Global polymer markets face soaring freights amid pent-up demand

Cost of shipping goods has rallied worldwide and lent support to rising polymer markets across the board. The main driver behind surging freight rates is a lack of containers and vessels particularly in Asia.

Polymer demand in China and some other regions resumed following the virus-induced lockdowns back in late Q2. This has recently coupled with an active pre-Christmas trading and added to the situation.

“We are trying to deliver our PP and PE cargos to China via railway amid difficulties in finding available vessels and containers.”
A Global Polyolefin Producer

Reasons behind the escalation

The factors behind rapid freight hikes are as follows:

· Robust activity ahead of year-end holidays

· Falling number of deep-sea vessels

· Equipment issues and pandemic impact

According to MTS Izmir, freight rates from Asia to Europe, Mediterranean and the Gulf Coast recorded sharp increases during autumn amid equipment problems and the impact of the COVID-19 pandemic.

Trading activity in several markets has been brisk since the last quarter of a pandemic-hit year kicked off with pent-up demand. Pre-holiday activity ahead of Christmas and New Year holidays coupled with fears of a disruption in transportation due to a 2nd wave of outbreak buoyed imports and exports.

“The industry has witnessed a growing consolidation of major shipping companies in the recent years as a way to combat economic challenges. Some shipping lines started to share vessels in sync with mergers which idled many vessels and lowered the number of lines,” commented MTS Izmir.

Shortage of containers fueled freight hikes

China came out of the woods once it brought the outbreak under control in the second quarter of the year, while the country’s economy has enjoyed a solid improvement since then. A pent-up demand following the re-opening of factories coupled with government subsidies led to increased imports and exports.

This was also mirrored by the Chinese economy, where manufacturing output rose in October for the 7th month in a row.

“Freight forwarders directed empty containers to Asia which resulted in a lack of containers elsewhere. Many lines are operating once in 15 days or more instead of a week, which pushed freights up from the end of third quarter,” opined players.

Sizeable freight increases from Asia to the US, India as well as western and Mediterranean countries led to unprecedentedly higher transportation costs for global polymer sellers.

Fewer vessels added to limitations for polyolefins, PVC in Asia

Overseas PP sellers have recently preferred to direct their cargos to Southeast Asia citing more favorable netbacks, which led to fewer import cargos on ports, a China-based trader commented. “Sellers are sticking to their bullish pricings due to surging freights,” he further noted.

A Taiwanese major issued larger PVC hikes to India when compared to China for December earlier this week. This was not only attributed to a brighter demand in India but was also interpreted as a reflection of surging shipping costs from Taiwan to India.

Turkish players expect South Korean PE producers to seek additional increases in December. “Firmer ethylene prices and expensive transportation may pay a way for hike requests considering unplanned output cuts at LG Chem,” a buyer admitted.

Higher freights lifted PET markets of Turkey, Egypt

According to PET suppliers in Turkey, a lack of container availability paved the way for steep hikes in freights and delivery disruptions both for feedstocks and downstream PET.

“Better demand for home textiles and carpets coupled with rising freights were apparently reflected on polyester prices,” a textile manufacturer agreed. “Malaysian and Indian suppliers have no availability. We expect disruptions to continue until after the Chinese New Year holiday,” a trader opined.

Similarly, import PET bottle offers in Egypt reached an 8-month high this week with players blaming higher shipping costs. “This also encouraged the domestic producer EIPET to raise its offers,” said a buyer.

Firmer PET offers in Mediterranean markets remained indifferent to the seasonally low demand for certain end applications as this was offset by higher freight rates.

Climbing rates also played a role in hikes for styrenics in Turkey

PS and ABS prices from South Korea are expected to retain their strength in Turkey on the heels of higher freights and reduced supplies.

EPS prices extended their increases to the second month in a row as November offers posted up to 3-digit increases. Traders pointed to short supplies and visibly higher freights from Europe to Turkey as the main drivers behind the recent round of hikes for carbon black grade, particularly.

“Not only higher styrene prices across the board but also higher shipping costs resulted in quite short exports from European EPS producers,” a Turkish player affirmed to ChemOrbis.