Red sea crisis, utility prices push steel prices up by Rs3,000 per ton

January 08, 2024 (MLN): The steel rebar prices in the country have surged by up to Rs3,000 per ton owing to supply chain disruptions amid Red Sea crisis coupled with a domestic rise in utility prices.

Following the rate hike, the retail prices for steel rebar stand within a range of Rs263,000 per ton to Rs268,000 per ton.

Moreover, producers are passing on the increased production costs to consumers.

Red Sea Crisis

A wave of missile and drone strikes on ships plying the Red Sea has caused the biggest disruption to global trade since the pandemic, as per Bloomberg.

Bloomberg has reported that these attacks are the work of Yemen’s Iran-backed Houthi militants.

They say they are targeting vessels with links to Israel to protest against its military campaign in the Gaza Strip, though ships with no direct connection to Israel have also been affected.

A US-led force has redoubled naval patrols and thwarted some of the attacks.

But as of early January, with little sign that the Houthis were backing off, shipping companies were rerouting much of the Red Sea’s normal container traffic around the southern tip of Africa, a lengthier and costlier journey.

Impact

Half of the container-ship fleet that regularly transits the Red Sea and Suez Canal was avoiding the route because of the threat of attacks as of late December, according to Bloomberg quoting a tally compiled by Flexport Inc.

The diverted journeys around Africa can take as much as 25% longer than using the Suez Canal shortcut between Asia and Europe, according to Flexport.

Those trips are more costly and may lead to higher prices for consumers on everything from sneakers to food to oil if the longer journeys persist.

There were concerns that energy flows could be disrupted at a time when Europe increasingly depends on tanker-borne gas to replace once-crucial Russian pipeline gas, though so far the impact has been minimal.

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