Asia Petrochemicals Trade Faces Shipping Woes, Spiralling Freight Costs

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Asia’s petrochemical trade faces grave logistics challenges preventing regional producers from taking full advantage of strong demand in the west. Ocean freight rates continue to soar due to a global shortage of vessels and congestions at major ports. As of 10 September, freight rates from China for a 40-foor container to the US east coast now top US$ 22,000, while those to northern Europe were at more than US$ 14,000, according to online freight shipping platform Freightos. Prior to the pandemic, freight rates were below US$ 3,000 on these routes.

In the monoethylene glycol (MEG) market, around 10,000 tonnes of Asian September-loading cargoes were sold to Europe because of delayed shipments from the US caused by Hurricane Ida. In the recycled polyethylene terephthalate (R-PET) market, Asian producers could not move sold cargoes to deep-sea customers and have had to store these volumes in their storage spaces, causing further logistics constraints.

One Thai producer has been attempting to move its R-PET pellets from Thailand to their factories in Indonesia and Europe but was unable to do so due to high costs of freights. “It just doesn’t make sense right now to pay so high freight rates and expensive container space, so we opted to keep the volumes in Thailand,” a company source said. For a Taiwanese producer, most of its customers have also opted to delay shipping of purchased R-PET cargoes.

For ethylene, cargo backlogs and tight restrictions at selected Chinese ports will continue to hamper exports into October. A growing shortage of river pilots due to quarantine requirements has led to longer wait time of around a week to 10 days for vessels delivering cargoes to plants located on the Yangtze River. It is estimated that only seven foreign vessels can enter the major waterway each day based on the limited number of pilots.

“The shortage of raw material at China plants, shortage of vessels may mean delays for weeks,” said a southeast Asia-based market source, adding that all these are exerting upward pressure on Chinese domestic prices. In the Asian purified terephthalic acid (PTA) market, importers are increasingly opting for shipments via breakbulk, a method typically employed by buyers in Turkey, the Middle East, Pakistan and India.

Instead of being placed in shipping containers, the breakbulk method will transport the cargo in smaller portions in bags, boxes, crates, drums, barrels, among others. Importing via the break bulk method has its own challenges, with the buyers facing the possibility of demurrage costs, and the risk of product contamination by moisture, or the breakage of jumbo bags that the PTA are stored in.

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