Red Sea Crisis Casts a Shadow on Asian Polyester Staple Fiber (PSF) Exports in Early 2024
- 17-Jan-2024 3:01 PM
- Journalist: Patrick Knight
The recent crisis in the Red Sea and the subsequent changes in shipping routes through the Suez Canal are posing significant challenges on the export of Asian garments and textiles, particularly those made from Polyester Staple Fiber (PSF). This development comes at a time when these nations had anticipated improved prospects for 2024, but the crisis threatens to extend the slowdown in garment and textile exports due to the surge in freight charges, particularly to Europe.
Shinhan Securities Vietnam reports that Vietnamese firms exporting PSF to Europe and the East Coast of North America are facing disruptions due to the altered Red Sea routes. Vietnamese PSF exporters are expressing concerns about escalating transportation fees as shipping lines divert their routes to ensure safety amidst tensions in the Red Sea. This situation places an additional burden on exporters of PSF who were already grappling with the repercussions of the global economic slowdown in 2023.
Truong Dinh Hoe, the general secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP), notes that transport fees to the West Coast of the US surged by approximately 55-60% in January compared to the previous month. For the East Coast, the increase ranges from 58-73%. Notably, transportation fees to Hamburg, Germany, have skyrocketed to 3-4 times higher, jumping from USD 1200-1300 to USD 4350-4450.
The prevailing tension in the Red Sea area is causing an increase in oil prices, thereby positively affecting the upstream sector, and feedstock linked to oil like Purified Terephthalic Acid (PTA) and Mono-Ethylene Glycol (MEG), which serve as crucial feedstock for PSF.
At the beginning of 2024, there is a slowdown in the rate of growth in the demand for PSF in Asia, specifically in the home textiles sector. Nonetheless, there is an anticipated continuation of replenishment demand across the PSF industrial chain. Concurrently, the outlook for foreign trade to Europe and the US is cautiously optimistic, marked by sluggish growth in PSF market, weakened economic strength, and an anticipation of reduced prices.
ChemAnalyst further predicts that the export market for PSF is likely to experience tight supply due to increased freight charges for exports to the US and Europe. In the Asian market, particularly in China, selling pressure may be evident before the Spring Festival holiday. However, the availability of discounted space may be limited due to tight inventory amid strong cost support from the upstream market. Additionally, downstream markets are expected to resume operations approximately one month after the Spring Festival holiday.