Asian Markets
January 25, 2021
More on Containers
An ‘aggressive’ fight over containers is causing shipping costs to rocket by 300%
Published Sun, Jan 24 20218:58 PM ESTUpdated Mon, Jan 25 20219:53 AM ESTWeizhen Tan@weizentShareKey Points
- Shipping costs have skyrocketed as desperate companies wait weeks for containers and pay premium rates to get them, according to industry watchers.
- Ikea’s Singapore operations called it a “global transport crisis” and estimates 850 of its 8,500 products are affected by shipment delays.
- Chinese tech giant Alibaba’s logistic arm Cainiao launched a container booking service last week in response to the global shortage.
A Chinese worker looks on as a cargo ship is loaded at a port in Qingdao, eastern China’s Shandong province.AFP Contributor | AFP | Getty Images
SINGAPORE — A critical shortage of containers is driving up shipping costs and delays for goods purchased from China.
The pandemic and uneven global economic recovery has led to this problem cropping up in Asia, although other parts of the world have also been hit. Industry watchers said desperate companies wait weeks for containers and pay premium rates to get them, causing shipping costs to skyrocket.
This affects everyone who needs to ship goods from China, but particularly e-commerce companies and consumers, who may bear the brunt of higher costs.
In December, spot freight rates were 264% higher for the Asia to North Europe route, compared with a year ago, according to Mirko Woitzik, risk intelligence solutions manager at supply chain risk firm Resilience360. For the route from Asia to the West Coast of the U.S., rates are up 145% year over year.
Compared with last March’s low prices, freight rates from China to the U.S. and Europe have surged 300%, Mark Yeager, chief executive officer of Redwood Logistics, told CNBC. He said spot rates are up to about $6,000 per container compared with the usual price of $1,200.
Even rates from the U.S. have gone up, though not quite as dramatically, according to Yeager.
“The reason for this is the Chinese are being so aggressive about trying to get empty containers back … that it’s hard to get a container for US exporters,” he wrote in an email to CNBC, adding that 3 out of 4 containers from the U.S. to Asia are “going back empty.”
In fact, the shortage in Asia has also led to a similar crisis in many European countries, such as Germany, Austria and Hungary, as shipping carriers redirect containers to the East as quickly as possible, said Woitzik.
Trade surplus furthers container imbalance
There are a few factors stemming from the pandemic driving this phenomenon.
First, China is sending out a lot more exports to the U.S. and Europe than the other way round. Its economy bounced back faster as the virus situation within its borders was basically under control by the second quarter of last year. As a result, containers are stuck in the West when they are really needed in Asia.watch nowVIDEO03:37Port of Los Angeles executive director on shipping delays and traffic
There are about 180 million containers worldwide, but “they’re in the wrong place,” said Yeager of Redwood Logistics.
“So what’s happening is what was already a trade surplus in China has turned dramatically more severe and the reality is, there’s three containers going out for every container that’s coming in,” he said.
Making matters worse, orders for new containers were largely canceled during the first half of last year as most of the world went into lockdown, according to Alan Ng, PWC’s mainland China and Hong Kong transportation and logistics leader.
“The magnitude and pace of the recovery have caught everyone by surprise,” he said. “The sudden recovery in trade volume has seen virtually all of the major shipping lines needing to add significant container capacity to address the container shortage issue.”
Limited alternative
The shortage is further exacerbated by limited air freight capacity. Some high-value items that would normally be delivered by air, such as iPhones, now have to use containers via sea instead, according to Yeager.
International flight volumes have plunged due to virus and travel restrictions.
“Air freight companies typically use that extra capacity at the belly of a passenger plane. Well, there’s just not very many passenger flights, so not as much air service,” he said. “The lack of options, combined with this crazy amount of demand, has produced this crisis.”watch nowVIDEO02:21Analyst: Deutsche Post will benefit from global shortage in air freight supply
The container crisis affects all companies that need to ship goods. But analysts say the situation has a pronounced effect on e-commerce retailers that primarily offer consumer goods, many of which are made in China.
Ikea’s Singapore operations called it a “global transport crisis” in a mid-January Facebook post:
“The surge in demand worldwide for logistical services at this time has resulted in a global shortage of shipping containers, congested seaports, capacity constraints on vessels, and even lockdown in certain markets, amongst other challenges.”
The furniture giant estimated that about 850 of its 8,500 products sold in Singapore are affected by shipment delays, which Ikea said affects availability and planned promotions.
Redwood Logistics’ Yeager said retailers have to decide: “Do I pay a significant premium, or do I push back delivery substantially and (disappoint) customers?” The related costs are either being absorbed by retailers or passed on to customers, he said.
