Current Affairs
August 30, 2021
Hurricane IDA Update
Ida makes US landfall in Louisiana as powerful Category 4 hurricane
Author: Al Greenwood
2021/08/29
HOUSTON (ICIS)–Hurricane Ida made landfall on Sunday in Louisiana as a powerful Category 4 hurricane, and meteorologists expect the storm will continue north, following the state’s chemical corridor.
Many companies have already shut down plants in anticipation to the storm. These plants make many plastics and chemicals that are in short supply and at record prices. If they stay idled long enough, the shutdowns will further tighten markets.
STORM
Ida made landfall near Port Fourchon in Louisiana with maximum sustained wind speeds of 150 miles/hour (241 km/hour), making it a Category 4 hurricane on the Saffir-Simpson storm scale.
Ida is moving northwest at 13 miles/hour, according to the National Hurricane Center.
The following map shows the path of the storm.
Source: National Hurricane Center
PLANT SHUTDOWNS
Dow shut down its operations in Louisiana at its St Charles site in Taft and its Plaquemine site. Both sites have crackers and plants that make polyethylene (PE).
The St Charles site also makes acetic acid, acrylic acid, ethylene oxide (EO), glycol ethers and surfactants, among other chemicals.
The Plaquemine site also produces benzene, toluene, EO, glycol ethers, propylene glycol (PG) and propylene oxide (PO), among other chemicals.
At Baton Rouge, ExxonMobil is adjusting its rates and shutting down some units at its complex.
The ExxonMobil site has a refinery and a chemical complex that makes ethylene, propylene, butadiene (BD), PE, polypropylene (PP), phthalic anhydride (PA), plasticizers, benzene, toluene, isopropanol (IPA), base oils and various other chemicals.
BASF plans to idle its Geismar plants by Sunday. It makes butanediol (BDO), EO, methylene diphenyl diisocycanate (MDI), toluene diisocyanate (TDI) and polyether polyols.
Phillips 66 shut down its Alliance refinery in Belle Chasse, Louisiana. In addition to fuel, the refinery makes benzene, mixed xylenes (MX) toluene and propylene.
Shell shut down its plants in Geismar and Norco.
Geismar makes linear alpha olefins (LAO), ethylene glycol (EG), EO and glycol ethers.
Norco makes ethylene, propylene and BD.
Cornerstone is shutting down its acrylonitrile (ACN) and melamine plants in Louisiana.
It is the sole melamine plant in the US. The material is used to make laminates such as Formica.
The products made at many of these plants are already in short supply and the shutdowns could aggravate availability.
The ICIS assessment for US polymeric MDI is at a record high, reflecting the tightness in the market.
Likewise, ICIS has assessed North American BDO contracts and US melamine contracts at record highs before the hurricane.
ICIS recently assessed US contract prices for propylene at a double-digit increases.
Other plants could shut down as Ida moves inland.
The eastern part of Louisiana hit by Ida has a heavy concentration of plants that make polyvinyl chloride (PVC), a plastic used to make pipes as well as siding and profiles used in house construction.
US contract prices for PVC had already hit records before Hurricane Ida.
PVC is made with chlorine, and eastern Louisiana has several plants that make the chemical, along with caustic soda, a by-product of these units.
OIL SHUT-INS
As of Saturday afternoon, oil and gas operators have evacuated 279 platforms, nearly 50% in the Gulf of Mexico, according to the US Bureau of Safety and Environmental Enforcement (BSEE).
Producers have shut in nearly 91% of oil production and nearly 85% of gas production.
POWER OUTAGES
So far, more than 110,000 power outages have been reported to utility companies as of Sunday afternoon, according to PowerOutage.US.
Power outages can shut down operations at chemical plants and delay their restart.
PORT RESTRICTIONS, SHUTDOWNS
Ports threatened by Hurricane Ida have either restricted operations or shut them down.
