Polyethylene terephthalate (PET)

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. China’s petrochemical markets might well respond positively to any new economic stimulus measures announced during the delayed Third Plenum government meeting that takes place on 15-18 July. But the scale of economic reforms required are such that I believe the more likely outcome is China remaining stuck with lower growth than during the 1992-2021 Petrochemicals Supercycle. Sourabh Gupta – Senior Fellow at the Institute for China-America Studies in Washington, DC – wrote in an article for the East Asia Forum that reforms needed include: Progressively lifting Hukou restrictions to make public services more equitable. Building a unified and portable social security net more in line with advanced economies. A shift from indirect to direct taxes. Individual income tax revenues comprised 33% of total revenues in OECD countries compared to 9% in China. The tax base must expand as four out of five Chinese households do not pay personal income tax. He cautioned that reform would not be easy in a country that preferred top-down capital-intensive approaches and was disdainful of high welfare spending. China appears to have doubled-down on its capital-intensive approach since the end of the property bubble through investing in export-focused manufacturing. This raises the issue of geopolitical threats to its GDP growth, such as the US and the EU recently raising tariffs on Chinese electric vehicles and batteries. “If China is to maintain growth rates of 4-5% per year, it can only do so if the rest of the world agrees to reduce its own investment and manufacturing levels to less than half the Chinese level” wrote Michael Pettis, Professor of Finance at Peking University, in an article for the Carnegie Endowment for International Peace. The Economist reported that as reshoring accelerated, governments had adopted over 1,500 policies to promote specific industries in both 2021 and 2022. This compared with almost none in the early 2010s. But this latest Third Plenum could be as significant as the ones cited by Reuters in 1978 and 1993. The 1978 Plenum opened China up to foreign investment. In 1993, the Plenum liberalised trading in the Yuan and launched “socialist market” reforms following Deng Xiaoping’s Southern Tour a year earlier. How will we know the outcomes? If China’s polyethylene (PE) and polypropylene (PP) price spreads return to their Supercycle levels over the six-to-12-months.  If this doesn’t happen, more reforms will be needed as too much supply will continue to chase too little demand. Despite recent rebounds in spreads, China CFR high-density PE (HDPE) spreads over CFR Japan naphtha costs remain 116% lower than during the Supercycle with low-density (LDPE) spreads 46% lower and linear-low density (LLDPE) spreads 80% lower. The story is very similar in China PP spreads over naphtha. 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.

03-Jul-2024

HOUSTON (ICIS)–Hurricane Beryl continued to make its way west toward Mexico and the US Gulf on Tuesday afternoon, with landfall possible some time on Sunday. Meteorologists at the National Hurricane Center (NHC) said Beryl was about 125 miles (205 km) east southeast of Isla Beata, Dominican Republic, and moving west northwest at 22 miles/hour. Source: National Hurricane Center (NHC) The storm is going back and forth between a Category 4 and Category 5 hurricane as maximum sustained winds are at 155 miles/hour but had been at 165 mile/hour earlier in the day. According to the Saffir-Simpson Hurricane Winds Scale, a storm reaches Category 5 when maximum sustained winds reach 157 miles/hour. Saffir-Simpson Hurricane Wind Scale Category Wind speed 1 74-95 miles/hour 2 96-110 miles/hour 3 111-129 miles/hour 4 130-156 miles/hour 5 157+ miles/hour The most recent forecast indicates Beryl could miss southern Veracruz state in Mexico, where Braskem Idesa has its integrated polyethylene (PE) Ethylene XXI complex and where a lot of Mexico’s petchem capacity is located. Altamira is still in the projected path. The regions have been experiencing a drought and rainfall from Beryl could provide the area with much-needed rain but could also impact operations at the multitude of chemical facilities in the area. Another scenario would be if the storm swings to the north, which could threaten oil and gas production in the US Gulf as well as Gulf Coast petchem operations. A producer with capacity in the Corpus Christi area said it was still too early to decide on operations. ACTIVE HURRICANE SEASON The early activity in the Atlantic Ocean is in line with forecasts calling for a busier than usual hurricane season. The US National Oceanic and Atmospheric Administration (NOAA) is predicting the greatest number of hurricanes in the agency’s history. NOAA forecasters with the Climate Prediction Center said that the hurricane season – which started on 1 June and runs through 30 November – has an 85% chance to be above normal, a 10% chance of being near normal and only a 5% chance of being below normal. Damage from hurricanes can lead to increased demand for chemicals, but hurricanes and tropical storms can also disrupt the North American petrochemical industry because many of the nation's plants and refineries are along the US Gulf Coast in the states of Texas and Louisiana. In 2022, oil and natural gas production in the Gulf of Mexico accounted for about 15% of total US crude oil production and about 2% of total US dry natural gas production, according to the US Energy Information Administration (EIA). Even the threat of a major storm can disrupt oil and natural gas supplies because companies often evacuate US Gulf platforms as a precaution. Additional reporting by Mark Milam, Al Greenwood and Melissa Wheeler