Race to build new containers
While some new containers have been ordered, PWC’s Ng said they will not be ready right away. He pointed to a report by the Shanghai International Shipping Research Centre released in the fourth quarter last year, which said that the shortage issue is likely to last for another three months or more.
Chinese tech giant Alibaba’s logistic arm Cainiao launched a container booking service last week, citing the global shortage. It said its service would span over 200 ports in 50 countries, and port-to-port shipping fees would be 30% to 40% cheaper, according to Reuters.
But even the race to build more containers could be hobbled by delays, according to Yeager. He said the pandemic has also hit the supply of steel and lumber needed to build containers.
https://www.cnbc.com/2021/01/22/shipping-container-shortage-is-causing-shipping-costs-to-rise.html
January 13, 2021
Asian Propylene Update
Asian propylene-naphtha spread crunches to 4-month low on naphtha upswing
Highlights
Naphtha prices rise on robust demand, crude uptick
Propylene prices weaken as buyers retreat
- Author
- Wanda Wang Melvin Yeo
- Editor
- Wendy Wells
Singapore — Asian naphtha prices strengthening to an almost 12-month high as propylene prices weaken has narrowed the propylene-naphtha spread to a four-month low, S&P Global Platts data showed Jan. 13.
The spread between FOB Korea propylene and naphtha C+F Japan cargo assessments narrowed $7.75/mt day on day to $424.25/mt at the Jan. 12 Asian close. The spread was lower on Sept. 4, 2020, at $420/mt, Platts data showed.
The typical breakeven level for propylene production is around $250/mt, and the Asian propylene-naphtha spread has remained above this level since Jan. 9, 2020, Platts data showed.
Feedstock naphtha, used by steam crackers to produce propylene has been on a crude-driven price uptrend, which pushed benchmark naphtha C+F Japan cargo up $7.75/mt day on day to $525.75/mt at the Asian close Jan. 12, a level last higher on Jan. 24, 2020, at $531.75/mt, Platts data showed.
Crude prices have firmed in response to the recent production cut by Saudi Arabia, vaccine rollouts and stimulus hopes.
Front month March Brent crude futures were assessed at $55.98/b at the Asian close Jan. 12, up $2.05/b week on week, Platts data showed. Front month Brent crude at the Asian close had averaged $50.11/b in December and $43.62/b in November, Platts data showed.
In addition, naphtha demand is robust as petrochemical makers are keen to run their naphtha-fed steam crackers at full or close to full capacity on positive olefin margins. Moreover, winter demand has boosted LPG to a premium to naphtha, making it uneconomical as an alternative cracker feedstock, sources said.
PROPYLENE UNDER PRESSURE
Propylene prices have been weighed down by thin trading activity, the availability of cheaper domestic cargoes in China, and weakness in polypropylene, sources said.
The CFR China propylene price was assessed steady day on day at $975/mt Jan. 12 and down $40/mt month on month, while the FOB Korea marker was unchanged day on day at $950/mt and down $20/mt month on month, Platts data showed.
Chinese buyers were putting import spot purchases on hold as they were expecting prices to soften when South Korean majors YNCC and LG Chemical restart cracker operations later this week. Weaker downstream polypropylene futures were also impacting their buying interest.
The planned restarts of naphtha-fed steam crackers in January and February are slated to increase propylene supply, sources said.
China’s Fujian Meide is also expected to produce on-spec propylene from its new PDH plant in Fujian province this month, and this is expected to add further pressure on import prices, sources said.
January 13, 2021
Asian Propylene Update
Asian propylene-naphtha spread crunches to 4-month low on naphtha upswing
Highlights
Naphtha prices rise on robust demand, crude uptick
Propylene prices weaken as buyers retreat
- Author
- Wanda Wang Melvin Yeo
- Editor
- Wendy Wells
Singapore — Asian naphtha prices strengthening to an almost 12-month high as propylene prices weaken has narrowed the propylene-naphtha spread to a four-month low, S&P Global Platts data showed Jan. 13.
The spread between FOB Korea propylene and naphtha C+F Japan cargo assessments narrowed $7.75/mt day on day to $424.25/mt at the Jan. 12 Asian close. The spread was lower on Sept. 4, 2020, at $420/mt, Platts data showed.
The typical breakeven level for propylene production is around $250/mt, and the Asian propylene-naphtha spread has remained above this level since Jan. 9, 2020, Platts data showed.
Feedstock naphtha, used by steam crackers to produce propylene has been on a crude-driven price uptrend, which pushed benchmark naphtha C+F Japan cargo up $7.75/mt day on day to $525.75/mt at the Asian close Jan. 12, a level last higher on Jan. 24, 2020, at $531.75/mt, Platts data showed.