The following table shows the status of several ports. X-Ray is when tropical storms or hurricane-force storm is predicted to make landfall within 48 hours, Yankee within 24 hours and Zulu within 12.
| Port | Status | Condition |
| New Orleans, Louisiana | Closed | Zulu |
| Plaquemines, Louisiana | Closed | Zulu |
| South Louisiana, Louisiana | Closed | Zulu |
| St Bernard, Louisiana | Closed | Zulu |
| Baton Rouge, Louisiana | Closed | Zulu |
| Pascagoula, Mississippi | Closed | Zulu |
| Biloxi, Mississippi | Closed | Zulu |
| Gulfport, Mississippi | Closed | Zulu |
| Mobile, Alabama | Open with Restrictions | Yankee |
| Pensacola, Florida | Open with Restrictions | X-Ray |
| Panama City, Florida | Open with Restrictions | X-Ray |
RAIL UPDATE
The New Orleans Flood Protection Authority was scheduled to close by Saturday afternoon, which would disrupt all eastward and westward rail routes going through New Orleans, including interchange routes on other carriers.
BNSF was scheduled to suspend all rail operations between Lafayette, Louisiana, and New Orleans at 1200 local time on Saturday.
Norfolk Southern said its operations would be disrupted when the authority shuts down the final flood gate on Saturday at 1400 local time. Shipments destined to New Orleans will be affected for about 48 hours, Norfolk Southern said on Friday.
Union Pacific was scheduled to suspend operations at its intermodal terminal in Avondale, Louisiana at 1600 local time on Friday.
Kansas City Southern and CSX both said on Friday that they are taking steps to prepare for Ida. They did not announce any suspensions.
POTENTIAL FOR DAMAGE
Ida’s size, strength and path could cause billions of dollars worth of damage.
The property data firm CoreLogic estimated on Friday that Ida’s storm surge is threatening 941,392 homes. If all of these homes were destroyed and replaced, CoreLogic estimates that the cost would be $220.37bn.
The reconstruction cost value represents a worst-case scenario, CoreLogic said. For reference, the firm estimated in 2020 that Hurricane Laura may have caused $8bn-12bn in insurable losses.
Home repairs, remodelling and construction make up an important end market for several chemicals and polymers.
The white pigment titanium dioxide (TiO2) is used in paints.
Solvents used in paints and coatings include butyl acetate (butac), butyl acrylate (butyl-A), ethyl acetate (etac), glycol ethers, methyl ethyl ketone (MEK) and isopropnaol (IPA).
Blends of aliphatic and aromatic solvents are also used to make paints and coatings.
For polymers, expandable polystyrene (EPS) and polyurethane (PUR) foam are used in insulation.
Polyurethanes are made of MDI, TDI and polyols.
High density polyethylene (HDPE) is used in pipe. PVC is used to make cladding, window frames, wires and cables, flooring and roofing membranes.
Unsaturated polyester resins (UPR) are used to make coatings and composites.
Vinyl acetate monomer (VAM) is used to make paints and adhesives.
Additional reporting by Adam Burkin, Tracy Dang, Michael Sims, Antoinette Smith and Alex Snodgrass
Thumbnail image shows path of Ida. Source: National Hurricane Center
HOUSTON (ICIS)–Hurricane Ida made landfall on Sunday in Louisiana as a powerful Category 4 hurricane, and meteorologists expect the storm will continue north, following the state’s chemical corridor.
Many companies have already shut down plants in anticipation to the storm. These plants make many plastics and chemicals that are in short supply and at record prices. If they stay idled long enough, the shutdowns will further tighten markets.
STORM
Ida made landfall near Port Fourchon in Louisiana with maximum sustained wind speeds of 150 miles/hour (241 km/hour), making it a Category 4 hurricane on the Saffir-Simpson storm scale.
Ida is moving northwest at 13 miles/hour, according to the National Hurricane Center.
The following map shows the path of the storm.
Source: National Hurricane Center
PLANT SHUTDOWNS
Dow shut down its operations in Louisiana at its St Charles site in Taft and its Plaquemine site. Both sites have plants that make polyethylene (PE).
The St Charles site also makes acetic acid, acrylic acid, ethylene oxide (EO), glycol ethers, surfactants, among other chemicals.
The Plaquemine site also produces benzene, toluene, EO, glycol ethers, propylene glycol (PG), propylene oxide (PO), among other chemicals. Plaquemine also has a cracker.
At Baton Rouge, ExxonMobil is adjusting its rates and shutting down some units at its complex.
The ExxonMobil site has a refinery and a chemical complex that makes ethylene, propylene, butadiene (BD), PE, polypropylene (PP), phthalic anhydride (PA), plasticizers, benzene, toluene, isopropanol (IPA), base oils and various other chemicals.
