Here’s What’s Driving Challenges in Oleochemicals Logistics

It certainly has been an interesting year thus far! The first half of 2024 proved tumultuous for oleochemical logistics, with pricing and supply issues reminiscent of the early years of the COVID pandemic. Back then (in 2020-2021), global demand for oleochemicals surged, overwhelming logistics infrastructure components such as ISO tanks, flexitanks, container space and tanker space. This led to supply insecurity, and buyers shifted from cost-driven, just-in-time strategies to prioritizing supply assurance.

Within the next couple of years, logistics pricing and availability improved, particularly for containers (ISO containers, dry containers and flexi containers). Many oleochemical buyers were able to reduce inventories and revert to just-in-time strategies.

However, as my coworkers and I sometimes say, “What’s old is new” – and we’re seeing that now. This resonates with our experience in the oleochemicals market, one that’s often characterized by recognizable cyclical patterns.

The logistics challenges of 2024 have been driven largely by supply, demand and geopolitical constraints. For example, ISO containers, flexi containers and dry containers face route deviations and congestion that have reduced global container vessel capacity by 13%.

• Supply: The ongoing crisis in the Red Sea affects the Suez Canal, resulting in the diversion of ships around South Africa’s Cape of Good Hope. Factors related to these protracted journeys have removed an estimated 6% of global supply.
• Demand: Anticipating anti-dumping duties and tariffs, some Western countries have increased demand, while some buyers dependent on China have accelerated their orders.
• Congestion/Reliability: Longer journeys have disrupted schedules and trade lanes, causing port congestion in Southeast Asia as well as in India, the Middle East, Africa and China. Up to 7.5% of global capacity is currently caught in congestion.
  
  

Furthermore, chemical tanker rates have seen sustained upward pressure since ~2022.

• Tanker Shortage: While Suez-related diversions have had a near-term effect, the key factor has been the insufficient supply of tankers.
• Fewer New Builds: Orders for new tankers have dwindled due to high interest rates, costs and limited space at shipbuilding yards.
  
  

Our P&G Chemicals team will continue to monitor these logistics challenges and any effects of potential softening in interest rates, as well as recent announcements from key players about new tankers slated to launch in 2025 and 2026.

Indeed, in a volatile and uncertain logistics market, our customers can count on us, knowing we bring:

• Domestic Production in the three regions we serve (Asia, Europe and the Americas) – our products are produced close to where our clients need them
• 150+ Years of Experience in producing and transporting oleochemicals
• Informed Account Executives who can keep customers updated and equipped to handle volatility.
  
  

To learn more, reach out to your P&G Chemicals account representative directly or through our Contact form.