Polypropylene (PP)

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. The thing about petrochemicals is that events in our industry reflect what’s happening in every manufacturing chain and in the broader economy, as we supply indispensable raw materials. China's exports of electric vehicles (but also traditional fossil-fuel motors) and solar panels have soared. This has occurred as local capacity has also soared – and as manufacturing operating rates in general have declined to record lows on weak domestic demand. China’s polypropylene (PP) exports jumped by 96% in Q1 this year over the first quarter of 2023 to 619,367 tonnes. If the same export momentum was maintained throughout 2024, this year’s total exports would reach 2.5m tonnes compared with 1.3m tonnes in 2023. The early ICIS data for 2024 suggests that this year’s PP operating rate in China will be just 75% compared with the 1992-2023 average of 87% – during the Petrochemicals Supercycle. In 1992-2023, China’s PP capacity as a percentage of demand averaged 79%. This looks set to rise to 140% in 2024-2030. Growing trade tensions – recently underlined by US Treasury Secretary Janet Yellen’s comment that China’s capacity in new green industries was “too big” for the world to absorb – tell us this: China will struggle to grow exports by enough to maintain GDP growth at 4-5% per year. Increasing domestic consumption to achieve the same end also seems very difficult because of the end of the real estate bubble, an ageing population and the just-mentioned trade tensions. “Only 37% of China’s national income is spent by Chinese households on goods and services. That level is lower than anywhere else in the world—except for a few small tax havens and commodity hyper-exporters when prices are high,” wrote Mathew Klein on his The Overshoot blog. Early data for this year suggest that China’s PP demand growth in 2024 will be 2%. Growth in 2023 appears to have been flat. This suggests that demand growth has entered a New Normal of 1-3% per year versus the 1992-2021 Petrochemical Supercycle average of 12%. The China CFR PP price spread between CFR Japan naphtha costs has averaged just $203/tonne so far this year, the lowest since our price assessments for the above three grades began in 2003. I keep reflecting-back on Gillian Tett’s masterful Fool’s Gold, her account of the Global Financial Crisis. In the book, she details how too few bankers, politicians, regulators and financial analysts were able to take a helicopter view of events that led up to 2008 because they were trapped in “silos” of specialist knowledge. This meant that the problems with mortgage-backed securities were largely missed. So I believe has been the case with the events in and surrounding China. Experts in PP and other petrochemicals were good at building plants and in sales and marketing, but not so good at seeing connections between China’s demographics, its property bubble, its relatively weak domestic consumption and the shift in its relationship with the West. Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.

30-Apr-2024

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 26 April. NEWS Mexico's potential ADDs on China plastics no panacea amid wider stiff competition – Alpek CEO Mexico’s potential antidumping duties (ADDs) on several China-produced plastics will not by itself bring the Mexican market back to balance as “stiff competition” is coming from many other fronts as well, the CEO at chemicals producer Alpek said on Wednesday. INSIGHT: Latin America’s nascent EV market increasingly a Chinese affair Latin America’s take-up of electric vehicles (EVs) has started to gain momentum, said the International Energy Agency (IEA) this week, with Chinese producers drawing customers with sharply lower prices than western, established brands. Mexico’s Alpek Q1 earnings fall but volumes up on shy demand recovery Alpek’s first-quarter earnings and sales fell year on year but improved quarterly on a slight demand recovery, particularly for polyesters, the Mexican chemicals producer said on Tuesday. PRICING LatAm PP domestic prices drop in Argentina on poor demand Domestic polypropylene (PP) prices dropped in Argentina this week. Despite producer prices being unchanged, local distributors have lowered prices due to poor demand. Market participants have reported a 40-60% drop in sales in the past few weeks. LatAm PE domestic prices down in Argentina on sluggish demand After more than a year, domestic polyethylene (PE) prices in Argentina were assessed lower due to sluggish demand. Argentina January PE imports down 32% month on month Argentina polyethylene (PE) imports decreased by 32% month on month in January, totaling 19,106 tonnes, according to the latest figures from the ICIS Supply & Demand database.

