Volatile Global Market".

In this discussion, the panel of experts, featuring Ankur Dana (CEO, Dana Group), Rajeev Vyas (MD, Vinar Overseas), and Manish Lunker (President - Group Procurement [CPO] and Strategy, Man Industries), delved into the strategic importance of the Gulf market and the vulnerability of trade flows to geopolitical shocks. Key insights follow.

Shifting routes, multimodal logistics being explored

Previously, Jebel Ali Port in Dubai would be used for all export and import movements. Presently, although Jebel Ali (as well as Khalifa and Mina) is open and operational, vessels are not arriving due to the blockage of the Strait of Hormuz.

The UAE government is trying to solve this is by establishing multi-modal corridors between ports. For example, vessels that were supposed to call at Jebel Ali are now discharging cargoes at Khor Fakkan, which has emerged as a major port in this crisis as it lies to the east of Hormuz. Thereafter, containers are being transported to Jebel Ali via road. However, Khor Fakkan handles only containerised cargo, and so, it is not suitable for steel, which is generally shipped in bulk.

The cost of transporting cargoes via road is also exorbitant, which would be detrimental for a thin-margin product such as steel.

Another route being considered is through Sohar, Oman, again located to the east of Hormuz, to Dubai. Sohar can handle bulk cargoes unlike Khor Fakkan. This route, however, would be time consuming and involve complicated cross-country compliance procedures, as GCC does not have a unified customs.

No export cargoes are being shipped at the moment. Imports are being prioritised, that too for older contracts, as no steel supplier is willing to accept new contracts for the Middle East.

Indian exports severely affected

Buyers in the Gulf Cooperation Council (GCC), especially the UAE and Saudi Arabia, procure in bulk. Indian steel exporters hold a significant market share here because of short transit times.

Given the ongoing turmoil, Indian steel exports will fall sharply in March 2026, possibly by as much as 30-40%. The impact may even be felt during the second quarter of CY'26.

Some cargoes that had been shipped are being returned from Oman and elsewhere to Kandla, Mundra, and Mumbai.

Shipments to the Far East, such as Vietnam and Thailand, have also faced disturbances due to a 50% surge in freights. Shipping companies are unwilling to place a vessel unless charterers agree to strict stipulations.

Despite freights squeezing margins, most mills and traders are sticking to their commitments. Presently, exporters are firefighting to achieve sales targets before 31 March.

Importantly, demand remains strong in the Middle East with key projects underway and some nearing completion. As soon as the conflict ceases, these projects will be fast-tracked due to delays and cost overruns. Consequently, a sharp demand rebound is expected.

Even now, buyers are willing to pay a premium for safe and secure delivery, as steel users have to keep operations running.

In terms of alternative markets, Indian mills are eager to explore the Far East and East Asia overall. However, demand is limited, as buyers there prefer low-priced items. Additionally, these are very competitive markets because of China, Japan, and South Korea's dominance. Nonetheless, Indian mills are willing to adjust to maintain export offers.

Structural realignment of trade flows post war

A structural realignment of Gulf trade flows is expected following the end of the conflict. First, localisation of trade may take place to de-risk the steel supply chain, as the Gulf nations rely heavily on imports. Hadeed SABIC is the only major hot-rolled steel manufacturer in Saudi Arabia, so boosting domestic capacity will be a major ask.

Geopolitical volatility has also highlighted the need to reduce dependence on a single corridor for trade. Buyers will shift to sourcing closer geographies in the medium-to-long term.

The emergence of a unified customs framework across the GCC is likely as recent disruptions have highlighted the need for coordinated trade resilience. A common customs regime would reduce administrative fragmentation and enable smoother cargo movement.

Exporters have also started seeking longer delivery timelines, such as until end-July. A buffer of one month or more could become a norm due to geopolitical uncertainties and limited vessel availability.

Additionally, most sellers are willing to quote only FOB prices. This has led to buyers stressing on the total landed cost rather than just the basic steel price, which would not have been done previously.

Another likely fallout is the advancement of road and rail infrastructure. The UAE's Etihad Rail may be extended to Oman in the east and Saudi Arabia in the west.

Scope for India to emerge as transshipment hub

If the disruptions persist, India could also become a more central node in steel trade flows. In spite of being the second-largest steel producer, it is still not very active in the export market. In CY'25, India exported only 8.6 million tonnes (mnt) of steel against the 164 mnt produced (around 5%).

Recently, three Japanese vessels bound for, most possibly, the UAE discharged their cargo at Mumbai Port under a transshipment clause, with other Southeast Asian and Far Eastern suppliers exploring similar options via Kandla. The short voyage time between India and the Middle East would make delivery possible within 3-4 days as soon as the conflict stops.

However, the Middle East's logistics infrastructure is substantial, and it would not be easy to shift base from there. While the Gulf region could remain a focal point, there could be good opportunity for India to become a transshipment point, provided smoother customs clearances and a more favourable regulatory framework.

Outlook

Once the war ends, accumulated delays and limited local raw material availability are expected to drive demand for shorter lead times and faster deliveries, as stalled projects gradually restart.

However, even if the immediate situation stabilises, freight and insurance premiums will stay elevated for at least 6-12 months. Market players will need to become flexible and agile, as extreme volatility is expected.

With limited scope for alternative sea routes and escalating geopolitical volatility, the focus is also shifting from who offers the lowest prices or the best quality to who can ensure the most reliable supply.