02-Jul-2024

HOUSTON (ICIS)–Hurricane Beryl, already a major Category 4 storm, is making its way toward Mexico, but it remains too early to tell where it will ultimately make landfall. Beryl is now the earliest Category 4 storm on record in the Atlantic. The previous earliest was Hurricane Dennis on 8 July 2005. The US National Hurricane Center (NHC) said as of 1900 GMT Beryl was about 60 miles (100km) west northwest of Carriacou Island with maximum sustained winds of 150 miles/h and moving west-northwest at 20 miles/h. Source: National Hurricane Center (NHC) Late-cycle track guidance from the Tropical Cyclone Guidance Project (TCGP) shows the different tracks based on various models in the image below. Source: Tropical Cyclone Guidance Project (TCGP) If the storm continues to move to the west, it could threaten Mexican facilities in Veracruz state, which is in the south of the Bay of Campeche. Also in the region are the major port city of Coatzacoalcos and Braskem Idesa’s integrated polyethylene (PE) Ethylene XXI complex. Beryl could also make landfall near Altamira, which has been experiencing a drought and could provide the area with much-needed rain but could also impact operations at the multitude of chemical facilities in the area. Another scenario would be if the storm swings to the north, which could threaten oil and gas production in the US Gulf as well as Gulf Coast petchem operations. Beryl is expected to pass near Jamaica on Wednesday but the storm is unlikely to affect the chlor-alkali chain. Jamaica is home to a number of large alumina refineries that consume significant volumes of US caustic soda, used to refine alumina from bauxite, or aluminium ore. ACTIVE HURRICANE SEASON The early activity in the Atlantic Ocean is in line with forecasts calling for a busier-than-usual hurricane season. The US National Oceanic and Atmospheric Administration (NOAA) is predicting the greatest number of hurricanes in the agency’s history. NOAA forecasters with the Climate Prediction Center said that the hurricane season – which started on 1 June and runs through 30 November – has an 85% chance to be above normal, a 10% chance of being near normal and only a 5% chance of being below normal. The prediction of 17-25 named storms is the highest ever, topping the 14-23 predicted in 2010. A storm is named once it has sustained winds of 39 miles/h. Saffir-Simpson Hurricane Wind Scale Category Wind speed 1 74-95 miles/h 2 96-110 miles/h 3 111-129 miles/h 4 130-156 miles/h 5 157+ miles/h Damage from hurricanes can lead to increased demand for chemicals, but hurricanes and tropical storms can also disrupt the North American petrochemical industry because many of the nation's plants and refineries are along the US Gulf Coast in the states of Texas and Louisiana. In 2022, oil and natural gas production in the Gulf of Mexico accounted for about 15% of total US crude oil production and about 2% of total US dry natural gas production, according to the US Energy Information Administration (EIA). Even the threat of a major storm can disrupt oil and natural gas supplies because companies often evacuate US Gulf platforms as a precaution. Additional reporting by Al Greenwood, Kelly Coutu, Bill Bowen

