On March 27, 2026, local time, precision airstrikes by the United States and Israel targeted Iran’s Mobarakeh Steel Company and Khuzestan Steel Company in Isfahan. The attacks not only forced the complete shutdown of these two core enterprises—which together account for 27% of Iran’s steel production capacity and nearly 50% of its actual output—but also tore a rigid annual supply gap of 5–5.5 million tons in the global steel trading system. As the cornerstone of steel supply in the Middle East and Southeast Asia, the abrupt halt of Iran’s steel exports is accelerating the reconfiguration of global trade flows, driving up regional steel prices, and presenting a temporary opportunity for major exporting nations like China.

I. Core of the Incident: Shutdown of Two Major Mills Paralyzes Iran’s Steel Industry

The airstrikes targeted the “twin engines” of Iran’s steel industry: Mobarakeh Steel (with annual crude steel capacity of 11.8 million tons, accounting for over 20% of national capacity; Iran’s sole full-process flat steel producer, contributing over 60% of national flat steel exports) and Khuzestan Steel (with annual capacity of 3.6 million tons, accounting for over 40% of Iran’s billet and long steel exports). Combined, their capacity represents 27% of Iran’s national total, with actual output accounting for nearly 50%. On the export front, they are the absolute pillars of Iran’s steel foreign exchange earnings—Mobarakeh’s flat products and Khuzestan’s billets and long products together form the core source of steel supply for the Middle East and Southeast Asia.

During the airstrikes, the power plant supporting Mobarakeh Steel was destroyed, and the production lines of both major mills were severely damaged, leading to a complete shutdown. This blow has not only brought Iran’s steel industry to a standstill but also severed the “supply lifeline” for regional markets.

According to Mysteel’s global steel trade monitoring data, in 2025, Iran’s total exports of steel and billets reached approximately 10.8 million tons, accounting for 35% of its domestic crude steel output and making it Iran’s second-largest export earner after oil and gas. Its export structure and destination flows are highly concentrated:

Product Structure: Semi-finished steel (billets, slabs) exports totaled 5.4 million tons (50%), long steel (rebar, sections) 2.7 million tons (25%), flat steel (hot-rolled coil, cold-rolled coil, galvanized) 1.6 million tons (15%), and other varieties (pipes, special steel, etc.) 1.1 million tons (10%).

Regional Flows: The Middle East is the largest destination (over 53%), with over 80% of Iraq’s imported steel originating from Iran, and the UAE and Oman transshipping Iranian steel volumes reaching the 3-million-ton level annually. Southeast Asia accounts for over 30%, with Thailand as the largest single buyer of Iranian billets, and Indonesia and Malaysia as stable importers. Additionally, smaller volumes are imported by South Asian countries such as Pakistan and Afghanistan, as well as Southern European nations like Italy and Spain.

II. Impact Assessment: Dual Shock of a Short-Term Plunge and a Medium-Term Gap

The impact of these airstrikes on steel imports and exports is characterized by “rapid emergence in the short term, sustained development in the medium term, and differentiation by product and region”:

Short Term (1-3 months): With its power plant destroyed and production lines damaged, Mobarakeh Steel’s flat steel exports have nearly come to a complete halt. Khuzestan Steel’s smelting and rolling lines have been affected, leading to a direct halving of billet and long steel exports. Iran’s monthly steel exports are expected to plummet from the normal level of around 900,000 tons to 350,000–450,000 tons, marking a year-on-year decline of 50%–60% and a significant drop in export earnings.

Medium Term (3-12 months, assuming slow recovery scenario): If the restoration of core production lines and the power plant at the two major mills lags behind expectations, Iran’s annual steel and billet exports could be revised down from 10.8 million tons to 5–6 million tons, resulting in a global supply gap of approximately 5–5.5 million tons for the year. This gap includes 3–3.5 million tons/year of flat steel and 2–2.5 million tons/year of billets and long steel, which would be difficult for other smaller Iranian mills to compensate for in the short term.

