Generic Hero BannerGeneric Hero Banner
Latest market news

Container shipping downturn implications for polymers

  • Market: Petrochemicals
  • 23/06/23

Polymer freight costs have been on a wild ride over the past couple of years, with container shipping rates hitting record highs in the middle of the Covid-19 pandemic and for the most part of 2021. But the past year has seen a reversal, with spot rates on most port pairs on front-haul lanes falling back to around pre-pandemic levels.

As of 22 June, Freightos-derived Argus polymer freight rates on the key Shanghai-Antwerp and Busan-Antwerp routes were $49.50/t and $52.50/t, respectively, down by 92-93pc from peaks of $650.50/t and $703/t on 9 December 2021. The downtrend began at the end of the first quarter 2022 as accelerating inflation in the eurozone and the US led to a cutback in consumer spending. With the subsidence of lingering bottlenecks, which had kept freight rates elevated and well above historical averages in the first half of 2022, rates on both lanes fell rapidly to mid-high double digits by the end of the year.

Economic headwinds and carriers' response

Macroeconomic developments lay at the heart of the steeper fall in the second half of 2022, with pent-up demand for goods receding as consumers tightened their belts. Central banks responded to persistently elevated inflation with tighter monetary supply and consecutive increases in interest rates — a cycle that is yet to end. As of 23 June, the US Federal Reserve rates are at a 16-year high of 5-5.25pc, and those of the ECB at a 22-year high of 3.5pc. The Bank of England has raised rates to a 15-year high of 5pc.

Inflation has eased slightly from peaks earlier in the year but remain well above central banks' targets of 2pc, which have induced market expectations of interest rates being higher for longer. Consequently the economic outlook for the coming quarters appears stagflationary at best, and recessionary at worst — both of which indicate low confidence of a short-term recovery in consumer spending.

Against this backdrop container carriers have taken supply-side measures, mainly in the form of blank sailings and slow steaming. The average sailing speed slowed by 4pc on the year to 13.8 knots in the first quarter, and could drop by 10pc before 2025, according to the shipping organisation Bimco.

These capacity management measures have helped in bringing some stability to container shipping markets, with Freightos-derived Argus polymer freight rates on the Shanghai-Antwerp and Busan-Antwerp lanes oscillating so far this year in a range of $49.50-71.50/t and $52.50-81/t, respectively. Meaningful upside could be distant, given the capacity additions on the horizon. New container ship orders stood at a record 7.5mn twenty foot-equivalent units (TEUs) in April — equivalent to 29pc of the existing fleet — of which 4.9mn TEUs were for delivery before the end of 2024. Bimco expects 0.9mn TEUs to be scrapped, and the fleet to reach 29.8mn TEUs by December 2024, around 16pc higher from December 2022.

Polymer sellers in a pickle

These developments will have profound implications on global polymer trade. Sellers are already challenged by bleak demand and oversupply, and this situation will be compounded by low freight rates and reduced logistical bottlenecks. High freight rates contributed to a wide disconnect between polymer prices globally, but these will now be kept in check by competitive exports from other regions.

In Europe the protection freight rates provided against competitive imports has gone, and producers are resorting to aggressive pricing strategies to defend their market share. The low ends of European spot prices for many polyethylene (PE) and polypropylene (PP) grades are below import parity prices in June, with sellers seeking to ensure offtake from buyers and mitigate the lingering supply overhang.

This underlying basis risk could constrain the amount of polymers being moved, even with the numerous new PE and PP plant start-ups on the horizon in Asia-Pacific. Many sellers and buyers in Europe are showing reduced appetite for working long-haul import arbitrages from east Asia, instead preferring sourcing domestically with shorter lead times to delivery — especially where price differentials are minimal. Shipping lead times have slightly increased on east Asia to Europe routes as a consequence of slow steaming. As of 22 June, average container shipping times on the Busan-Antwerp and Shanghai-Antwerp lanes were 46 and 39 days respectively, and could extend out to as many as 65 days, according to Freightos.

The lack of forward demand and price visibility make long-haul arbitrages a risky venture for many regions, where competitively priced alternatives are available. Many traders are also spooked by the sharp fall in European prompt spot PE and PP prices so far in the second quarter, and in June particularly, which could have resulted in negative financial returns on import trades in some cases. Any risks posed by extraordinary logistical disruptions — such as the six-day Suez Canal blockage in March 2021 — cannot be overlooked by sellers in their cost-benefit analysis of working long-haul imports. Yet the wide availability of import offers based off reduced freight rates will continue to give buyers leverage in pricing discussions, whether or not physical volumes increase.