01-Jul-2024

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 28 June. NEWS Brazil Unigel falls short of tolling deal for ammonia plants – Petrobras Petrobras has alleged that Unigel has failed to meet the terms of their tolling agreement for the production of ammonia at two idled plants, the Brazilian state-controlled energy producer said on Friday. Brazil’s Cibra inaugurates new plant in Matopiba Cibrafertil Companhia Brasileira de Fertilizantes (Cibra) has inaugurated a greenfield plant in Sao Luís, Maranhao, the Brazilian fertilizer company has announced. Saudi Arabia, South America offer promising opportunities for base oils Markets such as Saudi Arabia and countries in South America hold potential for growth in the years ahead, industry sources said on Friday. Mexico’s central bank keeps rates unchanged at 11% as inflation ticks up The Banco de Mexico kept on Thursday the main interest rate benchmark unchanged at 11% after the annual rate of inflation has increased since February. Argentina GDP down 5.1% in Q1 but sentiment rises again in May Argentina’s recession may have bottomed out in the first quarter, with a GDP fall of 5.1% year on year, as a leading indicator for economic activity rose in May for the third month. Plant status: Chemours resumes TiO2 production at Mexico plant US producer Chemours has resumed operations at its Altamira, Mexico titanium dioxide (TiO2) facility after it was forced to reduce them due to water shortages in the area. PRICING LatAm PE domestic prices lower in Argentina on weak demand Domestic polyethylene (PE) prices were assessed as lower in Argentina while being unchanged in other Latin American countries.

01-Jul-2024

LONDON (ICIS)–Senior Editor for Recycling, Matt Tudball, discusses the latest developments in the European recycled polyethylene terephthalate (R-PET) market, including: Colorless and blue bale prices rise in eastern Europe PRSE: Most see stable market over summer PRSE: Confusion and frustration around lack of SUPD clarity PRSE: SUPD impact on R-PET not until Q4 earliest

27-Jun-2024

SINGAPORE (ICIS)–Thailand's SCG Chemicals (SCGC) has obtained government approval for its 200,000 tonne/year joint venture bio-ethylene plant in Map Ta Phut, paving the way for the company to reach its target of producing 1m tonnes/year of green polymers by 2030. SCGC, Braskem joint venture firm eyes green downstream PE output Final investment decision on bio-ethylene project likely by Q4 SCGC focusing on increasing recycled plastic production and use The Thai baht (Bt) 19.3 billion ($526 million) bio-ethylene plant will use agricultural products such as sugarcane, cassava and corn as feedstock, the Thailand Board of Investment (BOI) in a statement issued on 14 June. The project will be operated by Braskem Siam Co, a 51:49 joint venture between Brazilian producer Braskem and SCGC. The plant, which will built in Rayong province, will enable production of bio-based polyethylene (PE) in Thailand which will be the first of its kind outside Brazil. SCGC’s parent firm Siam Cement Group (SCG), in a 11 June slide presentation posted on its website, said that it will likely make a final investment decision (FID) on the bio-ethylene project by the fourth quarter of this year, the company said in presentation slides posted on 11 June. The chemicals arm of the Thai conglomerate has set a target of production 1 million tonnes/year of green polymers by 2030, by leveraging strategic partnerships and innovative technologies to drive its expansion, it said. As of end-2023, the company was producing around 218,000 tonnes/year of environment-friendly plastics. SCGC Green Polymers Growth Plans Source: SCGC As part of its green polymer expansion plans, SCG in February this year announced a Bt173 million investment to hold a 3% stake in Netherlands-based renewable chemicals technology firm Avantium. Avantium‘s proprietary technology can be used to produce a variety of sustainable chemicals, including bio-based polyethylene (PE) and bio-based polyamide (PA). SCGC and Avantium last year agreed to develop polymers based on sustainable carbon feedstocks such as those from biomass or carbon from air, and scale up a pilot plant in the next two years to produce 10 tonnes/year of the material. On the recycling front, SCGC is aiming to increase its sales volumes of green polymers from odorless post-consumer recycled resin (PCR) high density polyethylene (HDPE) via its partnership with Portugal-based recycled plastic producer Sirplaste. The Thai producer owns 70% of Sirplaste. In September 2023, SCGC achieved a fivefold increase in production capacity for odorless HDPE PCR resin to 45,000 tonnes/year following installation of new machinery at Sirplaste's plant, based on SCG’s June 11 slides. SCGC has also invested in Kras, a Dutch company that specializes in managing waste materials, to develop a comprehensive recycled plastic production system that meets global demand, especially in Europe, "where the need for environmentally friendly packaging is continuously growing". In May, SCGC and Dow signed a Memorandum of Understanding (MOU) to transform 200,00 tonnes/year plastic waste into circular products by 2030. The initial phases of the partnership will concentrate on building a robust materials ecosystem in Southeast Asia. This will involve establishing partnerships with existing suppliers for PCR and developing advanced technological solutions for waste sorting, mechanical recycling (MR), and advanced recycling (AR) in Thailand. Separately, SCGC parent firm SCG has also received approval to invest Bt6 billion in a co-generation power plant within the Map Ta Phut Industrial Estate in Rayong province. This plant will have a production capacity of 130 megawatts (MW) of power and 160 tonnes of steam per hour and will primarily supply electricity to factories within the industrial estate. Focus article by Nurluqman Suratman ($1 = Bt36.72) Thumbnail image: At the Laem Chabang Port in Chonburi Province, Thailand, 24 January 2022. (Xinhua/Shutterstock)

