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After Asia and Europe, Container Shortage Hinders Middle East Chemical Supplies

After Asia and Europe, Container Shortage Hinders Middle East Chemical Supplies

  • 22-Jan-2021 11:00 AM
  • Journalist: Francis Stokes

Pressure on maritime supply chains after the sudden rebound in demand since the second half of 2020 has caused huge congestion at ports, leading to unprecedented increase in prices and extended delay of scheduled deliveries. After Asia and Europe, which have recorded a steep hike in freight charges amidst congestion on the sea lines and container shortage, Middle East is the next country announcing severe tightness of supplies in its petrochemical sector.

Under the pressure of delivering any backlogs of previous contract purchases, various producers are refraining from booking any spot contracts in the near-term. In case of chemical commodities, sturdy demand for Polyethylene (PE) in the regional market has also hindered its deliveries to the Middle East especially from its major supplier US.

As most of the sellers have already sold their cargoes for this month and are poised to sanction new contracts for February by the end of January, the prices of Polypropylene (PP) are likely to witness upsurge in the Middle Eastern countries. The supply condition has turned worst in case of Base Oil as major suppliers in Iran were captivated to deliver the cargoes to India rather than Middle East to fetch better incentives.

Polyethylene terephthalate (PET) buyers in the Gulf Cooperation Council (GCC) region are experiencing a delay in their previous contract purchases by a week or two. Several production turnarounds in Asia have given the room to the regional PET sellers to cater to the domestic demand which has thus reduced the overseas delivery pressure. China’s Resources Chemicals and Zhejian Wakai New Material PET resin plants with the capacity of 400 KTPA each, have been shut for maintenance since December with no resumption date in sight. PET plant of IVL Dhunseri in India is also under maintenance since December and is anticipated to come back onstream by January end.

Various shipping lines anticipate that curtailed manufacturing in the Asian region under the rush of Lunar New Year in February is likely to give carriers the required time to deliver the backlogs of order and ease the prolonged pressure in prices of several chemical compounds. Although prices of several chemical commodities may drop after Lunar New Year, but the pressure will not ease completely as there are a huge backlog of cargoes waiting to be shipped.

ChemAnalyst predicts that soaring freight rates due to prolonged container shortage could curtail the trade growth in the near-term and can even contribute to significantly higher inflation pressures across the globe in H1 2021.

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