Pandemic-induced container shortage pressures freight rates from Asia to US, LatAm

Author: Adam Yanelli

2020/11/19

HOUSTON (ICIS)--Efforts to stop the spread of the coronavirus (Covid-19) across the globe have disrupted normal trade patterns, causing delays and contributing to higher freight rates from Asia, largely because of a shortage of shipping containers in major export ports.

Chemical tanker freight rates from the US to most regions have fluctuated a bit but have been relatively stable since falling significantly at the outset of the pandemic.

But container ships move polymers, such as polyethylene (PE) and polypropylene (PP), which is shipped in pellets.

Container ships also carry a wider scope of cargoes, including consumer products like electrical appliances and automobiles, so demand for that space has risen as economies reopened after lockdown measures because of the pandemic.

Market participants said they have seen container rates from SE Asia to the US spike to as high as $4,500/container.

The supply crunch is weighing on delivery times and forcing buyers to look for domestic supply or other alternatives.

PP importers are facing delays receiving shipments, or seeing shipments cancelled or pushed out in many cases, market participants said. Container space coming out of Asia is very tight and prices have doubled in recent months, with ranges between $3,600-4,100/container, players said.

Also creating headwinds for the chemical resin market is that shippers view resins as a low-priority cargo, meaning that resin shipments are often cancelled to make room for more valuable material.

In the glycerine/fatty acids market, higher freight costs combined with bullish feedstock costs are leading to some demand destruction for imported material.

Buyers in Latin America said they have seen freight rates from Asia double.

Freight from Asia to the Atlantic coast of South America were heard as high as $3,500/container, which equates to about an additional $150/tonne for resins such as polyvinyl chloride (PVC).

Similar price hikes have been noticed by South American buyers receiving deliveries at ports on the Pacific Ocean, who traditionally import many products from China and other Asian countries.

However, because of the spikes in the last month or so, buyers are importing resin from India since freight costs from there have seen smaller increases, market participants said.

In contrast, shipping costs from North America to Central and South America remain unchanged.

A PVC trader said freight is up by 150% from Asia and there are no containers available to take lifts until January. On the other hand, prices from the US to Asia are down slightly.

Focus story by Adam Yanelli

Additional reporting by Luly Stephens, Lucas Hall, Renato Frimm, Zachary Moore, Bill Bowen and Ai Teng Lim

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Photo: Stacks of containers at a container terminal of the Port of Qingdao in Qingdao city, east China (Image credit: Imagine China/Shutterstock)