19-Jun-2024

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. China's chemicals producers are said to be focusing on being “nimble and agile” in response to weaker demand growth, ample local supply of intermediate chemicals and increasingly sophisticated end-use markets. This involves producing everything up and down the value chains only when it makes economic sense and increasing the differentiation of grades for a broader range of more sophisticated applications. Local producers are reported to be tripling their range of polyethylene (PE), polypropylene (PP) and polyurethane (PU) grades as they broaden their licensing of technologies. A lot of this differentiation is aimed at supplying chemicals and polymers for higher-value downstream industries such as electric vehicles and batteries. There are said to be plenty of intermediate chemicals available locally that can compete with opportunistic imports. Local producers of intermediates are also reported to be able to make better domestic netbacks than selling overseas. Customers of the local intermediate producers increasingly value reliable suppliers who can provide a wider range of grades, technical services and local currency deals, I’ve been told. The ability of chemicals importers to compete on price alone seems to be under challenge as a sustainable business model. Future winners in China could be the Tier 1 suppliers. These suppliers would make all the grades necessary to serve ever-more sophisticated local end-use markets, which would require constantly successful R&D and good technical services. This points towards China becoming a vast continent-sized market that largely serves itself in speciality chemicals and composites, as well as commodity chemicals. I earlier discussed how self-sufficiency is increasing in commodity chemicals resulting in a pivot by “overseas-based” producers to specialities and composites. China could become just about entirely self-sufficient in commodity grades of PP, polyethylene (PE) and in paraxylene (PX) and ethylene glycols (EG) by 2030. The latter two chemicals are of course pure commodities. Note the above phrase “overseas-based” rather than overseas, as the foreign investors in China are in strong positions to take advantage of this vas and rapidly maturing market. For reasons discussed today, I don’t believe that the pivot by overseas-based producers to specialities and composites will work if it is based on exporting to China. What should the overseas-based producers do? Pretty much forget China as an opportunity as they focus on the rest of the world. And here's the link: https://www.icis.com/asian-chemical-connections/2024/06/chinas-ever-more-sophisticated-chemicals-markets-could-entirely-serve-itself/ 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.