Polymer freight rates, NE Asia to NW Europe $/t

Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
21/02/25

S Korea's SK Chemical to build plastic waste facility

S Korea's SK Chemical to build plastic waste facility

Shanghai, 21 February (Argus) — South Korean producer SK Chemical will establish a Recycle Innovation Centre (RIC) at its Ulsan petrochemical complex, where eco-friendly chemical materials are produced, the firm announced on 18 February. The company will invest in new pilot facilities for the chemical decomposition of plastic waste to produce recycled BHET (r-BHET), an intermediate raw material in the production of PET and copolyester. SK Chemical aims to start up the depolymerisation pilot facility in 2026 with production capacity of 50 t/yr of r-BHET. The plant is integral to SK Chemical's chemical recycling technology and will be linked with existing commercial copolyester production facilities. The pilot facility is part of SK Chemical's efforts to process and reuse plastic waste that is difficult to recycle. The facility will validate commercialisation technology for various low-quality plastic waste types that were previously difficult to recycle using conventional methods, including textiles, fibres, films, and automotive parts. Recycling textiles is known to be highly challenging because of the diverse forms and material types mixed in a single garment, including polyester yarn as well as fibres such as cotton and various accessories such as buttons. SK Chemical previously established a PET chemical recycling plant in Shantou in south China's Guangdong province after purchasing Guangdong Shuye's r-BHET and chemically recycled PET (r-PET) units in 2022 to strengthen its recycled plastic business. The Shantou plant can now produce 70,000 t/yr of r-BHET and 50,000 t/yr of r-PET pellets. Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Find out more
News

US housing permits tepid in Jan, PU outlook unchanged


19/02/25
News
19/02/25

US housing permits tepid in Jan, PU outlook unchanged

Houston, 19 February (Argus) — Stagnation in new housing permits in January suggests restrained US housing construction in early 2025 as annual permit and start figures lag the prior year. Domestic polyurethane (PU) market expectations for 2025 did not improve in January, with participants planning for flat to modest increases in consumption for the year as a whole. The building blocks of polyurethanes, such as isocyanates like polymeric MDI (PMDI), go into insulation, roofing applications and carpet underlay. PMDI demand so far has been largely restocking activity rather than end-uses in construction, as expected in the first few months of the year. Most participants anticipate stronger demand in the second half of the year, an expectation which January's slow start to construction activity seems to support. February PMDI contract prices settled at 95-103¢/lb, a rollover from the previous month as supply and demand are stable, according to Argus . However, multiple price increase announcements have come out and as cost inputs continue to put pressure on the market many participants expect prices to rise in the coming months. Privately-owned housing permits were at a seasonally-adjusted annual rate of 1.483mn units in January, according to data from the US Census Bureau and the Department for Housing and Urban Development (HUD). While January was up 0.1pc from December's rate, it was 1.7pc lower than the year prior and currently stands below the rates of each of the first three months of 2024. If January's lower annual comparison were to extend through the rest of the first quarter, it could set 2025's pace of new housing construction behind the prior year's through the early peak building season that lasts from the spring to early summer, as permits serve as a forward indicator for new housing starts. Single-family permits stood at 996,000 units in January, unchanged from December after the rate increased for three straight months. But while the recent uptrend in single-family permits presents a bright spot in the housing construction outlook, January's rate was still 3.4pc below the previous year. Housing starts in January were at a seasonally-adjusted annual rate of 1.366mn units, 9.8pc below December and 0.7pc lower than January 2024. Single-family starts were at a rate of 993,000 units, 8.4pc below December and 1.8pc lower than the previous year. The stagnant month-to-month and lower annual comparisons for permits could extend declining housing starts in the months ahead. The latest builder sentiment survey for February enhanced the mixed forward view of construction activity brought by January's tepid permit rate. February's reading reversed the small uptick in sentiment registered in January, falling back five points to 42, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). February's result was the lowest level in five months and reflected builders' increasing anxiety about the construction market's outlook, especially with the Federal Reserve signaling it is reluctant to lower borrowing costs until inflation slows further. Any index reading below 50 denotes a weak market environment. NAHB Chairman Carl Harris said that builders were still hopeful that regulatory reform could spur development, but uncertainty over tariffs and high housing costs was resetting 2025 expectations in February. By Aaron May and Catherine Rabe Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

