SMU Community Chat: Posner warns steel sector to brace for logistics shockwaves

Posner is well-positioned to address such topics because Mercury Resources specializes in global supply chain management for commodities. The company’s end-to-end solutions include everything from warehousing to ocean freight, as well as inland barge, rail, and trucking services.

He opened the Chat with news of the most urgent development: the overnight seizure of a vessel anchored off Fujairah. “This looks like it was potentially a targeted capture of a ship that was directly engaged in security operations going through the Strait of Hormuz,” he said. The incident highlights a deteriorating security environment that is already disrupting metals flows out of the Gulf.

Aluminum supply routes re-routing

Aluminum producers in Bahrain, Saudi Arabia, and the UAE are struggling to move metal out of the Gulf – and to bring raw materials in.

Posner described a workaround that illustrates the scale of disruption: “We’re seeing Gulf aluminum producers bringing Cape-size vessels of bauxite into India… then moving into mini-bulkers to move to Oman… to avoid the Strait of Hormuz.”

The cost implications are severe. With a large share of global aluminum production effectively constrained, US Midwest premiums have surged enough to pull Canadian aluminum back into the US market despite tariffs. Posner noted that “Canadian aluminum coming from Quebec [is] starting up again,” adding that the premium strength has “overtaken the basic interference from the tariff situation.”

Ocean freight is ‘on fire’

Freight inflation is hitting every mode of transportation. “The ocean freight market is on fire,” Posner remarked.

Cape-size vessel rates have jumped into the $50,000-$70,000 per day range. Fertilizer cargoes that moved at $15/ton in December were $30+/ton by March-April. Fuel surcharges on inland barge freight are running 30-40%. Trucking and rail are seeing parallel diesel-driven increases.

Posner put it bluntly: “Our clients are needing to make significant adjustments in their pricing… very thin margins are being severely impacted.”

Panama Canal

Energy exporters are outbidding metals shippers for transit slots in the Panama Canal, according to Posner. LNG and crude cargoes are paying premium auction rates that steel cannot match, pushing steel-bearing vessels into multi-day delays. Lock repairs scheduled for June will further reduce daily transits.

For steel importers expecting late-summer arrivals, he estimated “a couple of extra weeks… not devastating, but more time financing the commodity and more time explaining delays to customers.”

Fuel availability improving

Early fears of bunker fuel shortages in Singapore have eased, but only because buyers are paying up. “If you’re willing to pay for it, you can get it,” Posner said. The concern now is cost, not access.

Chinese vessel fees

Asked about potential US increases in port fees for Chinese-flagged vessels, Posner said the issue has “gotten quiet” and that Washington has little appetite to add more cost pressure on consumers right now.

Takeaway for steel buyers

Posner offered his final thoughts: to build flexibility into contracts and pricing. With geopolitical risk driving unpredictable cost spikes, he urged producers, traders, and service centers to renegotiate terms that allow for fuel- and freight-linked adjustments.

“We’re dealing with a situation that is completely out of the control of just about anyone involved in the transaction,” he noted.

If anything, predictability is off the table for now. “It seems like we’re in for a wild, wild ride,” Posner said.