HOUSTON (ICIS)–A
continued shortage of shipping containers
in Asia is putting upward pressure on freight
costs – where some importers are paying three
times more than normal – and delaying delivery
times as securing space to ship goods has
become more difficult.
“It is the perfect storm,” said a plastic resin
distributor based in Canada who has never seen
freight costs spike like this. “This pandemic
has awakened a new sense of domestic
self-sufficiency with respect to your supply
chain.”
Most chemicals are liquids and are moved in
chemical tankers. But container ships move
polymers, such as polyethylene (PE) and
polypropylene (PP), which is shipped in
pellets.
The outbreak of the coronavirus, and efforts to
stop the spread, have disrupted normal trade
patterns in part because of the uneven way the
virus moved across the globe.
China’s economy has rebounded after being among
the first to restart following mitigation
efforts, and the country’s exports have soared.
But lockdown measures in other regions have
contributed to delays in containers returning
to Asia.
Polymer importers said this week that spot
container freight rates have risen to around
$5,000-5,500/container. In addition, shippers
need to pay around $1,000-1,500/container to
guarantee vessel space, putting effective
container rates at around $7,000/container.
This equates to freight costs of about
$200-300/tonne, almost three times higher than
the typical costs of $70-100/tonne.
The change in trade flows and global demand for
containers is also impacting other regions,
such as Africa and India, where exporters are
seeing shortages because shippers out of
Europe, the US and the Middle East want to push
as many containers as possible to Asia.
Polyvinyl chloride (PVC) importers said they
are also seeing spikes in freight costs.
“The ocean freight from Asia to USA has gone up
sharply. The rate is more than triple from the
previous normal price level,” a participant in
the PVC market said.
But the shortage of shipping containers in Asia
is keeping prices and availability of PVC
muted.
Asia now has the lowest export prices in the
world and lowest netbacks for PVC producers
because they must keep prices lower than other
regions in order to compete for business in
Latin America and other regions because of the
high shipping prices.
Some market participants in the Asia PVC market
have noted that the unprecedented combination
of market tightness and volatile freight costs
are the main factors pressuring market
discussions, rather than a zealous recovery in
demand.
Also creating headwinds for the chemical resin
market is that shippers view resins as a
low-priority cargo, meaning that resin
shipments are often cancelled to make room for
more valuable material.
Container ships also carry a wider scope of
cargoes, including consumer products like
electrical appliances and automobiles, so
demand for that space has risen as economies
reopened after lockdown measures because of the
pandemic.
The Canadian plastic resin distributor said it
is not just seeing higher rates from China, but
also from Taiwan, Vietnam, South Korea and
Singapore to US and Canadian ports on both
coasts.
“We used to pay between $2,200-$2,800 a
container and now it is $5,600 or more and it
doesn’t seem to be abating,” the distributor
said.
A market participant said it is also seeing
significant delays at port terminals and at
rail terminals in getting containers discharged
or onto the rail lines to transport to its
destination.
“We have experienced up to three weeks of rail
terminal wait time to get a container
positioned onto the rail, contributing to
serious adjustments in inventory management and
costs,” the participant said.
Focus story by Adam Yanelli
Additional reporting by Zachary Moore, Luly
Stephens, Bill Bowen and Jonathan Chou
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Photo: Stacks of containers at a container
terminal (Image credit: Imagine
China/Shutterstock)