29-Apr-2024

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 26 April 2024. Thailand's SCG Q1 net profit slumps 85%; eyes better H2 conditions By Nurluqman Suratman 26-Apr-24 12:45 SINGAPORE (ICIS)–Siam Cement Group (SCG) posted an 85% year-on-year decline in Q1 net profit on losses from chemicals operations, but the Thai conglomerate expects the segment’s earnings to recover in H2 on improved olefins demand and expected restart of its Vietnam petrochemical complex. China VAM exports jump; shipments to India surge in Q2 By Hwee Hwee Tan 25-Apr-24 13:42 SINGAPORE (ICIS)–China's vinyl acetate monomer (VAM) spot offers have tumbled, boosting buying interest in its outbound cargoes, and lifting its exports to India to a multi-month high into the second quarter. SE Asia PE May offers mostly rangebound; demand still weak By Izham Ahmad 24-Apr-24 14:09 SINGAPORE (ICIS)–Initial spot import offers for May shipments of polyethylene (PE) in southeast Asia were announced mostly rangebound so far in the week, while buying interest remained under pressure near recent lows. Saudi Aramco eyes stake in Hengli Petrochemical; prowls for more China investments By Fanny Zhang 23-Apr-24 14:13 SINGAPORE (ICIS)–Saudi Aramco continues its quest for downstream petrochemical investments in the world’s second-biggest economy, adding Hengli Petrochemical in a list of target companies in which the global energy giant intends to acquire a strategic stake. PODCAST: Production constraints keep Asian BD spot trades buoyant in Q1, demand outlook mixed By Damini Dabholkar 22-Apr-24 17:35 SINGAPORE (ICIS)–Persistent production constraints have driven Asia’s spot prices for butadiene (BD) to near two-year-high levels, but how the rally goes from here may hinge on downstream demand conditions. CHINAPLAS ’24: PODCAST: China PP exports strong, imports weak in Q1 By Sijia Li 22-Apr-24 16:23 SINGAPORE (ICIS)–ICIS analyst Sijia Li and senior industry analyst Joanne Wang discuss developments in China's polyolefins market.

29-Apr-2024

HOUSTON (ICIS)–Global shipping container rates are starting to moderate, the Panama Canal expects to increase transits in May, and liquid chemical tanker spot rates are mixed, highlighting this week’s logistics roundup. CONTAINER RATES Global shipping container rates are plateauing as shipowners have implemented blank sailings to control capacity and as some carriers have announced general rate increases (GRIs). Freight forwarder Flexport said in an update on 25 April that GRIs announced for ex-Asia westbound routes are expected to stick amid high utilization from carriers. Flexport noted three factors that supported the increases – a slight increase in demand because of the May labor holiday in China; reduced capacity from the increase in blank sailings; and increased congestion at ports and equipment challenges from certain carriers. Participants in the US polyethylene terephthalate (PET) told ICIS they are seeing higher freight costs as shipping in the Red Sea and now the Strait of Hormuz continues to be disrupted. Rate increases have also been announced for cargo heading to the Middle East region. Global container shipping major Mediterranean Shipping Company (MSC) announced $200/TEU (20-foot equivalent unit) effective 17 May for all cargo leaving the US and Puerto Rico going to the Middle East. Global container rates from supply chain advisors Drewry were flat this week, as shown in the following chart. Rates from North China to the US Gulf also held steady, although at levels higher than were seen in December before the attacks on commercial vessels in the Red Sea, as shown in this chart from ocean and freight rate analytics firm Xeneta. Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), which are shipped in pellets. They also transport liquid chemicals in isotanks. LIQUID CHEM TANKERS US chemical tanker freight rates assessed by ICIS were mixed this week with rates rising for parcels from the US Gulf (USG) to Brazil and India. However, rates from the USG to ARA decreased and all other trade lanes held steady. From the USG to Brazil, this trade lane has had limited availability for H1 May loading. However, mid and H2 May have showed a few more options with an outsider on berth currently to South America. This could place downward pressure on this route. Although COA nominations are still up in the air, a few regular owners hope to have more space and a broker says that time will tell when this space fills up. From the USG to Asia, regular players have said they are full on most of their positions through this time, which has placed some upward pressure on smaller parcels as it has become harder to find space for them. Currently, the USG to Asia market appears to be in a fragile balance between the interest in larger slugs, and the growing number of players looking for stainless steel vessels in the USG for May, according to a broker. BALTIMORE BRIDGE The Unified Command (UC) announced the opening of a new channel at the Port of Baltimore that has allowed ships trapped inside the port to leave. The Fort McHenry Limited Access Channel, which runs the length of the northeast side of the federal channel, provides additional access to commercially essential traffic. The limited access deep draft channel has a controlling depth of a minimum of 35 feet, a 300-foot horizontal clearance, and a vertical clearance of 214 feet. Starting Monday, April 29, operations to remove the Dali will require suspension of transits through the Fort McHenry Limited Access Channel. Once deemed safe, the channel will reopen for commercial traffic. PANAMA CANAL The Panama Canal Authority (PCA) will increase the number of slots available for Panamax vessels to transit the waterway beginning 16 May and will add another slot for Neopanamax vessels on 1 June based on the present and projected water levels in Gatun Lake. The PCA began limiting the number of transits in August 2023 because of low water levels in Gatun Lake brought on by a severe drought that made 2023 the second driest year on record for the Panama Canal watershed catchment area. Wait times for non-booked vessels ready for transit edged lower for northbound vessels and rose for southbound vessels this week, according to the Panama Canal Authority (PCA) vessel tracker and as shown in the following image. Wait times a week ago were 3.0 days for northbound traffic and 2.9 for southbound traffic. The Panama Canal Authority (PCA) said current forecasts indicate that steady rainfall will arrive later this month and continue during the rainy season, which would allow the PCA to gradually ease transit restrictions and traffic could return to normal by 2025. Please see the Logistics: Impact on chemicals and energy topic page With additional reporting by Melissa Wheeler and Kevin Callahan

