Suez has lingering impact on Europe while Maersk suspends bookings

Author: Will Beacham

2021/04/01

BARCELONA (ICIS)--Europe is suffering a lingering impact from the Suez Canal closure, with delays in deliveries of up to two weeks, while Maersk, the world’s largest shipping company has suspended short term bookings.

Although the canal reopened on 29 March after being blocked for six days by the Ever Given, one of the world’s largest container ships, it will take several days to clear the backlog of ships, which numbered 292 on 31 March, according to transport group Leth Agencies.

Although the canal is now open, there is also the possibility of further congestion at destination ports as a higher numbers of ships than usual arrive in the coming days.

Maersk said in a letter to customers on 31 March that the Suez closure impact has displaced ships, forcing it to stop taking short term orders on exports out of Asia, Europe, North America, Latin America and Africa.

Many European chemical markets had already been affected by supply shortages, panic buying and spiralling prices as the coronavirus pandemic disrupted global logistics systems. A spate of force majeures and the forthcoming turnaround season could tighten supply further.

Demand has also rebounded strongly since the second half of 2020 and the closure will affect sentiment in chemical markets already starved of supply.

Europe base oils face particular challenges because less travel has led to lower refinery run rates which have cut availability and caused real supply shortages plus triple-digit price increases. The Suez closure makes matters worse.

Heavier viscosity grades remain particularly short  and Group III imports are expected to be delayed due to the Suez Canal blockage.

One Group I base oils producer told ICIS: “Again it’s another in the round of problems that are leading to huge increases. It’s just incredible what these are guys are having to deal with.”

A distributor added: “The market will be for sure influenced from the Suez issue. We hear from customers that [a Middle East producer] got stuck in the queue and is now cutting volumes.”

Other base oils producers and buyers expected delays of between 5-6 days and a week for shipments coming through the canal.

A trader added: “Shippers are not taking bookings if it goes through the canal right now. I don't know how long it will take to recover. Heard there was a jam, that could take several weeks to clear.”

INSURANCE CLAIMS CAUSE DELAYS
Insurers are also holding back goods from the market while they process claims. According to one UK trader who has some product on the Ever Given: "Insurance companies are saying the goods will not be released until they decide who is at fault".

The trader anticipates only four day delays once the backlog of ships reaches Amsterdam, Rotterdam, Antwerp (ARA) ports. .

TURKEY POLYMERS HIT
Turkey polymer markets, which rely heavily on imports, have been tight for months because producers and traders chose to divert cargoes to China and Latin America. This has been exacerbated by product being sucked into Europe because shortages caused by planned and unplanned outages.

A Turkish trader said: “Suez issue is really big - we are hearing from our Korean suppliers that voyage time can be up to 60-90 days from the usual 40 days.  There are also delays from Saudi Arabia with a minimum of two and up to four weeks.”

Asian suppliers are also avoiding offering product to Turkey, the trader added.

Asia is becoming an alternative and much cheaper source of polymers for Africa and many other regions.

PET DIRE, R-PET FEELS KNOCK-ON EFFECT
Europe’s polyethylene terephthalate (PET) market was already suffering from a lack of feedstocks, and was critically tight before the canal closure.

Supply along the Europe PET value chain is in dire straits, and has been for a while, but the Suez Canal adds yet another strain.

There are three force majeure declarations on PET still in play in Europe: PlastiVerd, Spain, the latest to follow JBF, Belgium and UAB Orion Global (Indorama) in Lithuania.

Equipolymers in Germany has been running at reduced output due to its two major suppliers of feedstock purified terephthalic acid (PTA) unexpectedly shutting down, according to market sources.

Neo Group, Lithuania, had already anticipated running at reduced rates through H1 2021, and while it has managed to inch them up, it expects to cut production back again from H2 April.

ICIS has seen a letter to customers dated 31 March from Alpek Polyester in Wilton, UK, informing them of delayed deliveries of PET.

The vessel delays are likely to be a reason for Alpek Polyester delaying deliveries.

Alpek did not provide a reason nor any further comments, but it is the last in a long stream of events that is impacting supply.

Now there is a knock-on impact on recycled PET (R-PET) markets where virgin PET buyers are now trying to buy up R-PET flake to make up missing PET volumes.

An eastern-Europe based producer of R-PET flake said: “There will be a really critical situation for the virgin PET producers as they get paraxylene (PX) from Asia. In May, and end of April, there will be no spot offers for virgin, so will [prices are likely to] increase.”

A German R-PET flake producer added that the Suez delays and diversions are likely to keep PET prices higher for longer, keeping pressure on the R-PET market.

However, it is likely that by May, PET production across Europe should be restored, and imports should resume.

Container costs have been dropping, but some sources believe that the Suez mayhem may mean they go up again.

Anne-Sophie Briant-Vaghela, Eashani Chavda, Sam Wright, Tom Brown, Ben Lake, Matt Tudball, Caroline Murray and Jane Gibson contributed to this story.

Front page image: Ever Given, a Panama-flagged cargo ship, is seen in Egypt's Great Bitter Lake, on 30 March 2021. Source: Mohamed Elshahed/AP/Shutterstock.