18-Jun-2024

NEW YORK (ICIS)–US-based coatings producer PPG is seeing robust demand for sustainable products from customers, some of which rely on new, more energy efficient processes, said an executive on Monday. “Across the board there is strong pull… because when you look at [our customers’] narrative to the consumer, everybody is using sustainable advantage as a way to move market share,” said Peter Votruba-Drzal, vice president, Global Sustainability at PPG. “The challenge is to move with the speed and agility that’s required from customer industries. Large, mature industries are transforming right in front of us – the powertrain (EV) transformation in automotive, for example. The same holds when you look at how they will ultimately paint cars in the future,” he added. Votruba-Drzal spoke to ICIS at the New York Stock Exchange (NYSE). The time to get new, more sustainable products to market varies by industry, from being relatively quick – a matter of months – on the architectural coatings side, to longer for automotive, marine, aerospace and packaging, he pointed out. MARINE COATINGSIn the marine sector, the International Maritime Organization (IMO) is targeting a 20-30% reduction in greenhouse gas (GHG) emissions by 2030. “Marine coatings have a lot of sustainability benefits that are being pulled by the industry. The introduction of non-toxic anti-fouling technologies plus the benefits of fouling resistance which improves fuel efficiency over time, helps [shippers] meet their carbon emissions goals and reduces their cost of operation,” said Votruba-Drzal. On 5 June, PPG announced a collaboration with digital maritime sustainability platform RightShip to foster the development and adoption of sustainable marine solutions. PPG has a biocide-free silicone hull coating that helps vessels achieve up to 20% power savings and up to 35% lower GHG emissions versus traditional antifouling coatings, according to the company. SUSTAINABILITY + COST BENEFIT = PREMIUMIn most cases, simply introducing a more sustainable product is not enough to warrant a price premium, he pointed out. “Our customer typically requires improved performance – lower operating cost, less waste, energy efficiency – in addition to the sustainable benefit. We can partner with customers and create mutual value so that we both partake in the financial benefits,” said Votruba-Drzal. However, in other areas such as Europe’s architectural coatings market, consumers are willing to pay more for a more sustainable solution with the same performance, he added. Greener specifications, such as from builders of commercial real estate, are also driving demand for more sustainable products with lower carbon footprints, as building owners seek to achieve certain levels of LEED (Leadership in Energy and Environmental Design) certifications, he said. “If we’re working with a coil coatings customer and can provide a low carbon footprint solution, they win market share in the building,” said Votruba-Drzal. Coil coating is a continuous, automated process for coating metals prior to fabrication. TRANSFORMATION IN COIL COATINGS“In the coil industry, a fascinating transformation has been happening”, and only in the past two years or so, the executive said. Coil coatings operations are moving from using football field-length ovens fired by natural gas, to a much more compact electron beam system of around 30 yards in length, he explained. “You eliminate all of the burning of the fossil fuel and carbon emissions, as it runs off electricity which can be renewable power,” said Votruba-Drzal. “Here is a mature industry of 50-plus years that used to be heavily focused on operational throughput costs on the technology side. Now suddenly all these formulations are changing into electron beam curing. And so it resets the opportunity for market share gains,” he added. PROGRESS ON SUSTAINABILITY GOALSPPG in May 2023 introduced 2030 sustainability goals, including a 50% reduction in Scope 1 and 2 GHG emissions (from operations and purchased energy) and a 30% reduction in Scope 3 emissions (mostly from purchased raw materials) from a 2019 base, validated by the Science Based Targets initiative (SBTi). Source: PPG As of its May 2024 update, it has achieved 10% reduction in Scope 1 and 2 emissions, and a 12% reduction in Scope 3 emissions. PPG has also assessed 97% of key suppliers against sustainability and social responsibility criteria. Scope 1 and 2 emissions account for only 4% of PPG’s total carbon footprint. Further reductions to Scope 1 and 2 will primarily come from replacing motors and equipment on mixers, and using more renewable power. The bulk comes from Scope 3 emissions, with the primary components being raw materials, and how paint shops use PPG’s products, said the executive. Often the location of a supplier’s facility plays a key role in the carbon footprint of the products coming out of that site, he pointed out. “You can have a material made by a manufacturer that has operations in Asia as well as in other regions, that tie into very different electrical grids. And how green that grid is, basically impacts the carbon footprint associated with that product,” explained Votruba-Drzal. With global operations, PPG can also provide the same product at different levels of carbon footprint, depending on where it makes it, and ships it from, he added. RECYCLED AND BIO-BASED RAW MATERIALSPPG also uses recycled and bio-based raw materials in certain formulations. Its Mexico coatings company Comex uses recycled tires as a filler for waterproof roof coatings. Recycled polyethylene terephthalate (R-PET), acrylics, elastomers, polyurethanes and polyolefins can all be incorporated into coatings, he noted. “This is an emerging space of circularity where getting the scale matters,” said Votruba-Drzal, who pointed to partnerships between companies to develop new technologies and ecosystems. Interview article by Joseph Chang