26-Apr-2024

LONDON (ICIS)–The choppy economic backdrop, unprecedented growth of global polyolefins capacity, and how Europe can pivot under pressure from chunky legislation, were huge themes at the 10th ICIS World Polyolefins conference. Fresh from the stage, ICIS experts dig into the biggest themes that cropped up for delegates including converters, brands and producers in Vienna. In this podcast, PE and PP senior editor Vicky Ellis is joined by fellow senior editor Ben Monroe-Lake, senior analysts Emiliano Basualto, Lorenzo Meazza and Egor Dementev, and polyolefins consultant John Richardson.

26-Apr-2024

SINGAPORE (ICIS)–Siam Cement Group (SCG) posted an 85% year-on-year decline in Q1 net profit on losses from chemicals operations, but the Thai conglomerate expects the segment’s earnings to recover in H2 on improved olefins demand and expected restart of its Vietnam petrochemical complex. H2 conditions to improve on chemicals recovery Long Son Petrochemicals complex restart targeted in July Olefins prices to stabilize in Q2, recover later in 2024 In Thai baht (Bt) million Q1 2024 Q1 2023 % Change Revenue from sales 124,266 128,748 -3.5 EBITDA 12,623 12,170 3.7 Net profit 2,425 16,526 -85.3 *Earnings before interest, tax, depreciation and amortization First-quarter EBITDA increased on higher contribution of businesses related to cement and construction. The company's listed SCG Packaging (SCGP) subsidiary, meanwhile, posted a 15% year-on-year increase in EBITDA to Bt5.2 billion as sales rose by 1% to Bt34.0 billion. Chemicals results in Bt million Q1 2024 Q1 2023 % Change Revenue from sales 45,376 46,805 -3.1 EBITDA 1,289 2,445 -47.3 Net profit -1,866 1,356  – Petrochemicals demand remained weak in the first quarter due to ongoing geopolitical tensions and weak global economic conditions, the company said in a filing to the Stock Exchange of Thailand on 24 April. The first-quarter loss in the chemicals business, however, was mainly due to lower equity income from associates and start-up expenses of the company's Long Son Petrochemicals Complex (LSP) in Vietnam. Its 100%-owned integrated petrochemical complex completed initial test-runs early this year but was shut in March due to equipment issues and will remain down up to June. SCG expects to restart the facility in July for the final test run, followed by commercial operations beginning August 2024. In the first quarter, the company sold around 306,000 tonnes of both polyethylene (PE) and polypropylene (PP) products, down 22% year on year following the shutdown at Rayong Olefins' (ROC) cracker. SCG now expects olefins demand to improve gradually in the second half of 2024 as supply in the region is expected to be limited due to a series of planned maintenance, particularly in China and southeast Asia. It expects stable olefins prices in the second quarter and a recovery in the latter half of 2024 as demand growth is expected to exceed capacity additions. Polyvinyl chloride (PVC) demand in Asia continues to face challenges due to the persistent real estate crisis in China, while supply is impacted by high inventory in China resulting in more exports to Asia. Focus article by Nurluqman Suratman ($1 = Bt37.05)

