LOGISTICS: USG-Asia liquid chemical tanker rates jump as issues with Panama, Suez canals persist

HOUSTON (ICIS)–US Gulf to Asia spot shipping rates for liquid chemical tankers are surging this week as global trade lanes are being disrupted because of separate issues with the Panama and Suez canals.

A shipping broker said rates on the USG-Asia trade lane jumped by $15-32/tonne from the previous week and are likely to remain extremely volatile with the potential for extreme daily variances.

“Activity here has been slow, making it hard to accurately assess real market conditions,” a broker said, adding that space remains extremely tight because outsiders are reluctant to go on berth in this direction unless it is with a full cargo.

“As a result, there is a $20/tonne premium on larger parcels,” the broker said.

A participant in the US chemicals distribution market said the canal issues are already adding $800 to $1,800 per route on average.

Delays transiting the Panama Canal are because of restrictions put in place by the Panama Canal Authority (PCA) in November after a severe drought contributed to lower water levels in Gatun Lake.

A shipping broker said most chem tankers are waiting for a slot through the Panama Canal rather than taking the much longer trek around South America via the Strait of Magellan now that auction prices for slots are coming down, from highs of more than $1m/passage to $500,000-600,000/passage.

Current wait times to pass through the Panama Canal for non-booked vessels ready for transit are 10.1 days for northbound ships and 6.6 days for southbound ships, according to the PCA vessel tracker.

The PCA will increase the number of vessels allowed to transit the waterway daily on 16 January after rainfall and lake levels at the end of last year were less adverse than expected.

The increase will allow one additional Neopanamax vessel and one additional Panamax vessel to pass through each day, as shown in the following table.

The disruption of traffic through the Suez Canal and Red Sea comes after rebel attacks on commercial vessels led carriers to avoid the waterway altogether and instead sail around the Cape of Good Hope, which adds time and costs to each voyage.

Rates for shipping containers ex-Asia are also soaring because of the disruptions.

As of Friday, rates to the West Coast jumped by 63% and rates to the East Coast surged by 55%.

Robert Khachatryan, founder and CEO of Freight Right Logistics, said a container ship going from Shanghai to New York via Panama Canal would typically take 20-25 days, and another 20-25 days to get back to Shanghai for a 40-50 day round trip.

The same ship using the Suez Canal will take 50-70 days for the round trip, and routing around the Cape of Good Hope makes it an 80 day round trip, or longer.

“So, in the same period you are effectively reducing the number of containers that this vessel can transport by a whopping 50%,” Khachatryan said.

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), which are shipped in pellets.

Focus article by Adam Yanelli