17-Jun-2024

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 14 June. NEWS  INSIGHT: Brazil, Mexico currencies take a hit, energy policy under Sheinbaum remains in spotlight The Mexican peso continued sliding this week as the new President Elect Claudia Sheinbaum’s Morena party achieved the "super-majority" investors feared, which could open the door to one-party constitutional reforms, while her energy policy remains on the spotlight. Argentina’s inflation down to 276% in May, first fall in 10 months Argentina’s annual rate of inflation fell in May to 276.4%, down from April’s 289.4%, the country’s statistical office, Indec said, the first fall since July 2023 and six months after President Javier Milei took office. Higher import tariffs one leg of wider plan to save Brazil’s besieged chemicals producers – Abiquim Proposals to sharply increase chemicals import tariffs are only one of the three aspects Brazil’s chemicals producers have proposed to the government to save their "besieged” operations, according to the CEO at trade group Abiquim. Mexico’s petchems supply flowing despite Altamira disruption, but industry crisis could continue The drought affecting the Altamira petrochemicals hub in Mexico’s state of Tamaulipas is not yet affecting the supply of chemicals, but the water restrictions for industrial players could continue, sources said this week. Brazilian pulp producer Suzano to acquire 15% stake in Austria’s Lenzing Brazilian pulp producer Suzano has agreed to acquire a 15% stake in Austrian cellulosic fibres company Lenzing for €230 million, paying €39.70/share, officials said on Wednesday. Brazil fertilizers interactive trade flow map January-May 2024 The Ministry of Development, Industry and Foreign Trade for Brazil has released fertilizer trade figures for January-May 2024. Future disruption to Panama Canal will depend on El Nino intensity – expert Despite arrangements put in place to make the Panama Canal fit for a changing climate, future disruption at the Americas key shipping route will depend on a variable no-one can predict: the intensity of future El Niño weather phenomenon, according to an expert at maritime services provider CB Fenton on Tuesday. Mexico’s chemicals output up 7.2% in April, manufacturing up nearly 4.0% Mexico’s chemicals output rose by 7.2% in April, year on year, well above the 3.8% increase in overall manufacturing activity, the country’s statistical office Inegi said on Tuesday. Chemical tanker prices rise as much as 75% since 2020 on lack of liquidity – expert Chemicals tanker prices have risen globally 30-75% in the past four years on a lack of liquidity, an expert at Chile-headquartered chemicals bulk operator Ultratank said on Tuesday. Brazil’s inflation up to 3.93% in May; prices rise sharply in floods-hit state Brazil’s annual rate of inflation rose in May to 3.93%, up from 3.69% in April, with notable price rises registered in food products, especially in the floods-hit state of Rio Grande do Sul, the country’s statistical office IBGE said on Tuesday. Closures of high-cost assets to accelerate in Europe, northeast Asia – ICIS Announcements of closures for high-cost assets, especially in Europe and northeast Asia, are likely to accelerate in coming quarters as the global petrochemicals industry is forced to rationalize, according to an ICIS analyst on Tuesday. Venezuela’s Pequiven, Turkey’s Yildirim mull petchems, ammonia facilities Venezuelan state-owned petrochemicals producer Pequiven has signed an agreement with Turkey’s conglomerate Yildirim to consider building petrochemicals and ammonia facilities in the country, according to the Venezuelan Ministry of Economy. Chile’s Petroquim navigating better than peers pressure from Asian material – exec Polypropylene (PP) producer Petroquim is also facing pressure from lower-priced material sent from Asia, but the company’s “dedicated” service to customers has kept its sales spared from a larger hit, according to the commercial manager at the Chilean company. PRICINGLatAm PP international prices steady to higher on squeezed margins, higher freight rates International polypropylene (PP) prices were assessed as stable to higher across Latin American countries because of higher freight costs and squeezed margins. LatAm PE international prices steady to up on higher offers from abroad International polyethylene (PE) prices were assessed as steady to higher across the region on the back of higher offers from abroad. Plant status: Alpek Polyester’s Altamira plants ceases operations due to water scarcity in Mexico Mexico’s chemicals producer Alpek has declared force majeure for purified terephthalate acid (PTA) out of its 1 million tonnes/year facilities in Altamira, state of Tamaulipas, on the back of the severe drought which has restricted water supplies to industrial companies. Stable PET prices in Mexico prevail amid supply challenges Throughout this week, polyethylene terephthalate (PET) prices have remained stable in Mexico, as per market observations. However, industry participants believe that this stability might not last long.