26-Apr-2024

SINGAPORE (ICIS)–Indonesia's central bank has unexpectedly raised its key interest rate to stabilize its slumping currency – the rupiah (Rp) – against the strong US dollar, with further monetary tightening likely given high possibility of worsening global risks. Central bank move prompted by rupiah's fall to lowest since 2020 Strong US dollar sends global currencies tumbling 2024 GDP growth forecast at 4.7-5.5% At 02:45 GMT, the rupiah was trading at Rp16,223 against the US dollar, easing from a four-year low of Rp16,316 hit on 17 April. On 24 April, Bank Indonesia (BI) hiked its seven-day reverse repurchase rate by 25 basis points to its highest since 2016 at 6.25%, and also raised its overnight deposit and lending rates by a quarter point to 5.50% and 7.00%, respectively. "Bank Indonesia continues orienting exchange rate policy towards maintaining rupiah stability against the impact of broad-based US dollar appreciation," the central bank said in a statement. RATE HIKES MAY CONTINUE AMID RUPIAH WEAKNESS The rupiah, along with other currencies in Asia, has been tumbling against the US dollar, which is being supported by higher-for-longer interest-rate stance of the US Federal Reserve. The US dollar is also generally considered a “safe haven” for investors in times of global economic distress. From the start of the year to 23 April, the rupiah tumbled against the US dollar by 5.1%, according to Bank Indonesia, noting that the depreciation was less severe compared with the Thai baht’s 6.6% fall, the South Korean won’s 7.9% plunge and the Japanese yen’s 8.9% slump over the same period. "The key message delivered by BI was that developments in the global economy have changed rapidly alongside heightened risks and uncertainties especially due to the shifting stance of the Fed's rate policy and deteriorating geopolitical tensions in the Middle East," Singapore-based UOB Global Economics & Markets Research said in a note. BI has been intervening to stabilize the rupiah, which slumped to its lowest since 2020 around mid-April as the US Fed is unlikely to cut interest rates anytime soon while escalated tensions in the Middle East continue. The Indonesian central bank’s April monetary policy decision, like in October last year, was in response to recent foreign exchange (FX) weakness amid worsening external conditions, it said. In October 2023, the central bank had issued an urgent 25bps interest rate hike. It deemed the move a “pre-emptive and forward-looking step” to reduce the impact on imported inflation and ensure headline inflation remains within its 1.5-3.5% target. In March, Indonesia's inflation was higher than expected at 3.05%. "We think today’s decision was a hawkish hike, and the rationale provided by BI underscores that its strong focus on FX stability remains in place," Japan's Nomura Global Markets Research said in a note. "We believe if the external backdrop does not improve and IDR [Indonesian rupiah] pressures persist, this may not yet be the end of BI's hiking cycle." GDP ON TRACK FOR SOLID GROWTH Southeast Asia’s biggest economy remains resilient despite the build-up of global uncertainty, BI said in a statement, with average growth in the first two quarters of 2024 likely to exceed the 5.04% expansion in Q4 2023. The central bank forecasts a 4.7-5.5% GDP growth in 2024, compared with the actual 5.04% expansion rate posted the previous year. "Goods exports remain unfazed by declining commodity exports given lower international commodity prices and weak demand from Indonesia's main trading partners, such as China," it said. Indonesia has been in trade surplus for the 47th consecutive month in March. The trade surplus for the month at $4.5 billion represents more than a fivefold increase from February’s $800 million. On a month-on-month basis, March exports increased by 16.4%, the first monthly growth this year, supported by the acceleration of non-oil and gas (non-OG) exports, particularly in crude palm oil (CPO), coal, and steel commodities. On a year-on-year basis, however, March exports were down 4.2% to $22.4 billion, but the rate of decline was narrower than February’s 9.6%; while imports fell by 12.8% to $18 billion. Indonesia is one of the biggest net importers of petrochemicals in southeast Asia, fulfilling around half of its PE and PP requirements respectively through imports, according to the ICIS Supply and Demand Database. Focus article by Nurluqman Suratman

