One example is the current global container shortage, which restricts freight shipping and causes sky-high prices. This rare shortage is affecting many markets and custom chemical manufacturers are particularly affected. The petrochemical industry in the Middle East is the latest to be affected by maritime supply restrictions. Delays in key commodities such as polyethylene terephthalate and base oil cargoes are now commonplace.
It is not easy to see why custom chemical manufacturers were so affected by the container shortage.
Where are all the Containers?
Many shipping containers are currently stuck at cargo ports or inland depots because of bottlenecks that date back to the beginning months of the pandemic. This results in a severely restricted flow of goods. It is due to several factors: first, a reduction in the availability of containers at the right places, second, port congestion, third, a reduced number of vessels, and inland connections, fourth, unpredictable changes in purchasing behavior.
Many carriers also responded to the predicted drop in trade in the early days of COVID-19, by reducing their fleet size and returning containers to leaseholders. Shipping rates continue to rise because of a lack of containers that could be moved in the right places.
However, not all areas are experiencing a shortage of containers. The latest issue is the North American bottleneck. Erik Rose, Customer Experience Manager, COBB’s Jayhawk Site in Galena (KS): ” During summer, it was difficult to get a booking but since December, we have been able o get containers but the boats that they are supposed to depart on are getting delayed by two to three weeks!
How Custom Chemical Manufacturers Respond to Logistics Container Challenges
The situation facing custom chemical manufacturers is one of high cost, low reliability, and routine delays. Each of these factors is very detrimental to global supply chains for custom chemicals. Shipping East-to-West has become a costly business. Current freight rates range from less than $2,000 to more than $8000 per container load.
These costs and delays can have an immediate impact on the customer. Rose elaborated:
Custom manufacturers have to communicate delays and look for ways to ship products earlier. This could mean that production schedules are adjusted or additional raw materials are purchased.
This situation is likely to continue with unpredictable consequences. Many custom chemical manufacturers are taking advantage of the reduced production in Asian markets to supply backlogs of chemical commodities while avoiding taking on any new near-term contracts.
Other custom chemical manufacturers have responded to the reduction in spot contracts by implementing temporary plant closures for more extensive maintenance. For Chinese custom chemical producers, who have had to deal with the financial burdens associated with lockdown for a longer time than others, this has become more common.
Gleichzeitig, custom chemical producers in the UK and Europe are dealing with new bureaucracy across borders after the UK’s exit from the Single Market and Customs Union. Containers have only exacerbated the transition period in which UK-27 custom chemical producers must adjust to the new trading environment.
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