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Escalating shipping costs hinder polymer demand in China, SE Asia

by Pınar Polat - ppolat@chemorbis.com
  • 16/06/2021 (03:23)
Demand has been limited for polymers in Asia as the resurgence of Covid in Southeast Asia since April and the rise in new infections in China led to various lockdowns and restrictions on a country basis. Adding to Covid-hit demand has been skyrocketing freight costs, which are put under further upward pressure by pandemic-related workforce disruptions at ports and the recent port congestion in China.

Freight costs remain elevated

Shipping freight costs have been rising steadily since November 2020, driven by a faster-than-expected recovery in manufacturing demand, first in China and then across the globe. Container shortage and limited number of vessels are also among the factors squeezing on transportation capacity on every freight route.

Although freight rates were expected to decline following China’s Lunar New Year holiday in February, the temporary closure of the Suez Canal blockage sent costs to new highs for certain routes by mid-April.

Since Yantian International Container Terminals -the world’s fourth-busiest container port- was partially closed for a few days in late May due to tighter restrictions amid an increase in Covid-19 cases in Guangdong, China, global supply chains have been facing longer delivery times and higher freight rates.

Located in southern China, Guangdong is an industrial center hosting production areas for all major downstream industries of petrochemicals.

Chinese and SE Asian players share similar concerns

Following the recent developments, several players have voiced similar concerns about how demand from export outlets was hit.

A source from a Chinese PVC producer said, “Shipping costs are moving higher almost every week, hampering export activities. For distant lines, the cost is as high as $150/ton while it is around $70-80/ton for Southeast Asia.”

“Higher freight rates have hit export demand for many PE end-products manufactured in China. In the face of declining demand, converters have reduced production as well as the purchasing volumes for raw materials,” a PE trader based in China explained.

A Vietnamese converter commented, “The current freight costs from Vietnam to the US have almost doubled compared to late last year. Accordingly, some converters are having hard times exporting. They either prefer to keep their products in the warehouses or reduce production rates to avoid high stocks.”

A Malaysian polyolefin producer also noted, “China is welcoming too much new PP, PE capacities and freight rates are notably higher. Therefore, re-exporters are having difficulty conducting their business.”
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