Rising Steel and Aluminium Prices in Asia: Impact on Manufacturing Prices of HVAC Products Amid the US-Iran War

US-Iran War Consequences

The escalation of the Iran war in early 2026 has triggered widespread disruption across global commodities, with steel and aluminium prices emerging as key pressure points for Asian manufacturing. As conflict-related risks spread through Middle Eastern energy corridors and shipping routes, Asian producers of building products, particularly HVAC equipment and iron‑based sanitaryware, are facing sharply higher input and logistics costs. These increases are now flowing downstream into factory gate prices and, ultimately, construction budgets across the region. According to Posco Group, Asia accounts for over 65% of global steel consumption, making its manufacturing sector extremely sensitive to geopolitical shocks affecting metal supply, energy pricing, and freight availability.

The global aluminium industry plays a vital role in supporting modern manufacturing and infrastructure, serving as a backbone for sectors ranging from construction and transportation to advanced engineering applications such as HVAC systems. As one of the most widely used industrial metals, aluminium’s availability, pricing, and supply chain stability have far‑reaching economic implications. In this context, Aluminium Bahrain (ALBA), the world’s largest aluminium smelter outside China, emerges as a key contributor to global supply, making it particularly sensitive to shifts in geopolitical, economic, and energy landscapes. Recent developments, especially the 2026 Middle East conflict, have underscored how disruptions affecting major producers like ALBA can ripple across international markets, influencing aluminium prices, industrial production costs, and the availability of critical components. Understanding the dynamics of ALBA’s operations alongside broader price determinants provides important insight into how interconnected global supply chains react under stress.

How the Iran War Is Driving Steel and Aluminium Prices Up

Iran has historically been a significant exporter of semi‑finished steel, billets, and iron ore, particularly into South and Southeast Asia. Since the outbreak of war, Iranian steel exports have largely halted, removing huge amount of semi‑finished steel annually from Asian markets.

At the same time, insecurity around the Strait of Hormuz, through which nearly 20% of global trade energy flows, according to the U.S. Energy Information Administration, has sharply increased freight costs and insurance premiums, disproportionately affecting bulk commodities like steel and aluminium.

Steel prices have seen an increase, or at least strong upward pressure, due to the ongoing Iran–US conflict. This is mainly because the conflict has disrupted global energy supplies, particularly oil and gas passing through key routes like the Strait of Hormuz, leading to higher energy costs, an important factor in steel production. Additionally, shipping disruptions, rising freight charges, and higher insurance costs have made the transportation of raw materials and finished steel more expensive. On top of this, damage to Iran’s steel production capacity has reduced supply in the global market, further pushing prices upward. Overall, the combination of increased production costs, supply chain disruptions, and reduced output has contributed to the rise in steel prices

Steel manufacturing is highly energy‑intensive. The Iran war has driven oil and LNG prices higher, increasing the cost of operating blast furnaces and electric arc furnaces across Asia. Indian and Southeast Asian steelmakers, many reliant on imported LNG, have reported fuel shortages, production cuts, and higher per‑ton steel costs since March 2026. As a result, Asian steel prices have shown moderate year‑on‑year increases and remain elevated due to supply disruptions, higher freight costs, and rising input prices. According to trading economics, steel prices were 2.4% higher in 2026 compared to 2025.

Aluminium prices are influenced by a combination of supply‑side disruptions, energy costs, and global demand, making them highly sensitive to geopolitical and economic conditions. Events such as the recent Middle East conflict have demonstrated this clearly: disruptions to production and shipping routes, particularly through the Strait of Hormuz, led Aluminium Bahrain (ALBA) to halt shipments and cut output, tightening global supply. As a result, aluminium prices on the London Metal Exchange surged sharply, with increases of over 5% in a short period and analysts warning of further rises if supply constraints persist. Beyond geopolitical risks, aluminium production is highly energy‑intensive, so fluctuations in fuel and electricity prices also directly impact production costs and, consequently, market prices. On the demand side, industries such as construction, automotive, packaging, and HVAC drive consumption, meaning that strong industrial activity pushes prices upward, while economic slowdowns can reduce demand and ease prices. Overall, aluminium prices reflect a dynamic balance between global supply disruptions, production costs, and industrial demand, often reacting quickly to external shocks.

Impact on HVAC Manufacturing in Asia

HVAC equipment, air conditioners, chillers, ducting, and heat exchangers, relies heavily on carbon steel, galvanised steel, and stainless steel. Raw materials can account for 45–60% of total HVAC manufacturing costs in Asia. With steel prices rising and delivery lead times extending, HVAC manufacturers in China, India, Thailand, and Vietnam are experiencing: Higher sheet metal and tubing costs, increased freight and warehousing expenses and greater working capital needs due to volatile procurement cycles. Industry data from Q2 2026 indicates HVAC factory prices in Asia have risen 6–12%, particularly for steel‑intensive products like commercial air‑handling units and industrial chillers.

Smaller manufacturers lacking long‑term steel contracts are the most exposed, increasingly passing costs onto distributors and construction contractors. This trend risks slowing new commercial real estate and infrastructure HVAC installations, especially in price‑sensitive emerging Asian markets. 

Rising costs of steel, iron, energy, and logistics are significantly influencing pricing strategies across Asia’s building products industry. In response, HVAC manufacturers are increasingly renegotiating contracts with shorter validity periods, exploring alternative steel procurement from China and local suppliers, accelerating initiatives focused on lightweight designs and material efficiency, and transferring a larger portion of cost increases to developers and contractors.

Aluminium Bahrain (ALBA) is widely recognised as the largest aluminium smelter outside China, with an annual production capacity exceeding 1.6 million tonnes, making it a critical player in the global metals supply chain and a cornerstone of Bahrain’s industrial economy. However, recent geopolitical tensions, particularly the 2026 Middle East conflict, have had a significant impact on ALBA’s operations. The company was directly affected when its facilities were targeted in an Iranian attack in March 2026, and it subsequently faced supply chain disruptions due to instability in the Strait of Hormuz, a key global shipping route. These disruptions forced ALBA to shut down nearly 19% of its production capacity and declare force majeure on shipments, halting exports and contributing to global aluminium price volatility. Since aluminium is a vital raw material used across industries, including HVAC (heating, ventilation, and air conditioning) systems, such disruptions have far-reaching implications. In HVAC applications, aluminium is extensively used in components such as heat exchanger coils, fins, ducts, casings, and structural frames due to its lightweight nature, excellent thermal conductivity, corrosion resistance, and ease of fabrication. Therefore, any supply constraints or price increases in aluminium, like those resulting from ALBA’s operational challenges, can directly affect manufacturing costs, lead times, and availability of HVAC equipment worldwide, highlighting the interconnectedness of global industrial supply chains.

The Iran war has evolved from a regional conflict into a systemic shock for global metals and manufacturing economics, with Asia at the epicentre. Rising steel and iron costs, driven by supply disruptions, energy inflation, and logistics uncertainty, are already pushing up HVAC. For manufacturers, the challenge lies in balancing competitiveness with cost recovery. For the construction sector, higher building product prices may translate into project delays and elevated inflationary pressure. Until geopolitical stability returns to the Middle East, steel‑linked building products in Asia will remain on an upward pricing trajectory.

Find out more in our latest edition of Asia Pacific Heating and cooling reports.

Anam Khan

Source: BRG Research

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