How are the current geopolitical tensions in the Middle East impacting the metals industry, particularly with force majeure declarations and supply chain disruptions?

Anshul Gupta: While the situation is undoubtedly challenging, I remain optimistic. Disruptions like these ultimately make industries stronger and more resilient. They force us to rethink supply chains and improve efficiency for the future. 

At present, the closure of key routes like the Strait of Hormuz has severely impacted vessel movement. Ports such as Jebel Ali remain operational, but vessel calls have reduced drastically. Governments in the UAE have responded proactively by diverting cargo through alternative ports like Khorfakkan, Fujairah, and even collaborating with Sohar Port.

On the production side, several aluminium smelters have declared force majeure or are operating at reduced capacity. This has removed significant volumes—potentially up to a million tonnes—from the global market, pushing up premiums in regions like Japan and Europe. 

We’ve seen similar patterns before, such as during the Russia-Ukraine conflict in 2022. Prices spike due to uncertainty, but eventually stabilize. What we’re seeing now is a short-term supply shock leading to higher premiums and tighter availability. 

How critical is the Strait of Hormuz for metals trade, especially for raw materials and finished products?

Anshul Gupta: The Strait of Hormuz is absolutely vital, not just for aluminium, but for the entire metals ecosystem.

Steel plants across the Middle East rely heavily on this route for importing raw materials such as iron ore, coal, bauxite, and limestone. With disruptions, these plants are facing challenges in securing inputs.

Many companies are exploring alternative routes via ports like Sohar or Jeddah, but these options are logistically complex and costly, especially for bulk cargo. At the same time, exports, particularly scrap shipments to countries like India and Japan, have nearly come to a halt.

The focus right now is on keeping plants operational and ensuring local markets do not face shortages.

Are traders and scrap buyers already adapting their logistics strategies to manage these disruptions?

Anshul Gupta: Yes, very actively. Industry bodies and market participants are in constant discussions to identify alternative routes and solutions.

Ports like Khorfakkan, Salalah, and Sohar have been explored, but the situation remains fluid. For instance, Salalah recently faced disruptions as well, which shows how quickly conditions can change.

The biggest challenge is unpredictability. Even when solutions are identified, they may not remain viable for long. Despite this, the industry is working hard to ensure cargo movement continues and commitments to customers are met.

What are the key impacts on pricing, supply chains, and contracts? Are buyers factoring geopolitical risks into their decisions?

Anshul Gupta: Absolutely. The impact is visible across multiple fronts. Shipping lines have introduced War Risk Surcharges (WRS), which can go up to $2,000 for a 20-foot container and $4,000 for a 40-foot container. These costs are significant and inevitably get passed down the value chain, from traders to manufacturers and ultimately to consumers.

Even with these surcharges, container availability remains a major issue. Jeddah is currently one of the few functioning routes, but capacity is limited.

For existing contracts, most buyers are understanding and willing to share these additional costs. For new contracts, there is much greater caution. Sellers are clearly communicating the risks, and clauses around disruptions and force majeure are being emphasized. Overall, prices of both scrap and finished metals have risen globally due to supply constraints and logistical bottlenecks.

Beyond logistics, are there other indirect impacts affecting the metals industry?

Anshul Gupta: Yes, energy, particularly gas supply, is a major concern.

In markets like India, gas shortages are already affecting industrial operations. Governments typically prioritize domestic consumption, which means industries like steel and aluminium are the first to face cutbacks.

This could lead to reduced production capacities not just in India, but globally wherever gas shortages emerge.

Which regions are most affected from a demand and supply perspective?

Anshul Gupta: From the Middle East, a significant portion of exports typically goes to Asia, especially India, Japan, and other East Asian markets. Europe and the U.S. are secondary destinations.

With current disruptions, exports to these regions have become extremely difficult. Even alternative routes like Jeddah involve high costs, truck shortages, and complex customs procedures.

So, the entire export ecosystem is under stress.

You’ve often described the recycling industry as resilient. What lessons from past disruptions are helping companies respond today?

Anshul Gupta:
There are three key lessons:

1. Strengthen local ecosystems:
Overdependence on global markets increases vulnerability. Companies should invest in local processing and manufacturing wherever scrap is generated.

2. Diversify logistics infrastructure:
Relying on a few major ports creates bottlenecks. We need multiple alternative ports and routes to ensure continuity.

3. Geographic diversification:
This is a classic principle: don’t put all your eggs in one basket. Companies must spread their operations and sourcing across regions to reduce risk exposure.

These lessons were reinforced during the pandemic and are proving equally relevant today.

Final thoughts—what should the industry expect going forward?

Anshul Gupta: In the short term, volatility will continue across prices, logistics, and supply chains. But in the long run, these disruptions will drive innovation, diversification, and resilience.

The industry will emerge stronger, more efficient, and better prepared for future shocks.

Watch the full interview here: Impact of West Asian War on Trade, Shipping & Logistics