Starting from the fourth quarter of 2023, the escalation of conflicts in the Middle East has led to armed attacks on commercial ships in the Gulf of Suez and the Red Sea, causing soaring freight costs along the way. Some Asian petrochemical companies are preparing to deal with long-term delays in transportation logistics. Although shipping from Asia to Europe is still ongoing, the longer sailing times and tighter shipping schedules caused by shipping companies taking detours around the Cape of Good Hope will inevitably affect the transportation efficiency of petrochemical products in Asia.

The international freight industry platform Freightos released a report on January 11th stating that due to the ongoing attacks, six of the world's top ten container transport companies, namely Maersk, MSC, Herbert, ZIM, ONE, and CMA CGM, are diverting ships from the Red Sea. According to Freightos data, the shipping fleet diverted from the Suez Canal accounts for 62% of global capacity. The Suez Canal connects the Red Sea and the Mediterranean, with approximately 12% of global trade, including 30% of container transportation, passing through the Suez Canal. Taking a detour around the Cape of Good Hope will result in longer shipping journeys and increased fuel demand, leading to higher shipping costs. Compared to the usual Red Sea routes, longer routes result in higher risks and increased insurance premiums for ships.

Chemical market insiders say that as the global economic recovery has not yet fully begun, there will be restrictions on the volume of chemical trade this year. The ongoing conflict in the Middle East will further exacerbate logistics difficulties in 2024, driving up costs and further reducing inter regional trade. As for acetic acid, China's exports to Europe are expected to shrink in January, as the Red Sea crisis has increased transportation costs and spot trade between China and Europe has dried up. According to a shipping brokerage company, the Asia Europe freight rate for 1000 tons of cargo has skyrocketed from around $160 per ton to over $200 per ton. Since December last year, the freight charges for Asia Europe acetic acid transportation have increased by $50-80 per ton.

As for terephthalic acid (PTA), the container freight of trade routes from Asia to Türkiye and Europe via the Middle East is also rising. The transportation cost from Northeast Asia to India is also increasing. According to market sources, container freight rates have more than doubled compared to the fourth quarter of 2023. PTA goods in Northeast Asia are mostly traded at offshore prices, with buyers bearing the shipping costs. Due to the relatively lower shipping costs compared to container shipping, some importers are looking for alternative trade methods, such as transporting goods in bulk. In the Asian polyester market, the increase in shipping costs due to the diversion of goods from the Suez Canal and Red Sea has suppressed purchases. In terms of oil and fat chemicals, a Southeast Asian fatty acid supplier has reduced its quotation to EU customers due to soaring shipping costs on this route.

The demand for finished products in the polyethylene (PE) market has been stable, but the shipping costs from Asia to Europe and the United States have doubled or more. An exporter of finished products in Southeast Asia said: "This is a big concern for us, because customers are comparing our prices with those from Poland and Türkiye, making our prices less competitive." An industry insider said that so far, the impact on PE shipped to Europe has not been significant.

In terms of the titanium dioxide market, Chinese manufacturers are concerned about market share as rising shipping costs have pushed up the landing costs of their products. Due to the high transportation costs to other regions at present, sellers may have to focus on the Asian market, thereby increasing supply in the region and intensifying market competition.

Currently, with the escalation of the situation in Yemen, the transportation costs of routes through the Red Sea and Suez Canal continue to increase. Freightos stated, "Currently, the transportation cost of a 40 foot standard container between China and Nordic countries exceeds $4000, compared to a price of approximately $1500 in November last year." On January 8th, the Freightos Baltic sea freight index for the Asia to North America East Coast route via the Suez Canal was $4234 per 40 foot container, an increase of 69% since mid-December, 2023. Compared to mid December 2023, the freight price from Asia to Northern Europe was $4789 per 40 foot, an increase of 226%, and the freight price to the Mediterranean was $5202 per 40 foot.

Freightos predicts that the demand for container transportation in Asia may increase as shippers attempt to ship earlier to accommodate longer transportation times. Due to insufficient transportation capacity and potential congestion, the period from mid January to mid February may be even worse.