Chinese hot rolled coil (HRC) exporters have been encountering serious disruptions in shipments to the Gulf region following the escalation of the war between US-Israel and Iran, which has created uncertainty around maritime safety and logistics through the Strait of Hormuz - a key route for steel cargoes moving from Asia to the Middle East.
In recent days, several Chinese mills are reported to have stopped issuing new export offers to Gulf buyers as freight conditions and insurance coverage for vessels transiting the strait remain unclear. Market participants said freight rates for shipments to the region have already risen by around $10/mt, which means around $50-55/mt for large-volume cargoes of HRC, while the lack of security guarantees has made both buyers and sellers reluctant to conclude new deals.
The logistical disruption has also affected cargoes already at sea. According to market insiders, ships that had departed Chinese ports and were approaching Gulf waters were advised to divert and discharge at alternative ports outside the strait. Additional complications have arisen after operational disruptions were reported at Jebel Ali port in Dubai, the largest port in the region, while security concerns have reduced staffing levels at many trading offices and logistics facilities across the UAE.
As a result, trading activity has effectively stalled. Sources in both China and the Middle East said that neither offers nor bids for new HRC cargoes were currently circulating in the market as participants wait for greater clarity on the geopolitical situation.
Middle East a crucial export destination
Several of China’s key Gulf export destinations are already being directly affected by the escalating conflict. Among China’s largest overseas markets for HRC, Saudi Arabia, the UAE and Iraq are currently experiencing the most immediate disruption, while Kuwait, Qatar and Bahrain also face rising exposure as the instability spreads across the region.
Although Chinese HRC shipments to these six Gulf countries, together with exports to Iran, amounted to around 3.68 million mt last year, representing a 20.6 percent decline compared with 2024, the region nevertheless remains strategically important for Chinese exporters. Even at this reduced level, the combined volume exceeded the HRC exports of major Asian competitors such as Japan and South Korea, underscoring the significance of the Gulf market for Chinese steel producers.
Notably, China shipped about 21.5 million mt of HRC globally last year, with roughly 17 percent of those volumes delivered to Gulf markets, according to China's General Administration of Customs (GACC). Estimates based on trade data suggest that the UAE imported around 1.33 million mt of HRC from China, while Saudi Arabia bought around 1.96 million mt. As a result, any prolonged disruption to shipping routes through the Strait of Hormuz could significantly affect Chinese mills, which rely heavily on exports to offset weak domestic demand.
Potential consequences for Chinese mills
For Chinese producers, the interruption of shipments to the Gulf presents a notable risk. Domestic steel consumption remains weak due to the prolonged downturn in China’s property sector, leaving exports as a crucial channel for balancing supply.
If the war leads to prolonged shipping disruptions, several outcomes are possible. Some cargoes may be redirected to alternative markets in Southeast Asia, Africa or Latin America, potentially increasing competition and putting downward pressure on export prices. At the same time, some trade flows could attempt to adjust through longer maritime routes or alternative land corridors through Central Asia or Pakistan, although these options would significantly increase logistics costs.
“The uncertainty has already affected market sentiment beyond the Middle East. Even buyers in regions whose shipping routes do not pass through the Strait of Hormuz have become more cautious, reflecting concerns about the broader impact of the conflict on oil prices, freight markets and global trade stability,” a market insider told SteelOrbis.
“For now, most participants are adopting a wait-and-see approach. Chinese exporters, Gulf buyers and shipping companies are closely monitoring developments in the region before committing to new transactions, while the timeline for a resumption of normal trade flows remains unclear,” another source said.
It is also worth noting that, even before the recent disruptions in the Middle East, Chinese HRC exporters had already been facing mounting difficulties in another key market - Vietnam. The country has traditionally been the largest overseas buyer of Chinese HRC, importing roughly 4.5 million mt last year, but access to this market has become increasingly constrained after Vietnam imposed antidumping duties on Chinese HRC. The situation has been further complicated by the introduction of stricter non-VAT regulations, which have reduced the competitiveness of Chinese material for local traders and end-users.
Against this backdrop, any prolonged disruption to shipments to the Gulf would further worsen the outlook for Chinese exporters. With Vietnam becoming a less accessible outlet and Middle Eastern demand now at risk, Chinese mills may find it increasingly difficult to redirect surplus volumes to alternative markets of comparable scale. Since producers are generally reluctant to implement major production cuts, excess material could increasingly be pushed into the domestic market. In such a scenario, domestic HRC prices could come under additional pressure as buyers recognize that mills may need to offer discounts in order to secure sales.