26-Apr-2024

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 19 April. NEWS Brazil’s Petrobras, China’s CNCEC mull petchems, fertilizers joint projects Petrobras and China’s chemicals major CNCEC have signed a memorandum of understanding (MoU) to explore petrochemicals and fertilizers joint projects, the Brazilian state-owned energy major said on Thursday. INSIGHT: Argentina’s petchems hit hardest by recession as country holds breath under Milei Argentina’s petrochemicals are taking a severe hit amid the recession, with falls in demand for some materials of up to 50%, but companies and the country are holding firm under the new President’s economic shock therapy. Brazil's Petrobras re-enters fertilizers sector with restart at ANSA plant Petrobras is to restart its large-scale ANSA fertilizers plant in Araucaria, state of Parana, which has been idle since 2020, the Brazilian state-owned energy major said late on Wednesday. Pemex to remain ‘fiscal challenge’ for Mexico's new administration – S&P Beleaguered finances at Pemex, the Mexican state-owned energy major, will require support from the federal budget for years to come, the analysts at S&P said this week. Argentina’s lower rates helping central bank shore up balance sheet at savers’ expense – economist Argentina’s latest cut to interest rates had more to do with shoring up the central bank’s balance sheet, possible thanks to currency controls implemented by the prior Administration, than the actual control of price rises, according to the director at Buenos Aires-based Fundacion Capital. Latin America's fiscal consolidation at risk of slippages as plans postponed – IMF Latin America’s countries high debt levels require fiscal consolidation plans which in some cases are being postponed, increasing risks for the long-term financial stability of the region, the Director of the Western Hemisphere Department at the IMF said on Friday. Chile inflation falls to 3.7% in March Chile’s annual inflation rate fell in March to 3.7%, down from 4.5% in February, according to the country’s statistics office INE. Brazil’s automotive output barely up in Q1, sales rise 9% Brazil’s petrochemicals-intensive automotive output rose by 0.4% in the first quarter, year on year, to just below 550,000 units, the country’s trade group Anfavea said on Monday. LatAm PE domestic price lower in Chile on cheaper US export offers Domestic polyethylene (PE) prices were assessed lower in Chile because of cheaper US export offers. In other Latin American (LatAm) countries, prices remained steady. Latin America’s February lube demand holds steady Lube demand in Latin America was relatively steady in February at a time of year when consumption typically falls in other markets like the US and Europe. The steady consumption coincided with lower base oils output in the region in February. LatAm PP international prices stable to up on higher freights from Asia International polypropylene (PP) prices were assessed as stable to higher because of increased freight rates from Asia to the region. However, Asian offers remain competitive compared to other origins like the Middle East and the US. Plant status: Dow Argentina shuts HDPE and LDPE plants on technical issues – sources US chemicals major Dow’s subsidiary in Argentina shut on 16 April a high density polyethylene (HDPE) plant due to a mechanical pump failure and a low density polyethylene (LDPE) plant due to technical failure, several sources said. Weather conditions starts to slightly shift PET demand in Latin America Polyethylene terephthalate (PET) prices remained stable in Brazil, with a slight softening in consumption coinciding with stabilized temperatures. However, demand continues to exceed expectations when compared with the corresponding period last year. Weather conditions starts to slightly shift PET demand in Latin America Polyethylene terephthalate (PET) prices remained stable in Brazil, with a slight softening in consumption coinciding with stabilized temperatures. However, demand continues to exceed expectations when compared with the corresponding period last year.

