Rates for shipping containers continue to skyrocket amid shortage in Asia

HOUSTON (ICIS)–A continued shortage of shipping containers in Asia is putting upward pressure on freight costs – where some importers are paying three times more than normal – and delaying delivery times as securing space to ship goods has become more difficult.

“It is the perfect storm,” said a plastic resin distributor based in Canada who has never seen freight costs spike like this. “This pandemic has awakened a new sense of domestic self-sufficiency with respect to your supply chain.”

Most chemicals are liquids and are moved in chemical tankers. But container ships move polymers, such as polyethylene (PE) and polypropylene (PP), which is shipped in pellets.

The outbreak of the coronavirus, and efforts to stop the spread, have disrupted normal trade patterns in part because of the uneven way the virus moved across the globe.

China’s economy has rebounded after being among the first to restart following mitigation efforts, and the country’s exports have soared. But lockdown measures in other regions have contributed to delays in containers returning to Asia.

Polymer importers said this week that spot container freight rates have risen to around $5,000-5,500/container. In addition, shippers need to pay around $1,000-1,500/container to guarantee vessel space, putting effective container rates at around $7,000/container.

This equates to freight costs of about $200-300/tonne, almost three times higher than the typical costs of $70-100/tonne.

The change in trade flows and global demand for containers is also impacting other regions, such as Africa and India, where exporters are seeing shortages because shippers out of Europe, the US and the Middle East want to push as many containers as possible to Asia.

Polyvinyl chloride (PVC) importers said they are also seeing spikes in freight costs.

“The ocean freight from Asia to USA has gone up sharply. The rate is more than triple from the previous normal price level,” a participant in the PVC market said.

But the shortage of shipping containers in Asia is keeping prices and availability of PVC muted.

Asia now has the lowest export prices in the world and lowest netbacks for PVC producers because they must keep prices lower than other regions in order to compete for business in Latin America and other regions because of the high shipping prices.

Some market participants in the Asia PVC market have noted that the unprecedented combination of market tightness and volatile freight costs are the main factors pressuring market discussions, rather than a zealous recovery in demand.

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.

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.

The Canadian plastic resin distributor said it is not just seeing higher rates from China, but also from Taiwan, Vietnam, South Korea and Singapore to US and Canadian ports on both coasts.

“We used to pay between $2,200-$2,800 a container and now it is $5,600 or more and it doesn’t seem to be abating,” the distributor said.

A market participant said it is also seeing significant delays at port terminals and at rail terminals in getting containers discharged or onto the rail lines to transport to its destination.

“We have experienced up to three weeks of rail terminal wait time to get a container positioned onto the rail, contributing to serious adjustments in inventory management and costs,” the participant said.

Focus story by Adam Yanelli

Additional reporting by Zachary Moore, Luly Stephens, Bill Bowen and Jonathan Chou

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Photo: Stacks of containers at a container terminal (Image credit: Imagine China/Shutterstock)