Regional Shockwaves: Markets dependent on Iranian supply are hit hardest. The sudden halt of Iranian exports puts immediate pressure on regions heavily reliant on its:

Iraq: As the most directly affected country, 70% of its construction long steel relies on Khuzestan Steel, and 90% of its industrial flat steel comes from Mobarakeh Steel. Supply disruptions pose a risk of material shortages for local infrastructure and housing projects, with spot prices rapidly rising 20%–30%, forcing procurement demand to turn to China, Turkey, and Russia.

UAE & Oman: As core transshipment hubs for Iranian steel, handling over 3 million tons annually, the supply halt has led to a stagnation of regional re-export trade. Steel inventories in the Persian Gulf region are depleting rapidly, with flat steel and billet prices taking the lead in rising, temporarily limiting the hub’s function.

Southeast Asia (Thailand, Indonesia): Thailand, which imports 90% of its Iranian billets from Khuzestan Steel, faces feedstock shortages at local re-rollers, driving up Southeast Asian billet premiums and shifting procurement demand towards China, India, and Russia. Indonesia, a significant importer of Iranian billets, is seeing a widening steel supply gap for construction and manufacturing, with import costs rising correspondingly.

South Asia & Europe: Pakistan, which imports over 500,000 tons of steel annually from Iran, faces a pronounced supply gap for long and flat steel, turning to China and India. Afghanistan, almost entirely dependent on Iranian long steel, experiences significant local steel price volatility, hindering infrastructure projects. The impact on Southern European nations like Italy and Spain, which import smaller volumes of high-end Iranian flat steel, is limited.

III. Global Reconfiguration: China, India, Russia Fill the Gap as Trade Flows Shift

The 5–5.5 million tons/year export market vacated by Iran is expected to be filled by the three major steel-exporting nations—China, India, and Russia—leading to structural adjustments in global steel trade flows:

China: Leveraging established export channels to the Middle East and Southeast Asia (exporting over 13 million tons to the seven Persian Gulf countries in 2025), China is expected to capture an additional 1.5–2 million tons/year. Key advantageous products include hot-rolled coil, cold-rolled coil, galvanized steel, billets, and rebar, with export profit margins expected to improve.

India: Capitalizing on price advantages in long steel and billets to penetrate Middle Eastern and Southeast Asian markets, India is expected to capture an additional 1.2–1.5 million tons/year, becoming a primary supplier for the long steel gap.

Russia: Amidst ongoing Western sanctions, Russia continues to increase its market presence in Asia and the Middle East. Leveraging geographical proximity and price advantages, it is expected to capture an additional 1–1.3 million tons/year, increasing its share of billet and hot-rolled coil exports.

For the Chinese steel market, the direct impact of this incident is almost negligible: in 2025, China directly exported only 266,700 tons of steel to Iran (0.22% of total exports) and imported approximately 5.7 million tons of iron ore from Iran (0.45% of total imports). However, the indirect impact presents a scenario of “opportunities outweighing risks”:

Opportunities: The emergence of rigid steel supply gaps in the Middle East and Southeast Asia is likely to strengthen Chinese steel export orders and FOB quotations periodically. The export competitiveness of products like hot-rolled coil, billets, and rebar is enhanced. External demand provides support for domestic steel prices, and export enterprises see expanded profit margins.

Risks: Increased shipping uncertainty in the Strait of Hormuz. If geopolitical conflicts escalate, China’s steel exports to the Gulf region, amounting to over 13 million tons, could face logistical disruptions, rising freight costs, and shipping delays, increasing pressure on export fulfillment.

The attack on Iran’s core steel mills is fundamentally a regional disruption of steel supply in the Middle East, rather than a trend reversal in the global steel market. In the short term, it will create a rigid annual supply gap of 5–5.5 million tons, most pronounced in flat steel, billets, and long steel. Markets highly dependent on Iranian supply, such as Iraq, the UAE, and Thailand, face the most direct impact. For the global market, steel prices in the Middle East and Southeast Asia will see periodic strength, with trade flows rapidly shifting towards China, India, and Russia. For the Chinese market, the direct impact is minimal; the marginal improvement in external demand significantly outweighs logistical risks, presenting a temporary opportunity for steel exports. The key variable in the subsequent evolution of the incident lies in the actual resumption progress of Iran’s two major steel mills—if the recovery period is prolonged, the supply gap will persist; conversely, the gap will close quickly.

Reprinted from steel.com