BASF plans to idle its Geismar plants by Sunday. It makes butanediol (BDO), EO, methylene diphenyl diisocycanate (MDI), toluene diisocyanate (TDI) and polyether polyols.
Phillips 66 shut down its Alliance refinery in Belle Chasse, Louisiana. In addition to fuel, the refinery makes benzene, mixed xylenes (MX) toluene and propylene.
Shell shut down its plants in Geismar and Norco.
Geismar makes linear alpha olefins (LAO), ethylene glycol (EG) EO and glycol ethers.
Norco makes ethylene, propylene and BD.
Cornerstone is shutting down its acrylonitrile (ACN) and melamine plants in Louisiana.
It is the sole melamine plant in the US. The material is used to make laminates such as Formica.
The products made at many of these plants are already in short supply and the shutdowns could aggravate availability.
The ICIS assessment for US polymeric MDI is at a record high, reflecting the tightness in the market.
Likewise, ICIS has assessed North American BDO contracts and US melamine contracts at record highs before the hurricane.
ICIS recently assessed US contract prices for propylene at a double-digit increase.
OIL SHUT-INS
As of Saturday afternoon, oil and gas operators have evacuated 279 platforms, nearly 50% in the Gulf of Mexico, according to the US Bureau of Safety and Environmental Enforcement (BSEE).
Producers have shut in nearly 91% of oil production and nearly 85% of gas production.
POWER OUTAGES
So far, more than 110,000 power outages have been reported to utility companies as of Sunday afternoon, according to PowerOutage.US.
Power outages can shut down operations at chemical plants and delay their restart.
PORT RESTRICTIONS, SHUTDOWNS
Ports threatened by Hurricane Ida have either restricted operations or shut them down.
The following table shows the status of several ports. X-Ray is when tropical or hurricane force storm is predicted to make landfall within 48 hours, Yankee within 24 and Zulu within 12.
| Port | Status | Condition |
| New Orleans, LA | Closed | Zulu |
| Plaquemines, LA | Closed | Zulu |
| South Louisiana, LA | Closed | Zulu |
| St Bernard, LA | Closed | Zulu |
| Baton Rouge, LA | Closed | Zulu |
| Pascagoula, MS | Closed | Zulu |
| Biloxi, MS | Closed | Zulu |
| Gulfport, MS | Closed | Zulu |
| Mobile, AL | Open with Restrictions | Yankee |
| Pensacola, FL | Open with Restrictions | X-Ray |
| Panama City, FL | Open with Restrictions | X-Ray |
RAIL UPDATE
The New Orleans Flood Protection Authority was scheduled to close by Saturday afternoon, which would disrupt all eastward and westward rail routes going through New Orleans, including interchange routes on other carriers.
BNSF was scheduled to suspend all rail operations between Lafayette, Louisiana, and New Orleans at 1200 local time on Saturday.
Norfolk Southern said its operations would be disrupted when the authority shuts down the final flood gate at 1400 local time. Shipments destined to New Orleans will be affected for about 48 hours, Norfolk Southern said on Friday.
Union Pacific was scheduled to suspend operations at its intermodal terminal in Avondale, Louisiana at 1600 local time on Friday.
Kansas City Southern and CSX both said on Friday that they are taking steps to prepare for Ida. They did not announce any suspensions.
POTENTIAL FOR DAMAGE
Ida’s size, strength and path could cause billions of dollars worth of damage.
The property data firm CoreLogic estimated on Friday that Ida’s storm surge is threatening 941,392 homes. If all of these homes were destroyed and replaced, CoreLogic estimates that the cost would be $220.37bn.
The reconstruction cost value represents a worst-case scenario, CoreLogic said. For reference, the firm estimated in 2020 that Hurricane Laura may have caused $8bn-12bn in insurable losses.
Home repairs, remodelling and construction make up an important end market for several chemicals and polymers.
The white pigment titanium dioxide (TiO2) is used in paints.
Solvents used in paints and coatings include butyl acetate (butac), butyl acrylate (butyl-A), ethyl acetate (etac), glycol ethers, methyl ethyl ketone (MEK) and isopropnaol (IPA).
Blends of aliphatic and aromatic solvents are also used to make paints and coatings.
For polymers, expandable polystyrene (EPS) and polyurethane (PUR) foam are used in insulation.
