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How the Red Sea Crisis is Reshaping the Global Polyurethane Trade and Raw Material Supply

The ongoing crisis in the Red Sea has had a substantial impact on the global polyurethane market and its raw material supply. The disruption of global supply chains and trade due to the Red Sea navigation suspension and security threats has resulted in higher transportation costs, lower vessel turnover efficiency, and limited container capacity.




Impact on Trade Routes for Polyurethanes and Raw Materials


With over 20,000 ships passing through the Red Sea Passage and the Suez Canal each year, or 14% of global seawall trade, the Red Sea is a vital waterway for international trade. Containerised transportation of polyurethane, raw materials, and related products accounts for approximately 30% of Red Sea traffic.

Due to the increased risk associated with shipping in the region, many container ships have chosen to avoid the Red Sea and divert around South Africa's Cape of Good Hope. This rerouting has resulted in higher transportation costs because the voyage has been extended by approximately 10 days and the total journey distance has increased by roughly one-third.


Shipping, Freight, and Raw Material Costs


The Red Sea disturbance has also resulted in higher freight costs for shipments of polyurethane and its raw materials. Spot market freight rates on Far East to Eastern Mediterranean routes have doubled, according to freight forwarders, significantly increasing the cost of polyurethane trade.


Increasing shipping costs and delays have had a direct impact on the polyurethane market. According to industry reports, freight rates on Asia-Europe routes, including for polyurethane shipments, have risen as a result of the suspension of Red Sea sailings and subsequent uptake by container lines.


Impact on Insurance Costs

The increased risks associated with shipping in the Red Sea have also led to higher insurance costs for polyurethane and raw material cargoes. Insurers have raised premiums for vessels transiting the Red Sea, adding to the overall costs for polyurethane producers and exporters.


Impact on Supply and Demand for Polyurethane and Raw Materials


Supply chain delays and rising costs have put pressure on the profitability and competitiveness of polyurethane producers and exporters. Numerous polyurethane manufacturers have reported a decrease in profit margins due to increased freight and transportation costs.


Furthermore, the disturbance in the Red Sea has reduced demand for polyurethane in some areas. Due to rising costs and supply chain delays, domestic buyers' offtakes have been somewhat low, affecting the total amount of polyurethane products consumed.



In conclusion, the ongoing crisis in the Red Sea has significantly impacted the global polyurethane market and its supply chain. The disruptions have led to higher freight rates, increased insurance costs, and higher transportation costs, causing supply chain disruptions and putting pressure on the profitability and competitiveness of polyurethane producers and exporters. The industry must continue to adapt and find strategies to mitigate the effects of these trade disruptions as long as the Red Sea situation remains unstable.

 

 

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