The blockade of the Strait of Hormuz is disrupting iron ore trade, forcing cargo ships to seek new destinations.

　　Market sources said on March 13 that heightened tensions in the Middle East have reshaped shipping routes in the seaborne iron ore market, driving up freight costs and prompting several shipments of high‑grade ore to be diverted from Gulf ports to China over the weeks ending March 12.

　　At least four vessels originally scheduled to sail to ports in Bahrain and Oman have been rerouted to Chinese destinations in recent weeks, including the Cape Shangrila, which was carrying 170,000 tons of iron ore fines bound for Bahrain, and the Ore Italia, which was transporting 385,000 tons of pelletized ore destined for Sohar. The Mineral Zimbabwe was found to have shifted its discharge port from Sohar in Oman to Dongjiakou in China, while the Cape Jasmine, carrying 170,000 tons of iron ore, has also changed its destination from Bahrain to Qingdao.

　　Rising energy and freight costs are supporting the bottom of iron ore prices.

　　On March 11, the average CFR benchmark price for 61% Fe fine iron ore at Qingdao Port on overseas platforms was US$102.81 per ton, up from US$98.88 in February. Analysts attribute the rise to increasing energy and freight costs as key drivers, providing indirect support for iron ore prices in both derivatives and spot markets.

　　A Shanghai-based analyst stated, “Rising freight rates have universally pushed up China CFR prices for iron ore.” A source in Xiamen noted that shipowners are now in a stronger position during charter rate negotiations, which is inevitably slowing down the negotiations for upcoming cargoes on the C3 and C5 trade routes.

　　The tight, high‑quality supply situation has become even more complex.

　　These shifts have added complexity to an already tight supply situation for high‑grade ore. According to a source at a Shanxi steel plant, a major mining company ships roughly 500,000 tons of high‑grade pellet feed to the Middle East each month, while traders warn that the continued diversion of these volumes could put downward pressure on China’s sintered fines prices.

　　A Singaporean trader said, “If these volumes continue to shift toward China, it could put downward pressure on high‑grade sinter fines prices.” He added that weak demand for pellets and pellet feed in China means some materials may ultimately enter the sinter feed market at a discount.

　　Traders are also exploring opportunities in other parts of Asia. A Japanese trader noted, “We’ve heard about some attempts to pitch high‑grade pellets to buyers in Japan and South Korea, but so far no deals have been confirmed.”

　　A source in Hebei said that if steelmaking profits remain limited and demand for high‑grade pellets outside the Middle East—especially in China—fails to rebound, some additional pellet feedstock originally intended for pelletizing may be offered on the spot market.

　　Follow the Middle East Processing Center

　　In addition to direct shipping disruptions, traders are closely monitoring any impact on the Middle East as a key hub for processing and redistribution of iron ore products destined for Asia.

　　Worth noting is Vale’s iron ore operations at the Port of Sohar in Oman, which houses a pelletizing plant with an annual capacity of approximately 9 million tons and a distribution center capable of handling up to 40 million tons of iron ore products per year. This complex serves as a key redistribution hub for steelmakers in the Middle East, North Africa, and Asia.

　　In October 2025, Vale and China Jinan Steel Group also announced the construction of a beneficiation plant in Sohar, with an investment exceeding US$600 million. The plant is designed to process 18 million tons of ore annually and produce approximately 12.6 million tons of high‑grade concentrate. Market participants note that there are currently no indications that regional tensions will impact the project’s scheduled commissioning in mid‑2027.

　　In contrast, a Beijing-based trader noted that Bahrain primarily consumes imported iron ore concentrate domestically through its steel and direct reduction facilities, meaning that disruptions there would mainly affect regional steel production rather than export flows.

　　A Shanghai-based analyst estimates that if the situation persists, shipments of pellets and concentrates from the Middle East—primarily Oman—to China could be disrupted by as much as 2 million tons per month. This could temporarily tighten the supply of high‑grade iron ore products such as pellets and pellet feed in China’s seaborne market. At the same time, if Oman’s processing facilities struggle to handle pellet feed or concentrate feed, some materials originally intended for pelletizing may instead flow into the seaborne fines market.

　　As of March 10, the premium for 67.5% Fe iron ore pellet feedstock on overseas platforms at Qingdao Port CFR was calculated at USD 0.30 per dry ton, down USD 1.11 per dry ton from the average premium of USD 0.81 per dry ton in February 2026.

　　Further curb limited iron ore exports to China.

　　The long‑term stalemate in the Strait of Hormuz is expected to further curb Middle Eastern exports of iron ore to China, which primarily consist of iron ore concentrate and pellets.

　　According to Chinese customs data, in 2025 China imported approximately 16.69 million tons of iron ore from Oman and about 5.69 million tons from Iran. The combined shipments from these two countries accounted for roughly 2% of China’s total iron ore imports.

　　In 2025, Oman surpassed India to become China’s largest supplier of iron ore pellets. Oman’s exports of pellets to China reached 6.59 million tons, accounting for 29% of China’s total pellet imports of 23 million tons. Meanwhile, Iran’s pellet shipments to China saw a substantial year-on-year decline, falling 43% in 2025 to 2.2 million tons, compared to 4.03 million tons in 2024.

　　The trade in refined ore is showing a similar trend: In 2025, Oman exported 7.48 million tons of iron ore concentrate to China, a substantial increase of 187% compared to the previous year’s 2.61 million tons. In 2025, Iran exported 3.29 million tons of iron ore concentrate to China, down from 3.86 million tons in 2024—a decrease of 15%.

　　However, market participants have already noted that, as of early Q1 2026, the spot supply of 65% Fe pellets from the Middle East in China’s maritime shipping market is dwindling.

　　The second Xiamen-based trader stated: “Since December 2025, although pellet premiums have remained relatively stable in the Chinese CFR market, quotations for high‑grade pellets from the Middle East have been extremely scarce. The naval blockade could completely sever any remaining direct shipments to the Chinese market, forcing end users to seek alternative sources.”

　　A source at a Hebei steel mill said that the supply crunch caused by the lockdown has yet to translate into stronger premiums for high‑grade pellets, mainly due to ample port inventories and the arrival of competitively priced lump ore.

　　However, the withdrawal of Iranian pellets from the Chinese import market has begun to provide clear upward support for the premium on blast furnace pellets sourced from India, as buyers seek alternative suppliers to fill the gap left by Iran.

　　Indian pellet producers (who typically offer pellets with an iron content ranging from 62% to 64%) have benefited from a marked improvement in inquiry levels from Chinese buyers since the second half of February, as spot bid prices have strengthened amid rising import interest.

　　During the second trading week of March, 62.5% Fe AMNS blast furnace pellets were reportedly traded at a premium of approximately USD 11.50–12.50 per ton, based on the March average price of the 61% Fe index adjusted via VIU, up USD 1–2 per ton from deals concluded at the end of February.

　　A source familiar with India’s ball‑export market noted that inquiry volumes from Chinese counterparties surged in the first week of March. However, given high domestic prices in India and a narrow arbitrage window in China’s CFR market, transactions remain selective.