22-Apr-2024

HOUSTON (ICIS)–Costs for shipping containers from Asia to South America are soaring while rates are plummeting along the other major trade lanes and Maersk will resume transits through the Panama Canal after administrators said they expect to be back to normal in 2025, highlighting this week’s logistics roundup. ASIA-SOUTH AMERICA CONTAINER RATES Rates for shipping containers from Asia to the US and Europe continue to fall, but rates from Asia to South America are spiking, according to data from ocean and freight rate analytics firm Xeneta and as shown below. Market participants said space along the Asia-South America route has tightened as China is exporting a lot of electric vehicles (EVs) to Brazil. A market participant told ICIS that Chinese automaker BYD has booked more than 10,000 containers to ship EVs to Brazil in April. Autos are typically transported using roll-on, roll-off (RoRo) ships that are designed to carry wheeled cargo. But the surge in EV imports from China has taken up most of the RoRo capacity, forcing China to send autos in containers, which is more expensive. A 20-foot shipping container can hold one or two vehicles, and a 40-foot container can hold up to four standard-sized cars, according to IncoDocs, a shipping solutions provider. ASIA-US CONTAINER RATES FALL Rates from east Asia and China to both US coasts continue to fall, along with rates from Asia to Europe, as shown in the following charts. Asia-US rates from online freight shipping marketplace and platform provider Freightos were largely steady this week, suggesting to the company's head of research that rates might be nearing a floor. Judah Levine, head of research at Freightos, said if diversions continue into the Q3 peak season months, shippers can expect rates to increase relative to this floor. STRAIT OF HORMUZ Global shippers are watching the situation in the Gulf of Hormuz after Iran’s Revolutionary Guard Corps (IRGC) seized a container ship operated by Mediterranean Shipping Co (MSC) near the Strait. "If attacks like this one continue, broaden, or Iran moves to completely close the strait, Middle East container flows would feel the strongest impact," Levine said. A closure would see ports in Kuwait, Iraq and most of the United Arab Emirates (UAE) become inaccessible. Saudi Arabia, with access to their Red Sea port access already challenged, would see their Gulf port access cut off as well. "These disruptions would also impact container hubs in India some of which are part of services that connect south Asia and the Middle East," Levine said. Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), which are shipped in pellets. They also transport liquid chemicals in isotanks. PORT OF BALTIMORE The Unified Command (UC) continues to remove containers from the Dali and clear wreckage from the collapsed bridge at the entrance to the Port of Baltimore. The US Army Corps of Engineers (USACE) expects to open a limited access channel 280 feet wide and 35 feet deep by the end of April, and are aiming to reopen the permanent, 700-foot-wide by 50-foot-deep federal navigation channel by the end of May, restoring port access to normal capacity. Source: Key Bridge Response 2024 LIQUID CHEM TANKERS US chemical tanker freight rates assessed by ICIS were stable to lower this week with rates for parcels from the US Gulf (USG) to Rotterdam and the USG to Brazil unchanged. However, rates from the USG to Asia ticked lower and all other trade lanes held steady. On this route, there is no shortage of glycol enquiries. From the USG to Rotterdam, there are bits of part cargo space still available for April. Most of the outsiders’ vessels that were on berth have already sailed, and only the regulars remain at this time as they push tonnage availability. Freight rates are now expected to remain steady for the time being. PANAMA CANAL Wait times for non-booked vessels ready for transit edged higher for northbound vessels and were unchanged for southbound vessels this week, according to the Panama Canal Authority (PCA) vessel tracker and as shown in the following image. Wait times last week were 0.9 days for northbound traffic. The Panama Canal Authority (PCA) said current forecasts indicate that steady rainfall will arrive later this month and continue during the rainy season, which would allow the PCA to gradually ease transit restrictions and traffic could return to normal by 2025. Global container shipping major Maersk said it will resume Panama Canal transits for its OC1 service beginning 10 May, ending its “two-loop” setup it established in January because of transit restrictions brought on by a persistent drought. Please see the Logistics: Impact on chemicals and energy topic page Additional reporting by Bruno Menini and Kevin Callahan

