Middle East tensions delay scrap shipments to India, support PDRI prices

Geopolitical tensions in the Middle East have curtailed scrap availability in Asia and delayed scrap shipments to India, a development expected to support prices in the near term, Asia-based traders, buyers and mill sources said March 2.

Prices for direct-reduced iron are expected to be largely affected by the development, which could lead to higher demand for partially reduced iron, the sources said.

Platts assessed the spot price for pellet-based Indian domestic DRI with 80% Fe at Rupees 27,500/mt ($299.81/mt) on an ex-works Raipur, Chhattisgarh, basis on March 2, up 5.8% from Feb. 27, marking the largest single-day percentage increase since the assessment was launched in September 2024.

With supply from Iran already uncertain and further impacted by the conflict, buyers now anticipate delays in scrap vessels that were in transit, a North India-based DRI trader said.

Scrap is often used as a substitute for sponge iron in India, as it is generally cheaper. However, freight costs can impact this advantage, especially if scrap imports from the Middle East are disrupted. In such cases, mills may turn to sponge iron, which will influence pellet and sponge iron prices, according to a North India-based end-user.

The ripple effect has begun to reflect in the downstream rebar segment. Platts assessed IS1786 Fe500D/Fe550D 12-25 mm diameter rebar up Rupees 1,100/mt from Feb. 27 at Rupees 49,000/mt ex-works Raipur March 2.

"Rebar offers are up significantly amid increasing raw material costs linked to the Middle East situation," a Raipur-based trader said. "It is more of a sentiment-driven increase, especially as activity this week is already subdued due to Holi festivities."

Buyers, however, have been cautious. "They are mainly on the sidelines as the sharp hike has kept them in a wait-and-watch mode," the trader said, adding that market participants remain uncertain about the sustainability of the current uptrend without a meaningful pickup in demand.

Rising fuel costs are adding another layer of pressure. "The tensions in the Middle East will increase fuel costs, which in turn will raise transportation expenses," a west India-based trader said.

Raipur-based traders said higher logistics costs and constrained scrap availability could continue to underpin input prices in the near term, though finished steel demand will remain the key determinant of how long the gains persist.