The Suez Canal Blockage Crisis Continues, How Will It Affect the Chemical Market?

A "traffic congestion" occurred in the Suez Canal a few days ago, which for a time seemed to be strangling the "throat" of the world's busiest shipping channel, attracting global attention

The closure of the Suez Canal, one of the world's busiest shipping lanes connecting the Middle East, Asia and Europe, will further disrupt an already strained global shipping network

A total of 206 large container ships, oil and gas tankers, and bulk carriers carrying grain were blocked at both ends of the canal, creating one of the worst shipping jams in years, according to tracking data

Shipping of chemical products between Asia and Europe faces delays

Some petrochemical shipments between Asia and Europe are facing delays due to disruptions to the Suez Canal

According to shipping agency Leth Agencies, 16 crude and natural gas tankers and 10 chemical tankers waited to pass through the canal

Reuters sources said the tankers were carrying 870,000 tonnes of crude oil and 670,000 tonnes of clean petroleum products such as gasoline, naphtha and diesel

The German BDI industry association expressed concern that earlier delays had affected production, particularly industries that depended on raw material or construction supplies

About 16 percent of German chemical imports are transported through the Suez Canal, and Henrik Meincke, chief economist at the Association of German Chemicals and Pharmaceuticals Producers, said the lockdown was (now) impacted on a daily basis

　　Shippers in Europe have notified an Indian trader that synthetic rubber cargo shipments will be delayed by about seven days, while two vessels from Asia carrying 10,000 tonnes of vinyl acetate (VAM) may not arrive as scheduled, ICIS reported.

　　ICIS analysis believes that some conventional synthetic rubber imports from Europe to Asia are expected to be delayed, at least a week according to the current situation

　　The market for chemicals such as polyolefins has struggled, with supplies already curtailed and prices soaring as the ongoing impact of production disruptions caused by polar storms on the U.

　　The global polymer market has been grappling with a shortage of container supplies since freight rates rose sharply in the second half of last year

　　Logistics problems plaguing the petrochemical-rich Middle East could worsen as the Suez Canal is blocked, further limiting its ability to move goods out

　　Asia is the largest market for PE and PP in the Middle East, and the region will face more serious logistical problems as a lack of ships has already delayed shipments to China

　　The European market has recently seen a sharp rise in polypropylene prices due to insufficient material supply.

　　There is also the potential for delays in shipments from the Middle East to the Americas, as all shipments have to be transshipped through the Cape of Good Hope Shipping Center in South Africa, significantly extending delivery times
.

　　Natural gas prices may rise

　　Relevant data show that this route is of great significance to global trade.
In terms of tonnage, about 10% of world trade volume and 9% of world seaborne oil (equivalent to 5.
5 million barrels of oil per day) pass through the Suez Canal every year
.

　　About 30% of the world's container ship capacity passes through the 193-kilometer Suez Canal every day, and about 12% of global trade is completed through this canal connecting Europe and Asia
.

　　The paralysis of the Suez Canal waterway once led to a surge in oil prices in the international market
.
On the 24th, Brent crude oil and North American crude oil both rose about 6%
.
However, Brent crude oil fell another 3.
3% to $62.
25 a barrel on the 25th, and U.
S.
light crude oil fell 3.
9% to $58.
76 a barrel as fears of a new round of blockades in Europe due to the new crown epidemic intensified
.

　　According to ICIS, some analysts believe that if the Suez Canal is interrupted for a long time, it may lead to a rise in natural gas prices
.

　　The Suez Canal is a key transit route for the LNG market, and disruptions to transport could force LNG ships to take longer routes, such as detours around the Cape of Good Hope in South Africa
.

　　For example, it takes about 27 days for Qatari cargo to travel through South Africa to the United Kingdom, while the voyage using the Suez Canal takes about 17 days
.

　　The delays in deliveries could push up gas prices and put additional pressure on the shipping market, thereby increasing charter rates
.

　　This will particularly affect Qatari deliveries to European customers, including regular deliveries from South Hook in the UK, Zeebrugge in Belgium, Rovigo in Italy and Swinoujscie in Poland
.

　　In addition, the supply disruption will delay cargoes from Russia's Yamal LNG project that are trying to be shipped to Asia
.
In the summer, Yamal is able to carry some cargo eastwards to Asia via the Arctic Ocean route
.
But it's currently closed due to ice, so Yamal hopes to reach Asia, usually westward into Europe, and eastward into Asia via the Suez Canal
.

　　According to ICIS LNG Edge ship tracking data, there were about 276 LNG ships using the Suez Canal on the east-to-west route in 2020
.
These are from Qatar to Europe and Turkey
.

　　About 112 LNG tankers will use the Suez Canal from west to east in 2020, and the Yamal project in Russia is the largest single producer using this route
.

　　The 400-meter-long giant ship "blocks" the canal at a 45-degree angle

　　The Egyptian Suez Canal Authority issued a statement on the 24th saying that a heavy cargo ship flying the Panamanian flag ran aground in the new channel of the Suez Canal on the 23rd.
The stranded cargo ship was about 400 meters long and 59 meters wide, and was heading for the port of Rotterdam in the Netherlands
.

　　Data from the ship's real-time location website showed that the giant ship was stuck not far north of the southern end of the Suez Canal, with the bow facing northeast and the stern facing southwest, at an angle of about 45 degrees
.

　　The "blocking" of the Suez Canal channel has attracted widespread attention.
Some experts said that the accident once again showed that the world economy relies heavily on the smooth transportation of important materials
.
Whether the Suez Canal, the Strait of Hormuz, the Strait of Malacca, the Panama Canal and other key parts can ensure smooth shipping will become an important factor related to the stability of the world economy
.

　　The latest news is that Osama Rabie, chairman of the Egyptian Suez Canal Authority, issued a statement on the 25th, saying that the rescue of cargo ships stranded in the Suez Canal is still continuing, and the canal is suspended
.
A rescue company source said that it could not be ruled out that the rescue may take several weeks
.

　　Rabiei said in a statement that on the 24th, 13 cargo ships entered the Suez Canal via Egypt's Port Said, with a view to continuing to move forward after the stranded cargo ship floated
.
Dozens of other cargo ships carrying important cargo were stranded at both ends of the canal
.
At present, nine tugboats and two dredgers have participated in the rescue
.