Ongoing attacks on vessels within the Red Sea by Yemen’s Houthis proceed to disrupt shipping lanes within the chemical industry’s supply chain, based on Al Greenwood, chemicals expert and deputy editor at ICIS.
“It’s having an impact mainly in Europe and Asia. It’s rearranging routes since the rates for containers have really passed through the roof,” Greenwood told FreightWaves in an interview.
ICIS is a London-based provider of chemical and energy intelligence with 15 offices worldwide.
Greenwood said the Houthis are creating significant supply chain disruptions for chemical corporations and governments.
“The chemical industry uses containers to ship plastics similar to polyethylene and polypropylene that are in pellets, put it in bags and ship it out. A few of the liquids are shipped in ISO tanks,” said Greenwood, who relies in ICIS’ Houston office. “We’ve seen for container ships and tankers a mixture of upper rates, port congestion, vessels having to take longer routes — it’s causing all types of delays.”
Polyethylene is a plastic utilized in the whole lot from garbage and grocery bags to insulation for wires and cables to agricultural mulch, in addition to bottles, toys, housewares and even knee joints. Polypropylene is a polymer utilized in pallets, bottles, jars, containers, cups and food packaging.
About 15% of the world’s ocean carrier traffic normally goes through the Red Sea, based on the International Monetary Fund. But now ships between Europe and Asia are as a substitute going across the Cape of Good Hope on the southern tip of Africa, which might add anywhere from 10 days to a month of travel time in comparison with the Red Sea/Suez Canal route.
Rates for 40-foot containers from Asia to North Europe are at $8,764.14, based on the Freightos Baltic Day by day Index, which measures the worth movements of 40-foot containers in 12 major maritime lanes.
Related: Red Sea attacks reveal supply chain fragility
While the US chemical supply chain is somewhat insulated from the disruptions within the Red Sea, Greenwood said the U.S. remains to be being impacted by the Houthi attacks.
Rates for 40-foot containers from Asia to North America West are currently at $7,993.11.
“Here in the US, our principal waterway conduit is the Panama Canal. We’re not as exposed to the Red Sea disruptions as Europe,” Greenwood said. “But shipping is a worldwide market. The US does export quite a lot of polyethylene, quite a lot of polyvinyl chloride. Those are bagged and pelletized, shipped in container ships. Well, those shippers are having to pay those higher rates as well, they usually’re not joyful about it.”
China is the world’s largest chemical producer
China is the world’s leading exporter of chemicals, accounting for $141.3 billion (18%) of world chemical exports in 2023, based on Tendata, a world trade data consulting agency.
The US was the No. 2 global exporter of chemicals last yr, accounting for $67.9 billion (8.8%) of world exports. The U.S. was the most important importer of chemicals in 2023, importing $324 billion, or 13.6%, of the overall, based on TradeImeX.
Greenwood said rising freight rates, shipping delays and cancellations of shipments are causing containers filled with chemicals to pile up in some Asian countries and ports.
“In India chemical buys for biphenyl are at a 20-month high due to tight vessel space and rising shipping costs. Melamine corporations in China are on a wait-and-see mode because of upper freight rates. Polypropylene from South Korea, there’s been recent cancellations on a few of the shipments to Europe. For Asian polyester exports, the sentiment is just awful due to the high costs and poor margins,” Greenwood said.
The prolonged and costlier shipping routes around Africa to avoid the Red Sea will likely proceed through the remainder of the yr, Greenwood said. The outcomes will proceed to ripple through the worldwide supply chain and be increasingly felt by regular consumers in the shape of upper prices and fewer availability of certain products.
“We’re seeing chemical buyers take some measures to attempt to remediate or make one of the best of this case. There’s been a rise in demand for breakbulk vessels from Turkish, European and Indian buyers,” Greenwood said. “The buyers are getting the brunt of this. That’s why in Europe, they’re turning to domestic suppliers for chemical production. That’s why they’re exploring breakbulk vessels due to the shortage of container ships.”
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