Last week, rates for shipping containers from east Asia to the US surged after rebel attacks on vessels in the Red Sea. Additionally, disruption of traffic through the Suez Canal is putting upward pressure on freight rates and increasing concerns of delayed shipments.
As a result, many companies are altering their shipping routes to avoid the disruptions from the Suez Canal and dangers of the Red Sea, opting to divert cargoes around the Cape of Good Hope. However, this route is adding significant delays, as well as reducing the availability of shipping containers.
The European PET and purified terephthalic acid (PTA) market is experiencing shortages as a result of diverted shipments combined with multiple outages. The Asia polyester market is also experiencing negative impacts from the Suez Canal and Red Sea diversions, as rising freight rates have dampened buying on the market.
In addition to the Suez Canal and Red Sea disruptions, commodities markets continue to grapple with issues at the Panama Canal due to low water levels as a result of a local drought. The Panama Canal Authority (PCA) has been limiting the number of vessels able to pass through the canal since early November. However, the PCA has announced it will increase the number of vessels allowed to transit the waterway daily on 16 January after rainfall and lake levels at the end of last year were less adverse than expected.
The US PET market is dependent on imports, with close to 1m tonnes of PET being imported from January 2023 to October 2023, according to the ICIS Supply and Demand Database. As a result, disruptions and delays to PET imports due to these logistics issues could also impact domestic PET supply and prices.
Currently, demand for US PET is weak due to economic headwinds and low seasonality, and the market is balanced. However, if these freight disruptions continue into the peak summer season, or if any disruptions to domestic production occur – like a natural disaster – supply of PET could be threatened, potentially putting upward pressure on domestic spot prices.
