A global logistics crisis has dragged on through the summer and into the autumn of 2021, highlighted by a continued shortage of vessels and containers, together with port congestion across the globe.
Quarantines related to Covid-19 in Asia have raised freight costs further in the second half of 2021, while natural disasters such as Typhoon Chanthu have caused extra delays. Shipping giant Maersk said in late September that the global port bottlenecks are unlikely to ease this year
Fastmarkets reached out to metal market participants ahead of the LME Week, to understand what challenges they face and how they are dealing with them.
The shipping issues are causing two sets of problems: delays in loading times and delivery schedules, and low inventory levels in destination markets, sources said.
Long shipping delays are a big concern for sellers and buyers alike. One trader of refractory minerals said new shipments of the material from China were “grinding to a halt.”
A source who imports bauxite and alumina noted that "ports in China are now 4-5 weeks late for loading, and there is now a backlog of three weeks for discharge in Rotterdam. [The] total lead time has gone up to four months to warehouse."
The shipping crisis has come at a time of rapidly recovering demand for some commodities, which adds extra pressure on the inventory side of things.
Supply chains across many commodity-consuming markets destocked heavily in 2020 at the height of the Covid-19 pandemic and entered this year with historically low stock levels.
But as demand surged in 2021, sellers of many commodities have struggled to replenish their stock.
“I tried to buy additional quantities to increase my warehouse cargo and serve prompt orders. But the cargo ends up being all sold while it’s still on the boat. By the time it gets to Rotterdam, it’s all taken,” a trader of refractory minerals said.
A Singapore-based steel scrap trader said he had seen delays of three months from North America to Vietnam for containerized steel scrap.
“It is difficult to do anything to hurry up the shipping lines and unless you are a top client, anything you say will be negligible. Traders cannot get long-term agreements because we change routes around depending on where we can do business,” he added.
Overcoming the hurdles
Some market participants who have been successful in this climate have used informal or unorthodox methods to overcome the hurdles that have emerged from the freight crisis.
A group of scrap traders - usually fierce competitors in the marketplace - have found success by grouping up to make bookings on containers.
“We can book 120-180 boxes between us and get a better rate whereas as a sole trader I can only book 30 boxes,” an Indian trader of ferrous and non-ferrous scrap said.
“When you do a bulk booking, you can go to the shipping line on the first week of the month, [make your order] and negotiate prices down. The container line is also satisfied with this, so everyone is a happy camper,” he said.
A magnesia seller source told Fastmarkets that he had been able to use his personal contacts at the shipping line - to make sure he gets to the front of the queue when arranging container space.
A large buyer of iodine, which is affected by the logistics crisis as well as metals, told Fastmarkets that he used his own logistics to make deliveries without relying on third parties.
And a buyer of antimony based in the United States said that he rearranged delivery ports depending on availability. “We use whatever space we can get,” he added.
Some market participants who do not rely on sea freight have also had an advantage this year.
A lithium producer source in Russia told Fastmarkets that the company was not affected by the freight crisis because it was able to mostly use railways for its shipments and was not beholden to sea shipments.
Rail container freight is getting more orders in Russia. In January-September 2021, container volumes increased by 31% compared with the same period in pre-pandemic 2019, according to state-owned rail company RZD.
In many other cases, participants have had little choice but to pay increased rates to shipping companies.
Shipping rates for a 20-foot container from China to the US can reach $20,000, and up to $8,000 from China to Europe, buyer and seller sources told Fastmarkets.
“If you want to ship, you have to pay,” the antimony buyer source said.
Ultimately, increased shipping costs have been passed down to consumers in the form of higher prices, several market participants conclude.
Fastmarkets’ price assessment for steel scrap, HMS 1&2 (80:20), containerized, import, cfr Bangladesh
was $492-500 per tonne on September 30. At an average rate of $3,000 per container from the United Kingdom to Bangladesh, freight made up 23% of the price, up from 21% one year before.
Increased shipping prices are also contributing to higher inflation across major Western economies. While metal and mineral prices are not included in these assessments, energy and transportation costs are.
The Bank of England (BOE) recorded a UK inflation rate of 3.2% in August while inflation in the eurozone hit a 13-year high of 3.4% in September.
BOE governor Andrew Bailey noted that “supply bottlenecks have appeared, which have raised global shipping costs.”
European Central Bank vice president Luis de Guindos on Monday October 4 said that supply disruptions had led to the rise in eurozone inflation
Davide Ghilotti in London contributed to this report.