Polyurethanes are made of methylene diphenyl diisocycanate (MDI), toluene diisocyanate (TDI) and polyols.
High density polyethylene (HDPE) is used in pipe. Polyvinyl chloride (PVC) is used to make cladding, window frames, wires and cables, flooring and roofing membranes.
Unsaturated polyester resins (UPR) are used to make coatings and composites.
Vinyl acetate monomer (VAM) is used to make paints and adhesives.
Additional reporting by Adam Burkin, Tracy Dang, Michael Sims, Antoinette Smith and Alex Snodgrass
Thumbnail image shows path of Ida. Source: National Hurricane Center
August 27, 2021
Its That Time of Year
Tropical Storm Ida forms in Caribbean, heads towards Louisiana
Author: Al Greenwood
2021/08/26
HOUSTON (ICIS)–Tropical Storm Ida formed on Thursday in the Caribbean Sea, and meteorologists expect it will become a hurricane before making landfall in southeastern Louisiana by Sunday.
Ida has maximum sustained winds of 40 miles/hour (65 km/hour), according to the National Hurricane Center.
It is 100 miles west-southwest of Negril, Jamaica and 130 miles southeast of Grand Cayman. It is moving northwest at 14 miles/hour. Source: National Hurricane Center
Projected storm paths have it crossing over the center of the US Gulf, where federal offshore oil production accounts for 17% of total US crude output, according to the Energy Information Agency (EIA).
Federal offshore natural gas production in the Gulf accounts for 5% of total US dry gas output.
Chevron said it is moving non-essential personnel off its platforms in the Gulf of Mexico, although production remains at normal levels.
Louisiana has several petrochemical plants and refineries, many of which dealt with the active hurricane season last year that saw Lake Charles get hit by more than one storm.
Markets are still recovering from the disruptions caused by last year’s hurricane season and winter storm Uri in February.
Markets could face another wave of disruptions if the storm makes landfall in Louisiana as a major hurricane.
Participants in US polymers markets said they are monitoring the situation.
A polymer distribution company told ICIS that it is warning customers of possible storm impacts stretching from Beaumont and Orange in Texas to Lake Charles in Louisiana by early next week.
While ethylene supply has loosened considerably during the last few months, polymer-grade propylene (PGP) inventory levels remain well below average, which has rendered PGP spot prices unusually sensitive to production issues.
Demand for both olefins is strong.
A majority of aromatics capacity is in the US Gulf region. Market participants could see key disruptions to supply and transportation of benzene if large-scale refineries were forced to halt production amid inclement weather conditions.
The US methanol market is facing tighter supplies and higher prices for natural gas feedstock.
With 95% of domestic capacity located on or near the Gulf Coast, any further disruptions to production could have severe ramifications.
Extreme supply tightness persists for US acetic acid and vinyl acetate monomer (VAM) with producers unable to keep pace with demand for both domestic and export markets.
Another hit to Texas-area production, similar to winter storm Uri, would be devastating to US inventories.
Base oil supplies could tighten further if a major hurricane were to disrupt ExxonMobil’s Group I Baton Rouge refinery or Chevron’s Pascagoula Group II refinery.
Butadiene supplies could tighten further if a major hurricane were to disrupt Shell’s Norco site or ExxonMobil’s Baton Rouge site.
Styrene supply right now is ample, but three Louisiana plants – one in Lake Charles and two along the Mississippi River – make up about 30% of North American styrene market share so a direct hit to Louisiana would have an impact.
The US polycarbonate (PC) market is very tight, and Sabic has a plant in Alabama that could have immediate effect on the market if it took a direct hit.
Feedstocks for polyethylene terephthalate (PET) are mostly located along the Gulf Coast.
US ethylene glycol (EG) supply is snug, with at least 25% of North American capacity offline for planned maintenance amid healthy demand into PET.
US EG production is situated in southwestern Louisiana and southeastern Texas along the Gulf Coast, and both plants and nearby ports are susceptible to hurricane damage.
US paraxylene (PX) supply has been plentiful in recent months.
Intermediate purified terephthalic acid (PTA) and PET production largely relies on imports of PX due to much of the production being located on the US East Coast.
Mexico receives most US PX exports so it would be most likely to be affected by any potential storm damage.
In acrylates, Dow has a facility in Taft, Louisiana, that could be impacted. Supply is still snug although largely improved since the spring.
