Direct Impact Of Red Sea Crisis On China’s Iron Ore And Steel Trade Is Minimal, But Indirect Influence Deserves Attention

Specifically, from the perspective of shipping routes, China’s main iron ore suppliers were Australia and Brazil. The largest export destination for China's steel was the Asian market, accounting for as much as 70% of the total exports, followed by Africa and South America. None of the mainstream routes for ore and steel transportation involved the Suez Canal. Regardless of routes or ship types, the impact of the obstruction of Red Sea transportation on iron ore and steel was relatively small. However, according to professional estimates, avoiding the Red Sea route and detouring around the Cape of Good Hope indicated that transportation time will increase by at least 10 days and transportation costs will hiked by at least 15%.

In a word, the Red Sea crisis will add global shipping costs and indirectly increase China's steel costs, denting market sentiment in a short term. In the mid-to-long term, the obstruction of freight transportation in Europe and the US will also raise their price, casting certain uncertainty over local interest rate cuts.