19-Apr-2024

DUBAI (ICIS)–Importers in the Middle East are being hit by surging costs of transporting goods by land through Saudi Arabia from the Jebel Ali port in the UAE, amid a shipping crisis in the Red Sea to the west of the region. Increased demand meets truck shortage Polymer market activity slow to pick up after Eid holidays Logistics woes may spill into Strait of Hormuz as tensions escalate Buyers in Jordan, Syria and Israel have been relying more on this route to take cargoes coming in from elsewhere in the world. Most shipping companies avoid the Red Sea fearing attacks on commercial vessels by Yemen’s Houthi militants since late last year following the outbreak of the Israel-Hamas war. GCC suppliers are the main exporters of PP and PE to the East Mediterranean region and have been selling most of the material through truck via Saudi Arabia, with limited quantities sold via the CFR (cost & freight) Aqba route. The Red Sea, which has the Suez Canal in the north, offers the shortest route between Asia and Europe and shipping access to the East Mediterranean markets. From the Jebel Ali port in Dubai to Jordan, land freight has more than doubled in recent months, a Jordanian trader said. ”We’ve seen jumps from $60-70/tonne [trucking] cost from Jebel Ali, to Jordan, via Saudi Arabia, to … as high as $150/tonne when ordering non-prime material for both PP and PE  from a major UAE-based supplier,” the trader said. The Middle East observed the Muslim fasting month of Ramadan from 10 March, during which working hours were reduced, culminating with the Eid ul-Fitr holiday during the second week of April. “Now that we are back from Eid, the expectations are towards some decreases in the [land freight] costs,” the trader said. In March, the spike in freight cost was due shortage of trucks following a sharp spike in demand to transport essential goods by land for Israel from Jebel Ali via Saudi Arabia. This shortage was exacerbated by Saudi Arabia’s existing ban on trucks older than 20 years from transiting through its territories, which came into effect in 2023. Trucking demand for polymer cargoes from Oman and the UAE to Egypt via Saudi Arabia also increased, causing a sharp increase in freight cost. “The cost of [transporting] polymers by truck to Egypt was around $80-100/tonne before March, but it increased to $120-140/tonne ahead of Ramadan Season,” a regional trader said. Saudi Arabia’s own cost of transporting polymer cargoes, however, was not affected, market players said, despite a lot of trucks mobilized since the beginning of the year to transport material inland from plants located on the west coast to ports situated on the east coast, so be able to ship them to customers in Asia. Overall polymer market activity has yet to pick up as the Gulf Cooperation Council (GCC), East Mediterranean, and North African markets are just returning from the Eid holiday. Concerns are now shifting toward repercussions of a potential full-on war between Iran and Israel, which could further impact logistics in the region, specifically in the Strait of Hormuz, which could cause oil and feedstock prices to soar. Explosions in Iran, Syria and Iraq were reported early on Friday, causing oil prices to surge by more than $3/barrel in early trade, with Brent crude breaching $90/barrel before easing down. According to media reports, Israel was behind the explosions in Iran. The Strait of Hormuz, which connects the Gulf of Oman and the Persian Gulf, is bordered by Iran, Oman and the UAE. It is an important chokepoint for energy trades from the Middle East. On 13 April, Iran’s Revolutionary Guards seized Portuguese-flagged container ship MSC Aries in the key shipping lane which Tehran says is linked to Israel. On the same day, Iran had launched drones and missiles on Israel, which it blames for a fatal attack on an Iranian diplomatic facility in Damascus that killed a high-ranking member of Iran's Islamic Revolutionary Guards and eight other officers. Focus article by Nadim Salamoun and Pearl Bantillo Click here to read the ICIS LOGISTICS topic page, which examines the impact of shipping disruptions on oil, gas, fertilizer and chemical markets.

19-Apr-2024