Dow also has isobutanol and N-butanol facilities in Taft. Oxo-alcohol supply is snug-to-tight, and while production is improving, it is still difficult to obtain material, especially for spot buyers.
Glycol ethers have been tight recently because of the shortage of acetic acid. This impacts propylene glycol methyl acetate (PMA) in particular.
Shell has a facility in Geismar, Louisiana, and Dow has one in Plaquemine, Louisiana.
The US ethyl acetate (etac) market has been facing strong demand amid tighter than usual supply. If the storms hit any acetic acid or etac production located in the US Gulf, then the supply constraints could worsen.
US gasoline and refined product demand has been strong through the summer driving season, although it failed to reach 2019 levels. Demand is slowly trending downward on seasonal factors, although any supply impacts from storms in the US Gulf could place upwards pressure on the market.
While Latin America is not in the storm path, its markets that rely on US imports could be affected.
Any delay in resuming normal levels of US exports that can result from new plant disruptions will impact Mexico that is already short of supply for PE and PP.
As the storm approaches the coast, companies may choose to shut down chemical plants and refineries as a precaution.
If the storm makes landfall in southern Louisiana, flood gates in the state could be closed.
When the flood gates are closed, it prevents interchange among railroad companies with eastern carriers. That would cause delays in rail shipments, compounding the logistical constraints that have already disrupted markets.
The storm could also cause power outages, which could shut down petrochemical complexes in the area.
(adds paragraphs 4-40)
Additional reporting by Ignacio Sotolongo, Anna Matherne, Amanda Hay, John Donnelly, Antoinette Smith, Deniz Koray, Alex Snodgrass, Renato Frimm, Adam Burkin and Zachary Moore
Click here for the topic page on US Gulf storms – impact on chemicals.
Visit the ICIS supply chain topic page.
Visit the ICIS US Gulf Coast polar storm topic page.
August 27, 2021
Its That Time of Year
Tropical Storm Ida forms in Caribbean, heads towards Louisiana
Author: Al Greenwood
2021/08/26
HOUSTON (ICIS)–Tropical Storm Ida formed on Thursday in the Caribbean Sea, and meteorologists expect it will become a hurricane before making landfall in southeastern Louisiana by Sunday.
Ida has maximum sustained winds of 40 miles/hour (65 km/hour), according to the National Hurricane Center.
It is 100 miles west-southwest of Negril, Jamaica and 130 miles southeast of Grand Cayman. It is moving northwest at 14 miles/hour. Source: National Hurricane Center
Projected storm paths have it crossing over the center of the US Gulf, where federal offshore oil production accounts for 17% of total US crude output, according to the Energy Information Agency (EIA).
Federal offshore natural gas production in the Gulf accounts for 5% of total US dry gas output.
Chevron said it is moving non-essential personnel off its platforms in the Gulf of Mexico, although production remains at normal levels.
Louisiana has several petrochemical plants and refineries, many of which dealt with the active hurricane season last year that saw Lake Charles get hit by more than one storm.
Markets are still recovering from the disruptions caused by last year’s hurricane season and winter storm Uri in February.
Markets could face another wave of disruptions if the storm makes landfall in Louisiana as a major hurricane.
Participants in US polymers markets said they are monitoring the situation.
A polymer distribution company told ICIS that it is warning customers of possible storm impacts stretching from Beaumont and Orange in Texas to Lake Charles in Louisiana by early next week.
While ethylene supply has loosened considerably during the last few months, polymer-grade propylene (PGP) inventory levels remain well below average, which has rendered PGP spot prices unusually sensitive to production issues.
Demand for both olefins is strong.
A majority of aromatics capacity is in the US Gulf region. Market participants could see key disruptions to supply and transportation of benzene if large-scale refineries were forced to halt production amid inclement weather conditions.
The US methanol market is facing tighter supplies and higher prices for natural gas feedstock.
With 95% of domestic capacity located on or near the Gulf Coast, any further disruptions to production could have severe ramifications.
Extreme supply tightness persists for US acetic acid and vinyl acetate monomer (VAM) with producers unable to keep pace with demand for both domestic and export markets.
Another hit to Texas-area production, similar to winter storm Uri, would be devastating to US inventories.
Base oil supplies could tighten further if a major hurricane were to disrupt ExxonMobil’s Group I Baton Rouge refinery or Chevron’s Pascagoula Group II refinery.
