Sanjeev Daga, Founder of Regsus Consulting, one of the speakers on the webinar, offered a stark analogy: cutting off 15% of the world's energy supply is like cutting 15 percent of the water supply to your house. You can cope for a day, perhaps two or three. But not for 40 days. Not without permanently changing how you live.  

That analogy is now resonating with sharp force across the global base metals and ferrous scrap industries. As the conflict dragged on into the 40th day, the Strait of Hormuz became what traders are calling the epicentre of the disruption. And the aftershocks are spreading in every direction. 

Daga was careful to distinguish the current crisis from previous geopolitical disruptions. “The Russia-Ukraine conflict of 2022, for instance, was largely a future supply shock: Markets feared what might happen to Russian aluminium exports if the U.S. sanctions escalated, but the physical logistics remained largely intact. Prices surged on sentiment and post-Covid demand momentum, not on actual physical shortages.”  

“This is a present-day supply shock, one with real physical consequences that are already being felt across trade routes and supply chains. The nearby prices have moved up sharply, while the far forward prices are moving lower. This did not happen in 2022. 

Aluminium is at the heart of the pain. The Gulf region is one of the world's largest exporters of the metal — and aluminium, as Daga noted, is the largest base metal by volume, with global consumption running at 75 million tonnes annually, more than all other metals combined. “Physical premiums, which measure the real-world cost of securing metal over and above the London Metal Exchange benchmark price, have surged. The MJP (Midwest Japan Premium) reached $353 above the three-month LME price. Backwardation — where nearby prices trade above future prices — has set in sharply, a classic indicator of physical tightness rather than paper speculation.  

On ground reality  

For those working at the sharp end of this disruption, the challenge is not abstract. Rajasekar Krishnaraj, Head of Sales, PGI Group, and Sanjeev Phadke, Managing Director of Metaal Europe International FZC, speaking from the trading frontline, painted a picture of a logistics system straining under pressures it was never designed to absorb.  

“Jebel Ali — consistently ranked among the world's top three container ports — sits squarely inside the Persian Gulf. There is no immediate replacement for its volume. In its absence, vessels have been diverting to Sohar in Oman and rerouting imports via Jeddah on the Red Sea. But capacity at alternative ports is nowhere near sufficient, and the situation is compounding day by day,” explained Rajasekar  "More than 200,000 to 250,000 boxes are trapped inside the Persian Gulf. That will have an aftereffect in terms of repositioning."  

The cost structure of a shipment has been transformed. War risk surcharges — revised every week or fortnight — are now layered on top of standard freight, fuel surcharges, and the cost of working capital in an environment where no one can predict when a vessel will actually sail. Rajasekar estimated that real movement of cargo was running at roughly five percent of normal volumes. The market, he noted, is not short of metal but short of confidence. "Today people pay a premium not for the metal, but for the reliability, the certainty that the cargo will actually ship." 

Exporters caught off guard 

For exporters based in the UAE, the disruption arrived without warning and without a playbook. Many had operated on what one panelist called "auto mode" — with sailings, documentation, and logistics so well established over years of smooth trade that almost no active planning was required.  

Phadke noted that the first priority was not new export orders — it was retrieving cargo already stuck at Jebel Ali or on vessels that could not depart. "More than worrying about new exports, the first few weeks were spent thinking about how to manage getting those containers back from the port," he said.  

New routes through Oman and within the UAE are being worked out with proactive support from government agencies, Phadke acknowledged, but every new port and customs jurisdiction brings unfamiliar procedures, unpredictable queue times, and capacity constraints that make planning almost impossible.   

A more fragile chain for secondary metals  

Primary metals carry recognised brand certifications and can, at least in theory, be sourced from alternative origins with manageable quality implications, noted Rajasekar. “Secondary metals quality varies by origin. The supply chain is fragmented, built on smaller collection points, cross-border movements, and informal flexibility that simply cannot be replicated at short notice.”  

The risk of demand destruction 

Beyond the immediate supply disruptions, Daga warned of a more insidious second-round effect beginning to take hold: demand destruction. “Automotive sales, a major consumer of aluminium and steel, are already weakening across the United States, Europe, and China. EV sales in China, which had been stimulated by government incentives, are contracting. A 25 % US tariff on automotive imports has been slowly passed on to consumers. As fuel prices rise, personal vehicle demand softens,” he noted.  

Oil, Daga stressed, is not merely an energy input — it is an industrial product, a consumer product, a pharmaceutical input, a chemical feedstock. He noted that Brent crude in the physical market was trading at $147 per barrel, against futures prices of $110, a gap that reflects the tension between physical reality and the hope still priced into paper markets. "Every week this war extends," he said, "is a compounding problem. If it extends to the end of April, I see very clear signs of a global recession."  

Against this backdrop, panellists offered concrete guidance on how market participants should reposition. Three themes emerged consistently.  

The first is diversification of suppliers, of sourcing geographies, and of energy inputs. Rajasekar noted that Indian buyers are already spreading their sourcing risk, pulling more material from Europe and seeking alternatives, even though those routes come with longer transit times and higher carrying costs. "The replacement will come with friction," he said, "but the direction is clear."  

The second is hedging. For years, the proximity of Middle Eastern supply to India made hedging seem unnecessary, freight costs were low enough that the economics of risk management barely applied. That assumption has been shattered. Daga urged companies new to hedging to start modestly. "Even 10, 20 or 30 % of a portfolio gives you the learning and the preparation for a day like this," he said.  

The third is contractual rigour. Force majeure clauses need to be reviewed and rewritten with the benefit of legal expertise. Contracts should build in room for renegotiation when cost structures change dramatically due to external events, even where formal force majeure cannot be invoked. "The language of your contract is being tested right now," as Phadke put it. 

The lasting structural question 

Market intelligence data points to a trend that is likely to outlast the immediate conflict. LME stocks have dropped by nearly 15% on a quarterly basis compared to the prior year. Physical premiums across base metals have diverged significantly from exchange prices, an indication that the exchange price is no longer telling the full story of what is actually happening in the physical market. 

Neha T U, Analyst – Aluminium Value Chain, BigMint, presenting market data for the panel, noted that shortages of specific secondary grades — particularly alloys like ADC12 used in die-casting — have pushed prices to record levels in India. Middle East supply, which accounts for around 20 percent of India's non-ferrous scrap imports, has been severely disrupted. "The market may move," she concluded, "from being purely cost-driven to being more risk-managed and supply-security focused — and that shift may be permanent." 

Whether the conflict ends in days or months, the disruptions to freight, insurance, and supply chain confidence are unlikely to normalise quickly. The containers trapped in the Persian Gulf will need repositioning. The new logistics routes being established will take time to mature. And the habits formed during this crisis such as larger inventory buffers, diversified sourcing, active hedging, tighter contract design, may simply become the new standard of practice.