Hormuz Tanker Explosions Force Strait Closure, Oil Surges To $88 — China Steel Margins Hit Multi-Year Low - News

Two commercial tankers exploded in a minefield in the southern Strait of Hormuz on July 18, after which Iran's Revolutionary Guard Corps declared the strait "completely closed" to vessel traffic. Oil prices have now rebounded more than 25% from early-July levels to the $88 range. Simultaneously, Chinese steel mill profitability fell to 37.23% - breaking below 40% for the first time in years. This is one of the most pressured weeks the global steel market has faced in 2026. Here is everything buyers need to know.

China's steel billet exports in June reached 2.839 million tonnes - a new all-time monthly record. The surge reflects a deliberate shift in China's export strategy: as finished-product anti-dumping measures accumulate across Japan, South Korea, Turkey, India, the UAE, and Australia, Chinese mills are redirecting volume into semi-finished categories like billet and slab, which currently face far fewer trade remedy actions globally. According to CISA data released July 20, H1 member mill crude steel production totalled 408 million tonnes, down 3.7% year-on-year. Stainless steel exports in the same period fell to 2.06 million tonnes, a sharp 17.6% decline year-on-year - direct evidence that trade barriers are now significantly reshaping China's steel export portfolio.

The 247 mill profitability rate tracked by industry data fell to 37.23% this week, dropping 3.03 percentage points and breaking below the 40% threshold that market participants treat as a key stress indicator. Independent electric arc furnace operators are now averaging a loss of RMB 55 per tonne, with only valley-hour electricity pricing keeping them marginally above breakeven. Daily hot metal output at the 247 surveyed mills fell to 2.392 million tonnes, down 20,600 tonnes from the prior period, as blast furnace maintenance windows expanded and major North China mills cut coke purchase prices ahead of further output reductions. Hot rolled,

cold rolled and

galvanized benchmark prices dipped RMB 10–30 per tonne on July 20, though rebar apparent demand edged 94,700 tonnes higher - a modest but notable positive signal.

Rebar total inventory fell 76,000 tonnes to 6.925 million tonnes this week, marking a turn from accumulation to drawdown after several weeks of build - a genuine marginal improvement. Rebar apparent demand rose to 2.044 million tonnes (+94,700 tonnes). However, the broader five-product social inventory across 35 cities continued to accumulate, rising 127,700 tonnes to 11.69 million tonnes - 25% above year-ago levels. CISA's 21-city social inventory data for early July also shows a 25% year-on-year excess, with rebar social stocks running 37.6% above the same period last year. The single-product rebar improvement is real, but the broader inventory overhang remains a significant constraint on price recovery.

Baosteel's announcement of an August mill-gate price increase provides a counter-signal on the supply side - when China's largest producer raises list prices, it typically anchors spot market sentiment, at least temporarily. The People's Bank of China also injected a net RMB 430.5 billion into the banking system on July 17 as part of its moderately loose monetary policy stance, aimed at expanding domestic demand through counter-cyclical measures.

Promisteel has expanded its product range to include steel shot and steel grit for metal surface preparation and rust removal - available as a one-stop supply package together with steel strips and aluzinc coils. This addition complements our existing flat-rolled and coated product offering for customers requiring integrated surface treatment and coil supply for fabrication and coating operations.

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The Strait of Hormuz situation has moved through several escalating stages in rapid succession over the past ten days, and the trajectory matters for understanding where shipping and energy markets now stand.

On July 7–8, the US revoked Iran's oil sanction waiver general license; Iranian forces fired on three commercial vessels in the strait; and the US announced "forceful strikes" on Iran. On July 13, Trump announced the formal renewal of the naval blockade and the proposed 20% transit fee, while US airstrikes on Iranian targets continued for a third consecutive night. On July 14, the blockade became formally effective; an Emirati oil tanker was struck by an Iranian cruise missile, killing one crew member and injuring eight. By July 16–17, vessel traffic through the strait had dropped to just 8 ships per day - a three-week low - while Brent crude rose above $88 per barrel with a weekly gain exceeding 15%.

The situation reached a new threshold on July 18, when two oil tankers exploded after entering a mined area in the strait's southern passage. Iran's Revolutionary Guard Corps issued a formal declaration that the strait was "completely closed" and advised all vessels to avoid entry. Oil prices, which had been near $68 in early July, have now rebounded more than 25% to the $88 zone. OECD strategic crude inventories are at their lowest level since 2003, and US strategic petroleum reserves are near a 40-year low - meaning global market buffers against further supply disruption are minimal.

For steel buyers: the Strait of Hormuz carries the cargo supply chains of the Gulf's major construction and energy markets. Ports in the UAE, Saudi Arabia, Qatar, Kuwait, and Bahrain all depend on Hormuz for inbound steel coils, pipes, and structural sections.