Butadiene supplies could tighten further if a major hurricane were to disrupt Shell’s Norco site or ExxonMobil’s Baton Rouge site.
Styrene supply right now is ample, but three Louisiana plants – one in Lake Charles and two along the Mississippi River – make up about 30% of North American styrene market share so a direct hit to Louisiana would have an impact.
The US polycarbonate (PC) market is very tight, and Sabic has a plant in Alabama that could have immediate effect on the market if it took a direct hit.
Feedstocks for polyethylene terephthalate (PET) are mostly located along the Gulf Coast.
US ethylene glycol (EG) supply is snug, with at least 25% of North American capacity offline for planned maintenance amid healthy demand into PET.
US EG production is situated in southwestern Louisiana and southeastern Texas along the Gulf Coast, and both plants and nearby ports are susceptible to hurricane damage.
US paraxylene (PX) supply has been plentiful in recent months.
Intermediate purified terephthalic acid (PTA) and PET production largely relies on imports of PX due to much of the production being located on the US East Coast.
Mexico receives most US PX exports so it would be most likely to be affected by any potential storm damage.
In acrylates, Dow has a facility in Taft, Louisiana, that could be impacted. Supply is still snug although largely improved since the spring.
Dow also has isobutanol and N-butanol facilities in Taft. Oxo-alcohol supply is snug-to-tight, and while production is improving, it is still difficult to obtain material, especially for spot buyers.
Glycol ethers have been tight recently because of the shortage of acetic acid. This impacts propylene glycol methyl acetate (PMA) in particular.
Shell has a facility in Geismar, Louisiana, and Dow has one in Plaquemine, Louisiana.
The US ethyl acetate (etac) market has been facing strong demand amid tighter than usual supply. If the storms hit any acetic acid or etac production located in the US Gulf, then the supply constraints could worsen.
US gasoline and refined product demand has been strong through the summer driving season, although it failed to reach 2019 levels. Demand is slowly trending downward on seasonal factors, although any supply impacts from storms in the US Gulf could place upwards pressure on the market.
While Latin America is not in the storm path, its markets that rely on US imports could be affected.
Any delay in resuming normal levels of US exports that can result from new plant disruptions will impact Mexico that is already short of supply for PE and PP.
As the storm approaches the coast, companies may choose to shut down chemical plants and refineries as a precaution.
If the storm makes landfall in southern Louisiana, flood gates in the state could be closed.
When the flood gates are closed, it prevents interchange among railroad companies with eastern carriers. That would cause delays in rail shipments, compounding the logistical constraints that have already disrupted markets.
The storm could also cause power outages, which could shut down petrochemical complexes in the area.
(adds paragraphs 4-40)
Additional reporting by Ignacio Sotolongo, Anna Matherne, Amanda Hay, John Donnelly, Antoinette Smith, Deniz Koray, Alex Snodgrass, Renato Frimm, Adam Burkin and Zachary Moore
Click here for the topic page on US Gulf storms – impact on chemicals.
Visit the ICIS supply chain topic page.
Visit the ICIS US Gulf Coast polar storm topic page.
August 19, 2021
Shipping Outlook
Shipping container rates to remain elevated into 2022 as US demand outpaces capacity
Author: Adam Yanelli
2021/07/20
HOUSTON (ICIS)–Shipping container rates have spiked by as much as three or four times since the onset of the pandemic and are likely to remain elevated beyond the Lunar New Year in 2022 as the global demand for goods continues to outpace available capacity.
And even when the demand starts to ease, participants on a webinar hosted by online freight shipping marketplace and platform provider Freightos said that container rates are unlikely to return to their previous levels.
“I have been in this business for 20 years, and $4,500 was the previous high I had seen for a container from Asia to the US West Coast before the pandemic,” said panellist Robert Khachatryan, founder and COO of shipping forwarder Freight Right Global Logistics.
“I think that will be the new floor,” he added. “Maybe even above $5,000. I think that could become the new market rate.”
HOW WE GOT HERE
While most chemicals are liquids and are shipped in tankers, polymers such as polyethylene (PE) and polypropylene (PP), which are shipped in pellets, are moved by container ships.
Container ships also carry a wider scope of cargoes, including consumer products like electrical appliances and automobiles, so demand for that space has risen as economies reopened after lockdown measures because of the pandemic.
