Supply concerns mounting in Europe on transportation, logistics issues

A rail line in southern Germany was closed at the end of August due to a construction work near Karlsruhe, which has caused shipment disruptions, force majeure declarations to Italy and Switzerland and rising transportation fees in the industry. This has been followed by the recent nationwide strikes in France including the railway transportation, exacerbating the supply concerns in place.

A landslide occurred on part of the Rastatt tunnel by the first half of August and railway tracks above the tunnel consequently warped. As the Karlsruhe-Basel railway line is part of the important north-south corridor connecting the ports of Rotterdam, Hamburg and Antwerp with Switzerland and Italy, freight traffic needed to be shifted from rail either to road or inland shipping.

Major chemical sites owned by BASF, Evonik, Covestro, Lanxess and Ineos are connected to this railway. Deutsche Bahn and the Rastatt tunnel consortium announced that the railway will remain offline until October 7.

The impact of the incident has been more visible particularly in the PS, ABS and PE markets in Southern Europe, triggering woes about supply deliveries and some suppliers lifted their prices in the wake of disruptions.

Ineos Styrolution declared a force majeure on its ABS, PS deliveries to Switzerland and Italy on September 15 due to this reason.

An agent of the producer mentioned, “Disrupted transportation from Germany to Italy caused our supplier to declare force majeure on its deliveries. It also resulted in delays in South Europe given the fact that German players are using more trucks as alternative. We hope transportation will be smoother starting from early October.”

Another factor that reinforced delivery challenges was a nationwide strike in France against the changes in the labor law. Combined with the railway issues, this situation forced Total to extend force majeure on styrene output from its Gonfreville unit, although this was not directly confirmed by the company. Total had declared force majeure on styrene supplies by late August due to a technical issue before resuming production in mid-September. A PS trader reported, “The three-day transportation strike in France caused postponed deliveries. Overall logistics issues may offset weaker October expectations stemming from falling styrene costs during September.”

On September 20, Synbra also declared force majeure on its EPS deliveries to Italy and Switzerland blaming the ongoing rail transportation issues in Europe. Buyers in the region affirmed experiencing difficulties while securing supplies for September due to cancelled deliveries.

A manufacturer from Italy’s insulation industry stated, “EPS supply is limited since some West European suppliers closed their book orders for October already. The railway suspension contributed to limited EPS shipments from Germany, which might offset lower styrene prices for this product.”

A PE buyer in Switzerland, meanwhile, reported, “Import cargoes have been limited so far this month. We are also facing problems in deliveries from Germany amidst the disruption of the railways and missing trucks.”

On the other hand, there are also some players who argue that these disruptions in deliveries stemming from the transportation and logistics issues are temporary, and they will have a minor impact on October pricing.