With the strait now effectively closed and Houthi forces simultaneously blocking the Bab el-Mandeb Strait at the southern end of the Red Sea, ships serving the Gulf face a situation where both primary routing options carry acute risk. Alternative routing via the Cape of Good Hope adds approximately 10–14 days of transit time and meaningfully higher freight and insurance costs on every shipment.

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This week's shipping data reflects the dual nature of the crisis. The SCFI composite index fell 3.28% to 3,080.31 - its second consecutive weekly decline after a 10-week rally, with the US West Coast FAK rate down more than 20% month-on-month from $7,500 to the $5,800–6,000/FEU range as additional capacity eased container market tightness. The SCFI US East Coast lane held at $8,172/FEU, but faces a fresh constraint: the Panama Canal is tightening draft limits to 49 feet from July 24, which analysts project could reduce US East Coast capacity by 20–40% in Q4.

By contrast, the crude oil tanker index (BDTI) surged 12.41% to 2,283, driven directly by the Hormuz escalation and the resulting rerouting of tanker traffic. The BDI composite fell 6.52% to 2,671 - its lowest level since July 2 - led by a 12% plunge in the capesize vessel index (BCI to 3,889), which reflects cooling iron ore demand from Chinese mills rather than the conflict itself.

Port workers at Port Hedland in Western Australia - the world's largest iron ore export terminal - announced a strike on July 16. Global iron ore shipments fell 18.6% week-on-week as a result. Iron ore's 62% CFR China price index edged up 0.55% to $101.3/dmt, as the supply disruption offset the demand-softening signal from Chinese mill production cuts. The 47-port Chinese iron ore inventory drew down 2.613 million tonnes to 170.65 million tonnes, though total stocks remain elevated in absolute terms. For steel production cost modelling, the Hedland strike keeps the cost floor for hot rolled coil and plate supported in the near term even as finished steel demand languishes.

A US legislative proposal currently under review would impose tariffs of up to 100% on imports from countries that trade in Russian energy. China is the primary target. The bill is at the joint-signature review stage and could pass as early as August. If enacted, it would represent an order-of-magnitude escalation beyond existing Section 232 and 301 tariffs, and would effectively cut off virtually all remaining Chinese steel products from the US market. While the timeline and final scope remain uncertain, buyers with US-destination requirements who currently source Chinese material should be modelling this scenario.

Two additional trade policy milestones took effect this week. Japan formally implemented provisional anti-dumping duties on Chinese stainless steel cold-rolled sheet from July 9, with rates ranging from 3.86% to 45% for Chinese origin and up to 21% for Taiwanese origin - a meaningful escalation for the Chinese stainless export sector, consistent with the 17.6% H1 stainless export decline data above. Separately, India announced on July 6 an extension of existing anti-dumping duties on Chinese seamless steel pipes and hollow sections through January 27, 2027, maintaining pressure on a product category where Chinese pipe and tube exporters had been seeking market access recovery.

The week's bull/bear balance is unusually weighted to the bear side, but supply-side cuts are building a cost floor. On the bullish side: accelerating blast furnace maintenance, the Hedland strike, the rebar inventory turn, and Baosteel's August price hike all support the downside. On the bearish side: mill profitability at 37.23% with EAF losses widening, five-product inventory 25% above year-ago levels, construction activity at a seasonal trough, fixed-asset investment down 5.7% in H1 with real estate investment -18%, and the Hormuz crisis driving up energy and logistics costs simultaneously. The consensus view among market participants is price range-bound with a slight downside bias in the near term, with the key variables to watch being the pace of mill maintenance expansion, any further Hormuz escalation, and the trajectory of late-July tariff policy.

For the complete data package - China domestic spot and futures prices, FOB export quotes for HRC, CRC, HDG and coated products, iron ore and coke benchmarks, the full freight index table (SCFI, CCFI, BDI, BDTI by route), and the complete anti-dumping and safeguard case tracker - download Promisteel's Weekly Steel Industry Report (Jul 14–20, 2026), our comprehensive data briefing covering every major market variable in a single document.

At Promisteel, we track these geopolitical, logistics, and pricing developments in real time so our customers can make sourcing decisions based on the complete picture. Whether the Hormuz closure adds weeks to your delivery timeline, rising oil prices shift your cost structure, or evolving tariff proposals change your origin-country strategy, we work with you to identify the right product, routing, and lead-time solution.

Our core product range covers steel coils, sheets, pipes, tubes, structural profiles, galvanized/coated materials, and steel shot/grit, with tailored solutions for construction, manufacturing, energy, and industrial equipment sectors worldwide.

We publish weekly market updates to keep your sourcing decisions grounded in current data. If you need a quote or want to discuss how this week's developments affect your supply chain, reach out directly - our team responds quickly with professional, data-backed guidance.