At the onset of the COVID-19 pandemic in early 2020, global trade was facing clear and obvious risks such as reduced workforces and interrupted supply due to necessary travel restrictions. Yet it was far more difficult to predict the complex ripple effects that would occur as disruptions cascaded down the supply chain.
An example of this is the current global container shortage which is restricting freight shipping and causing sky-high rates. This unusual shortage is having a stranglehold on many markets, but custom chemical manufacturers in particular are feeling the sting of disruption. The Middle East’s petrochemical sector is the latest market to suffer the ramifications of maritime supply limitations, with delays in key commodities like polyethylene terephthalate (PET) and base oil cargoes now becoming commonplace.
The reason that custom chemical manufacturers have been affected so intently by the container shortage is complicated.
Where are the Containers?
Numerous shipping containers are currently stranded at inland depots or cargo ports due to bottlenecks stemming back to the early months of the pandemic. This creates an enormously restricted flow of goods, firstly due to a decrease in the number of available containers at the right locations, secondly due to port congestion, thirdly due to the reduced number of vessels and inland connections, and fourthly due to unpredictable changes in buying behaviour.
Additionally, many carriers responded to the foreseeable dip in trade during the early days of the COVID-19 pandemic by reducing fleet size and returning their containers to lease holders. The lack of accessible containers in the right locations created an untenable situation which continues to drive up shipping rates.
Not all locations are seeing a shortage of containers as one of the newest issues is a huge bottleneck in North America. Erik Rose, Customer Experience Manager at CABB’s Jayhawk site in Galena, KS: “During the summer, getting a booking was a challenge, but since December we have been able to get containers but the boats they are supposed to leave on are getting delayed by two, three, even four weeks!” The reason for this bottleneck is a huge spike in imports while there is still an issue with a reduced workforce due to the pandemic.
How are Custom Chemical Manufacturers Reacting to the Logistics Challenges?
Custom chemical manufacturers are faced with a situation characterized by high cost, low reliability, routine delays, and volume limitations. Each of these is extremely detrimental to the recovery of global custom chemical supply chains. The cost of shipping East-to-West is now notoriously high, with current freight rates surging from just under $2,000 to as more than $8000 per full container load.
These delays and costs can have a direct impact on their customer. Rose elaborated:
“Normally we would have to touch an order a few times to get it delivered, now we are having to constantly communicate with our freight forwarders and customers to follow up and provide status updates. It is a lot of extra work, but it makes a difference to our customers.”
In addition to communicating delays, custom manufacturers are having to look at ways to ship product earlier. This may mean adjusting production schedules and looking for additional supplies of key raw materials.
The situation continues to develop with further unpredictable consequences. Many custom chemical manufacturers are taking advantage of reduced manufacturing in Asian markets to deliver backlogs of chemical commodities while refraining from taking on any more near-term contracts.
Other custom chemical manufacturers are responding to a reduction in spot contracts with temporary plant closures for in-depth maintenance. This has been increasingly routine for Chinese custom chemical manufacturers who have been dealing with the financial burdens of lockdown longer than most.
Simultaneously, custom chemical manufacturers in the UK and Europe are struggling with new cross-border bureaucracy following the UK’s departure from the Single Market and Customs Union. The transition period where UK and EU-27 custom chemical manufacturers adjust to the new trading landscape has only been exacerbated by the container situation.
These intricate nuances are having knock-on effects in virtually every market, including the US, Asia-Pacific, Oceania, and so on.
How are Custom Chemical Manufacturers Handling the Issues?
Interested in news from custom chemical manufacturers?
At CABB, we are continuing to operate in the changing global landscape with a focus on premium services and shipping to ensure contracts are fulfilled in a reliable and timely manner. We will continue to share news about the shifting industry in the coming months. However, if you have any questions, simply contact a member of the team today.