FocusAsia-Europe shipping lead times rise by 3-4 weeks in 2010

15 March 2010 16:23  [Source: ICIS news]

LONDON (ICIS news)--Shipping lead times from Asia to Europe have increased by up to four weeks since the start of the year due to low availability and ships travelling at reduced speeds, sources across multiple chemical markets said on Monday.

Increased lead times for imported materials from Asia to Europe have been reported by sources in the polycarbonate (PC), flake maleic anhydride (MA), flake phthalic anhydride (PA), high-density polyethylene (HDPE) pipe resin, caustic soda, isopropanol (IPA), methyl ethyl ketone (MEK), methyl isobutyl ketone (MIBK), titanium dioxide (TiO2), diethylene glycol (DEG) and adipic acid (ADA) markets.

“There are long lead times on dry goods,” a polycarbonate distributor said. “Vessels from the Far East are extremely tight. Shipping is taking longer - an extra three-to-four weeks since the start of the year.”

Longer delivery times for imported material and uncertainty over when deliveries would arrive was leading to problems with supply, buyers and sellers said.

“It creates shortages because no product is arriving [in Europe],” a major petrochemical producer said. “On the other hand, it can cause [multiple] ships to arrive at once, leading to oversupply.”

This was particularly significant in tight markets such as flake MA and PA, MIBK, and PC, buyers and sellers said.

“The delays mean that no product is coming from Europe, and so there is no relief from supply constraints,” the major petrochemical producer said.

A major European chemical buyer said: “It’s a problem - you can never rely on these things to arrive just in time.”

The longer shipping times were attributed by sources to several factors, including low availability of vessels and ships reducing speeds of travel.

Low availability was the result of the economic downturn in 2008 and 2009, which had squeezed shippers’ profit margins and forced them to idle ships, buyers and sellers said.

“It’s because at the start of 2008 a lot of vessels were put out of service. Especially medium-sized vessels. Now volumes are increasing again so the market is tight. More than 40 vessels are not operating,” a chemical trader said.

The low availability of ships was also causing last-minute delays, making importing material unreliable, buyers and sellers said.

“It’s difficult to get shipping in time. Shipping lines are impolite. At the last minute suppliers say they’re overbooked and can’t take your containers for another 10 days,” a polycarbonate buyer said.

Reduced speeds were also the result of squeezed margins, as shippers seek to save on fuel costs, sources said.

“We heard that ships are optimising engines. Apparently even at 10% lower speeds, they can save 50% on fuel costs,” an MA producer said.

At the same time, dry goods freight rates were increasing due to strong demand, buyers and sellers said. Most sources reported a minimum rise of $30/tonne in the cost of shipments from Asia to Europe in the last month. Prices were regularly heard at $90-150/tonne, depending on the chemical.

Long lead times were not the only reason for imports not entering Europe, but were an important factor, buyers and sellers said. The strong US dollar against the euro was making import prices unattractive to European buyers, they added.

($1 = €0.73)

Additional reporting: by James Mills, Julia Meehan, Caroline Murray, Jane Massingham, Nel Weddle, Stephanie Wilson, Amandeep Parmar, Chow Bee Lin and Simon Robinson.

For more on MA, PA, HDPE, Caustic Soda, IPA, MEK, MIBK, TiO2, DEG and ADA, visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Mark Victory
+44 208 652 3214

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