Suez Canal still blocked; some Asia petrochemical shipments face delays

Author: Nurluqman Suratman

2021/03/25

SINGAPORE (ICIS)--The Suez Canal remained closed on Thursday following grounding of a massive container vessel, with some petrochemical shipments between Asia and Europe facing some delays as the blockage is now on its third day.

Shippers in Europe have issued notifications to an India-based trader that synthetic rubber cargo shipments will be delayed for about seven days; while two vessels from Asia carrying 10,000 tonnes of vinyl acetate monomer (VAM) may not arrive on schedule in Europe.

Right now, Ever Given - one of the world’s largest shipping containers - is stuck sideways towards the south end of the Suez Canal since 23 March.

The 400-metre long Panama-registered vessel operated by Taiwan-based shipping firm Evergreen was en route to Rotterdam in the Netherlands from China.

Salvage efforts by Egypt’s Suez Canal Authority (SCA) resumed early on Thursday after a brief overnight suspension, and no timing has been given to refloat the ship.

Any further impact of the blockage on commodities’ shipments will largely depend on how soon Suez Canal, which is a major global trade artery, can get back into operation.

Delays in shipments caused by the blockage could aggravate the supply crunch in some markets.

"We do not see significant impact on butadiene and elastomer value chain as there are limited supplies from Europe in the near term due to tight domestic supply," said ICIS analyst Ann Sun.

"Some regular synthetic rubber imports from Europe to Asia are expected to delay, at least one week as per the current situation,” Sun said.

“This should result in tighter synthetic rubber supply amid the concentrated scheduled turnaround in Q2 in China, the biggest synthetic rubber producing country," she added.

The Suez Canal is a crucial route for crude oil, chemicals and refined products travelling from the Middle East and Asia Pacific to Europe and North America, with any disruption presenting a significant choke point to trade, at a time when shipping routes are already substantially disrupted.

Crude oil prices had jumped 6% overnight on concerns over Suez Canal disruptions but fell by around 2% on Thursday as demand concerns re-emerged amid fresh lockdowns in Europe and slow vaccine roll-outs.

Spot prices of naphtha - the main petrochemical feedstock in Asia - have spiked, tracking crude’s strong gains overnight, with prices up by nearly 3% on Thursday noon at around $582.00/tonne CFR (cost & freight) Japan.

Around 12% of global trade passes through the Suez Canal, which connects the Red Sea and the Gulf of Suez with the Mediterranean Sea.

Meanwhile, any impact on China’s overall crude supply should be limited as less than 10% of the country’s crude imports - or between 40m-45m tonnes/year - are transported through the Suez Canal, according to ICIS analyst Jean Zhou.

The crude oil tanker Nordic Cygnus bound for Tianjin port in north China, from Novorossiysk, Russia, is currently stuck at the Red Sea side of the canal due to the blockage, Zhou said.

Focus article by Nurluqman Suratman

Additional reporting by Lim Ai Teng, Helen Lee and Melanie Wee

Photo: A tug boat works at the site of a giant cargo container trapped on the Suez Canal of Egypt on 24 March 2021. (Source: Xinhua/Shutterstock)