17-Jun-2024

HOUSTON (ICIS)–Rates for shipping containers continue to surge as carriers are implementing peak season surcharges while capacity remains tight from Red Sea diversions, but some shipping analysts think there are signs that the dramatic rate of growth may be slowing, which leads off this week’s logistics roundup. CONTAINERS Shipping container rates continued to rise this week, but the rate of increase slowed, according to data from supply chain advisors Drewry and as shown in the following chart. Ocean freight rates analytics firm Xeneta said its data indicates spot rates on major trades out of Asia will increase again on 15 June, but to a less dramatic extent than witnessed in May and early June. Average spot rates from Asia to US West Coast are set to increase by 4.8% on 15 June to stand at $6,178/FEU (40-foot equivalent unit). However, on 1 June, rates on this trade increased by 20%. From Asia into the US East Coast, rates are set to increase by 3.9% on 15 June to stand at $7,114/FEU. Again, this is a far less dramatic jump than when rates increased by 15% on 1 June. Rates from north China to the US Gulf are at the highest this year but leveled off this week, as shown in the following chart. “Any sign of a slowing in the growth of spot rates will be welcomed by shippers, but this is an extremely challenging situation, and it is likely to remain so,” Xeneta chief analyst Peter Sand said. “The market is still rising, and some shippers are still facing the prospect of not being able to ship containers on existing long-term contracts and having their cargo rolled.” 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), are shipped in pellets. They also transport liquid chemicals in isotanks. LIQUID TANKER RATESUS chemical tanker freight rates assessed by ICIS were mostly unchanged. However, rates were lower from the US Gulf (USG) to India and unchanged from the USG to the Caribbean. From the USG to Asia, the market has gone overall quiet after a few busy weeks in the month of May. The spot market faces headwinds as activity has been slow, causing spot space to pile up for July, placing downward pressure on spot rates. Recent force majeures in the USG have caused some COA vessels to look for additional cargoes, adding pressure to rates. Market participants are optimistic that freight rates for larger parcels will stabilize in the near term. US PORT OPERATIONS Operations at US ports are stable even as import volumes are at the highest since 2022, and railroad performance has improved over the past month, according to analysts at freight forwarder Flexport. Nathan Strang, director of ocean freight, US Southwest for Flexport, said that apart from the Port of Charleston, South Carolina, volumes are moving really well through the East Coast ports with rail dwell averaging about two days. Charleston is undergoing an infrastructure project on its Wando Welch Terminal to expand the docks. Dock construction at Wando Welch terminal started on 11 March, reducing berth space from three to two berths for one year, with berths given on first come, first serve basis. Strang said some vessels are discharging at the Port of Savannah, Georgia, and then moving material to Wando Welch via trucks, or using other terminals within the Port of Charleston as space becomes available. Overall port omissions from all carriers are starting to reduce the extent of the delays, with six to nine days delay expected in week 24, according to a port update from Hapag-Lloyd. RAILROADS Strang said Flexport customers are seeing lower dwell times for rail cars at ports over the past month. “I have been talking about how rail performance to and through the West Coast has been suffering a little bit,” Strang said, describing his point of view in past webinars. “I will say that we have seen real improvement.” Strang said West Coast port operations have remained stable, with local pick-up dwell at six days for Los Angeles/Long Beach, at five days in Seattle/Tacoma (SeaTac) and at four days in Oakland. For the first 23 weeks of 2024, ended 8 June, North American chemical railcar loadings rose 3.8% to 1,082,614 – with the US up 3.9% to 745,780. In the US, chemical railcar loadings represent about 20% of chemical transportation by tonnage, with trucks, barges and pipelines carrying the rest. PORT OF BALTIMORE OPENS The Fort McHenry Federal Channel – the entrance to the Port of Baltimore – is fully reopened just 11 weeks after a container ship lost power and struck the Francis Scott Key Bridge, causing its collapse and essentially shutting the port. The Unified Command (UC) said salvage crews successfully removed the final large steel truss segment blocking the 700-foot-wide Fort McHenry Federal Channel on 3-4 June. Deep-draft commercial vessels have been able to transit the port since 20 May when the UC cleared the channel to a width of 400ft and depth of 50ft. Following the removal of wreckage at the 50-foot mud-line, the UC performed a survey of the channel on 10 June, certifying the riverbed as safe for transit. The closing of the port did not have a significant impact on the chemicals industry as chemicals make up only about 4% of total tonnage that moves through the port, according to data from the American Chemistry Council (ACC). PANAMA CANAL The Panama Canal Authority (PCA) is offering an additional booking slot for the Neopanamax locks as of 11 June, increasing the total number of daily canal transits to 33, and is also raising the maximum authorized draft based on the current and projected level of Gatun Lake. The PCA will open an additional slot on 8 July, which will bring the total number of daily transits to 34. Because of the improved water levels now that the rainy season has arrived, the PCA is also increasing the maximum authorized draft for vessels to 14.02 meters (46.0 feet). This is the second increase in draft restrictions over the past few weeks. Wait times for non-booked southbound vessels ready for transit have been relatively steady at less than two days, according to the PCA vessel tracker. The tracker is only for non-booked vessels in the queue and shippers should consider two additional days as a minimum to estimate transit times for unscheduled vessels, the PCA said. Focus article by Adam Yanelli Additional reporting by Kevin Callahan

14-Jun-2024