The spread of the coronavirus pandemic – and the lockdown measures initiated to help mitigate it – led to a surge in demand for goods.
Consumers who were able to work from home found themselves with extra money since they were limited in how they could spend it.
Judah Levine, research lead at Freightos, said volumes began to increase, peaked in October and have remained elevated.
Container shipping has a peak season for goods from Asia to the US – from about July to October – but the added demand kept volumes above typical peak season levels.
“The impact was that all of these containers overwhelmed the capacity of the ports to process them,” Levine said.
He added that the port backlogs essentially sucked up all of the available capacity in ships and containers.
“All of the world’s container ships are active right now,” Levine said, explaining that shipowners typically have extra capacity that they can bring online for peak times. “In the current situation, there is no extra capacity, which is putting pressure all along the supply chain.”
Source: Freightos – fbx.freightos.com
Rates began to spike in Q4 2020, driven by the shortage of containers, and after some easing, shot up again when the Ever Given became lodged in the Suez Canal.
Rates continued rising recently when an outbreak of COVID-19 infections at the port of Yantian, one of China’s busiest container ports, led to lengthy delays at the port and added additional strain to the network.
IMPACT IN LATIN AMERICA
The increases in container rates have been particularly hard on Latin American markets, where resin producers have seen eroded margins because of the increased costs, which they have been unable to pass through to customers in many cases.
A market participant that imports polyvinyl chloride (PVC) from China to South America told ICIS it was quoted rates for end-July of $6,900/20-foot container from India to Argentina.
A 20-foot container from China to Argentina was quoted $9,000-12,000.
“The freight rates that you have mentioned align with what we are seeing in the market as well,” the market participant said.
“Spot rates are around $9,000-10,000/container, and even then, availability is not confirmed. Freight rates from Europe to US East Coast is also at similar levels,” the market participant said.
DEMAND TO REMAIN ELEVATED ON RESTOCKING
The panellists agreed that because of the various supply chain issues experienced this year, many businesses are running with limited inventory.
Efforts to restock barren warehouses are likely to keep demand elevated beyond this year’s peak season.
Source: US Federal Reserve
Khachatryan said that because of delays in receiving goods this year, some importers and exporters are ordering and scheduling shipments earlier than before.
He said he is seeing Christmas related items already being shipped when previously they would not be on a vessel until August or September.
“Next year we expect to see customers start ordering even earlier,” he said.
Ruthie Amaru, Freightos CEO, said it is more important than ever to look for different options for sourcing goods and to be flexible with the modes of transportation.
For example, while it would have never been cost effective prior to the pandemic to ship goods via air freight, now that container rates have spiked the gap has narrowed.
Add to that demurrage charges (a charge payable to the shipowner for failure to load or unload a ship within the agreed time frame) and the gap between rail and air could make more sense.
LIQUID TANKERS DIRECT OPPOSITE TO CONTAINERS
While container ships are facing severe shortages and price spikes, the liquid chemical tanker market is facing the opposite extreme with quite a slowdown in activity, particularly since the winter storm in February that shut much US Gulf Coast production.
“No one clearly knows what is going to happen for liquid tankers, and the more we think it is coming back, the more it is being pushed further and further away,” said one shipping broker.
After the winter storm, chemical production was at a low, and exports of product from the US slipped further.
For the remainder of Q3 and into Q4, the biggest factor that could cause a similar outcome is hurricanes. While chemical production slowly rebuilds and product becomes more available, even one significant hurricane can cause severe disruptions and declines in the tanker market.
“Other than a hurricane, I don’t think anything else can be bring this to a worse place than where we are currently,” the broker added.
Focus story by Adam Yanelli and Anna Matherne
August 19, 2021
Shipping Outlook
Shipping container rates to remain elevated into 2022 as US demand outpaces capacity
Author: Adam Yanelli
2021/07/20
HOUSTON (ICIS)–Shipping container rates have spiked by as much as three or four times since the onset of the pandemic and are likely to remain elevated beyond the Lunar New Year in 2022 as the global demand for goods continues to outpace available capacity.
And even when the demand starts to ease, participants on a webinar hosted by online freight shipping marketplace and platform provider Freightos said that container rates are unlikely to return to their previous levels.