Crude prices have firmed in response to the recent production cut by Saudi Arabia, vaccine rollouts and stimulus hopes.
Front month March Brent crude futures were assessed at $55.98/b at the Asian close Jan. 12, up $2.05/b week on week, Platts data showed. Front month Brent crude at the Asian close had averaged $50.11/b in December and $43.62/b in November, Platts data showed.
In addition, naphtha demand is robust as petrochemical makers are keen to run their naphtha-fed steam crackers at full or close to full capacity on positive olefin margins. Moreover, winter demand has boosted LPG to a premium to naphtha, making it uneconomical as an alternative cracker feedstock, sources said.
PROPYLENE UNDER PRESSURE
Propylene prices have been weighed down by thin trading activity, the availability of cheaper domestic cargoes in China, and weakness in polypropylene, sources said.
The CFR China propylene price was assessed steady day on day at $975/mt Jan. 12 and down $40/mt month on month, while the FOB Korea marker was unchanged day on day at $950/mt and down $20/mt month on month, Platts data showed.
Chinese buyers were putting import spot purchases on hold as they were expecting prices to soften when South Korean majors YNCC and LG Chemical restart cracker operations later this week. Weaker downstream polypropylene futures were also impacting their buying interest.
The planned restarts of naphtha-fed steam crackers in January and February are slated to increase propylene supply, sources said.
China’s Fujian Meide is also expected to produce on-spec propylene from its new PDH plant in Fujian province this month, and this is expected to add further pressure on import prices, sources said.
November 10, 2020
Wanhua Methanol Plant
China Wanhua starts up new coal-based methanol plant November 10/2020 MOSCOW (MRC) — Chinese private-sector firm Wanhua Chemical has recetnly started up a new coal-based methanol plant at Yantai in Shandong province, according to Petrotahlil.
The new plant has a nameplate capacity of 600,000 t/yr and can produce up to 670,000 t/yr of methanol.
Wanhua has mothballed its old, coal-based methanol plant with 200,000 t/yr capacity at the same site.
The new plant may not have much impact on the methanol market as Wanhua plans to maintain low operations at the plant in the initial stage, mainly for its captive consumption by its methylene diphenyl diisocyanate (MDI), methyl methacrylate and methyl tert-butyl ether units totalling 200,000 t/yr of methanol demand.
Weak margins are another concern for Wanhua to produce more methanol.
Wanhua is looking to sell vessel cargoes to east China in the longer term. The company owns China’s single-largest capacity propane dehydrogenation (PDH) plant at Yantai in Shandong province. The PDH unit has 750,000 t/yr of propylene capacity and fully integrated derivatives units. Wanhua is also the world’s largest MDI manufacturer.
The company is also set to start up its 1mn t/yr propane-feed cracker in early November.
As MRC wrote previously, China’s Wanhua Chemical posted a 49.56% decrease in net profits in the first half of the year, as sales and prices both took a hit from the coronavirus pandemic. Slump in oil prices also dampened demand and prices of its products.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).Author:Margaret Volkova
November 10, 2020
Wanhua Methanol Plant
China Wanhua starts up new coal-based methanol plant November 10/2020 MOSCOW (MRC) — Chinese private-sector firm Wanhua Chemical has recetnly started up a new coal-based methanol plant at Yantai in Shandong province, according to Petrotahlil.
The new plant has a nameplate capacity of 600,000 t/yr and can produce up to 670,000 t/yr of methanol.
Wanhua has mothballed its old, coal-based methanol plant with 200,000 t/yr capacity at the same site.
The new plant may not have much impact on the methanol market as Wanhua plans to maintain low operations at the plant in the initial stage, mainly for its captive consumption by its methylene diphenyl diisocyanate (MDI), methyl methacrylate and methyl tert-butyl ether units totalling 200,000 t/yr of methanol demand.
Weak margins are another concern for Wanhua to produce more methanol.
Wanhua is looking to sell vessel cargoes to east China in the longer term. The company owns China’s single-largest capacity propane dehydrogenation (PDH) plant at Yantai in Shandong province. The PDH unit has 750,000 t/yr of propylene capacity and fully integrated derivatives units. Wanhua is also the world’s largest MDI manufacturer.
The company is also set to start up its 1mn t/yr propane-feed cracker in early November.
As MRC wrote previously, China’s Wanhua Chemical posted a 49.56% decrease in net profits in the first half of the year, as sales and prices both took a hit from the coronavirus pandemic. Slump in oil prices also dampened demand and prices of its products.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).Author:Margaret Volkova
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