The situation in the Middle East has been aggravated further, and, among many other severe impacts, is having a significant influence on sentiments and expectations in the steel business. On July 6, Yemen’s Houthi militants carried out an attack on Greek-owned bulk carrier M/V Magic Seas, claiming later to have sunk the vessel. According to reports, the ship was carrying fertilizer-related chemicals and steel billet from China to Turkey through the Suez Canal. Additionally, Greek-operated bulk carrier Eternity C was attacked on July 7. According to the Yemeni authorities, both vessels were under attack due to their operators’ connections with Israel, with further threats to similar ships as targets implied.
Currently, market players are trying to estimate the potential long-term impact of the latest developments, but also the consequences for normal daily life. The steel billet cargo lost with Magic Seas and supposedly destined for Turkey is expected to create some additional urgent requirement for billet in this market for July-early August delivery, which, basically, can be covered by domestic billet in Turkey and by ex-Black Sea billet. Ukraine is expected to have, in theory, 30,000-40,000 mt of billet for August shipment altogether, while a leading Russian seller may allocate around 20,000-30,000 mt, sources evaluate. Still, not all of Turkey’s billet importers are working with Russia due to the international sanctions.
With these strikes on vessels, Yemen’s growing influence over critical maritime routes in the Red Sea along with some others is worrying market players in global trade, including the steel trade. Many expect that passage along Yemeni shores and through the Suez Canal will diminish as shippers and cargo owners would seek to minimize risks, which will lead to delays in deliveries of earlier planned cargoes and certain disruptions of the sequence of discharging of vessels at ports, at least in some cases. “European owners will be more careful passing by Yemen and might instead sail around South Africa, but the situation with Chinese owners will still be the same,” a trader told SteelOrbis. “It is the same as it was in previous times. The ones sailing - will continue sailing,” another source mentioned.
In addition, the related increase of maritime freight rates by $5-7/mt is one consequence expected to be seen in the short run, while freight rates have already been inching up lately due to market conditions, unrelated to the situation in the Red Sea, particularly due to the grain season. Another impact is that insurance companies might apply the $1-3/mt premium over their current rates due to the war clause for the newly nominated vessels.