“I have been in this business for 20 years, and $4,500 was the previous high I had seen for a container from Asia to the US West Coast before the pandemic,” said panellist Robert Khachatryan, founder and COO of shipping forwarder Freight Right Global Logistics.
“I think that will be the new floor,” he added. “Maybe even above $5,000. I think that could become the new market rate.”
HOW WE GOT HERE
While most chemicals are liquids and are shipped in tankers, polymers such as polyethylene (PE) and polypropylene (PP), which are shipped in pellets, are moved by container ships.
Container ships also carry a wider scope of cargoes, including consumer products like electrical appliances and automobiles, so demand for that space has risen as economies reopened after lockdown measures because of the pandemic.
The spread of the coronavirus pandemic – and the lockdown measures initiated to help mitigate it – led to a surge in demand for goods.
Consumers who were able to work from home found themselves with extra money since they were limited in how they could spend it.
Judah Levine, research lead at Freightos, said volumes began to increase, peaked in October and have remained elevated.
Container shipping has a peak season for goods from Asia to the US – from about July to October – but the added demand kept volumes above typical peak season levels.
“The impact was that all of these containers overwhelmed the capacity of the ports to process them,” Levine said.
He added that the port backlogs essentially sucked up all of the available capacity in ships and containers.
“All of the world’s container ships are active right now,” Levine said, explaining that shipowners typically have extra capacity that they can bring online for peak times. “In the current situation, there is no extra capacity, which is putting pressure all along the supply chain.”
Source: Freightos – fbx.freightos.com
Rates began to spike in Q4 2020, driven by the shortage of containers, and after some easing, shot up again when the Ever Given became lodged in the Suez Canal.
Rates continued rising recently when an outbreak of COVID-19 infections at the port of Yantian, one of China’s busiest container ports, led to lengthy delays at the port and added additional strain to the network.
IMPACT IN LATIN AMERICA
The increases in container rates have been particularly hard on Latin American markets, where resin producers have seen eroded margins because of the increased costs, which they have been unable to pass through to customers in many cases.
A market participant that imports polyvinyl chloride (PVC) from China to South America told ICIS it was quoted rates for end-July of $6,900/20-foot container from India to Argentina.
A 20-foot container from China to Argentina was quoted $9,000-12,000.
“The freight rates that you have mentioned align with what we are seeing in the market as well,” the market participant said.
“Spot rates are around $9,000-10,000/container, and even then, availability is not confirmed. Freight rates from Europe to US East Coast is also at similar levels,” the market participant said.
DEMAND TO REMAIN ELEVATED ON RESTOCKING
The panellists agreed that because of the various supply chain issues experienced this year, many businesses are running with limited inventory.
Efforts to restock barren warehouses are likely to keep demand elevated beyond this year’s peak season.
Source: US Federal Reserve
Khachatryan said that because of delays in receiving goods this year, some importers and exporters are ordering and scheduling shipments earlier than before.
He said he is seeing Christmas related items already being shipped when previously they would not be on a vessel until August or September.
“Next year we expect to see customers start ordering even earlier,” he said.
Ruthie Amaru, Freightos CEO, said it is more important than ever to look for different options for sourcing goods and to be flexible with the modes of transportation.
For example, while it would have never been cost effective prior to the pandemic to ship goods via air freight, now that container rates have spiked the gap has narrowed.
Add to that demurrage charges (a charge payable to the shipowner for failure to load or unload a ship within the agreed time frame) and the gap between rail and air could make more sense.
LIQUID TANKERS DIRECT OPPOSITE TO CONTAINERS
While container ships are facing severe shortages and price spikes, the liquid chemical tanker market is facing the opposite extreme with quite a slowdown in activity, particularly since the winter storm in February that shut much US Gulf Coast production.
“No one clearly knows what is going to happen for liquid tankers, and the more we think it is coming back, the more it is being pushed further and further away,” said one shipping broker.
After the winter storm, chemical production was at a low, and exports of product from the US slipped further.
For the remainder of Q3 and into Q4, the biggest factor that could cause a similar outcome is hurricanes. While chemical production slowly rebuilds and product becomes more available, even one significant hurricane can cause severe disruptions and declines in the tanker market.
“Other than a hurricane, I don’t think anything else can be bring this to a worse place than where we are currently,” the broker added.
Focus story by Adam Yanelli and Anna Matherne
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