US housing permits tepid in Jan, PVC outlook mixed


19/02/25
News
19/02/25

US housing permits tepid in Jan, PVC outlook mixed

Houston, 19 February (Argus) — Stagnation in new housing permits in January suggests restrained US housing construction in early 2025 as annual permit and start figures lag the prior year. Domestic PVC market expectations for 2025 did not improve in January, with participants planning for flat to modest increases in consumption for the year as a whole. PVC demand was largely tied to rebuilding inventories rather than end-uses in construction, according to market participants. Most PVC participants did not expect replenished inventories to be immediately used, with some not budgeting for stronger demand until the second half of the year, an expectation which January's slow start to construction activity seems to support. February demand has already plateaued for some PVC buyers, reaffirming the stagnant expectations for resin consumption in the months ahead. January contract prices settled at 57.5¢/lb, a rollover from the previous month due to buyers' underlying demand concerns, according to Argus . Privately-owned housing permits were at a seasonally-adjusted annual rate of 1.483mn units in January, according to data from the US Census Bureau and the Department for Housing and Urban Development (HUD). While January was up 0.1pc from December's rate, it was 1.7pc lower than the year prior and currently stands below the rates of each of the first three months of 2024. If January's lower annual comparison were to extend through the rest of the first quarter, it could set 2025's pace of new housing construction behind the prior year through the early peak building season that lasts from the spring to early summer, as permits serve as a forward indicator for new housing starts. Single-family permits stood at 996,000 units in January, unchanged from December after the rate increased for three straight months. But while the recent uptrend in single-family permits presents a bright spot in the housing construction outlook, January's rate was still 3.4pc below the previous year. Housing starts in January were at a seasonally-adjusted annual rate of 1.366mn units, 9.8pc below December and 0.7pc lower than January 2024. Single-family starts were at a rate of 993,000 units, 8.4pc below December and 1.8pc lower than the previous year. The stagnant month-to-month and lower annual comparisons for permits could extend declining housing starts in the months ahead. The latest builder sentiment survey for February enhanced the mixed forward view of construction activity brought by January's tepid permit rate. February's reading reversed the small uptick in sentiment registered in January, falling back five points to 42, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). February's result was the lowest level in five months and reflected builders' increasing anxiety about the construction market's outlook. Any reading below 50 denotes a weak market environment. NAHB Chairman Carl Harris said that builders were still hopeful that regulatory reform could spur development, but uncertainty over tariffs and high housing costs was resetting 2025 expectations in February. By Aaron May Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

Low water likely to persist at St Louis into March


19/02/25
News
19/02/25

Low water likely to persist at St Louis into March

Houston, 19 February (Argus) — Low water conditions are expected to persist at St Louis harbor on the Mississippi River through March, causing barge loading issues for both carriers and shippers. Minimal precipitation coupled with increased ice formation along the harbor decreased water levels to -3.3ft on 19 February at St Louis, according to the National Weather Service (NWS). Some terminals at the harbor have been unable to load and unload barges because of the low water. Carriers expect this to become a larger issue when barges carrying northbound products reach St Louis in March. Although low water has been an issue at the harbor since early January, more barge carriers and shippers began to prepare for slipping water levels when grain barge movement picked up later that month. Some barge carriers have reduced the amount of product placed in barges in order to keep drafts from dipping below 9.6ft this week. Low water levels are anticipated to remain through 4 March, which may hinder barge loadings and increase delays at St Louis. St Louis has received less than an inch of rainfall over the past seven days, according to the NWS. There has been even less precipitation upriver in the Northern Plains over the past week. Larger ice formations have appeared in the harbor on account of freezing conditions. The city of St Louis is under winter weather advisory, and is forecast to receive 1-3in of snow between 18-19 February, according to NWS. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

Japan’s Mitsubishi Chemical to produce recycled PE, PP


17/02/25
News
17/02/25

Japan’s Mitsubishi Chemical to produce recycled PE, PP

Tokyo, 17 February (Argus) — Japanese petrochemical producer Mitsubishi Chemical plans to demonstrate production of recycled polyethylene (PE) and polypropylene (PP) at its chemical recycling plant in eastern prefecture Ibaraki from this summer. Mitsubishi Chemical and its five recycled plastic supply chain partners — the city of Kashima in Ibaraki, recycled material producer Refinverse, package manufacturer Toyo Seikan, food supplier Kewpie and Ibaraki-based supermarket operator Kasumi — signed an agreement on 14 February to collaborate in demonstrating recycled plastic production and supply. The firms will collect waste plastics within Ibaraki for processing to produce oil, which will be used to manufacture recycled plastics such as lids of sauce bottles for supply to the market before being collected from end users as waste plastics for chemical recycling. Mitsubishi Chemical will use its chemical recycling plant in the Kashima petrochemical complex in Ibaraki for this circular economy project. The firm completed construction of the plant in November 2024 and has been conducting a trial run to turn waste plastics into regenerated oils. Mitsubishi Chemical's subsidiaries Japan Polyethylene and Japan Polypropylene will be in charge of manufacturing PE and PP from the recycled oil. The demonstration will continue until June 2026. But the timeline for this project and its Kashima chemical recycling plant beyond this, including targets for commercial operations, was not disclosed. Mitsubishi Chemical initially aimed to start commercial operation of the plant, which can process 20,000 t/yr waste plastics to generate around 12,000-16,000 t/yr of regenerated oil, by the April 2023-March 2024 fiscal year. But construction was postponed because of the Covid-19 pandemic and delays in deliveries of equipment amid the Ukraine-Russia conflict. By Nanami Oki Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Generic Hero Banner

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more