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Ukraine war disrupts chemical supply lines

[ March 28, 2023   //   Chris Lewis ]

The conflict in Ukraine has had a significant impact on chemical logistics, says UK-based specialist operator Suttons International. Supply chains in Europe and globally have been compromised and many long-established routes have been disrupted. However, the long-term effects are yet to be fully understood, it adds.

The impact the conflict has had on the transport of chemicals in Eastern Europe cannot be understated. The country is a major transit point for pipelines and links that carry raw materials in and out of Europe. The conflict has damaged or shut down many of these, disrupting the supply of key feedstock for many production processes.

The sanctions imposed on Russia due to the invasion has restricted access to raw materials and has significantly increased energy costs, leading to shortages and price increases for a wide range of chemical products. These, in turn, have had cascading effects on industries that rely on chemical inputs.

To protect chemical plants in Europe from costly shutdowns, new supply chains to source raw material and feedstock from other locations have had to be quickly established, often at great expense to producers.

The increasing costs of feedstock has been compounded by skyrocketing energy prices in an already highly energy intensive industry. This has forced many chemical producers in Europe to pass these costs on to customers and end users, ultimately making them less competitive and attractive compared to competitors in Asia or the Americas.

While deep sea ocean rates have recently stabilised to the lowest levels since pre-covid, chemical logistic costs within the EU (and UK) are at an all-time high, due in part to the issues discussed, and lingering effects of Covid and Brexit.

The result has been a downturn in demand, and production at many sites has decreased. The loss of output has further reduced the competitiveness of European chemical manufacturers, who are unable to bring the economies of scale necessary to reduce cost, when compared to rivals, or their own manufacturing, in other regions.

Suttons says that the impact on the global supply chain is far reaching: “We are only in the early stages of what could be a complete shift in numerous supply chains, which have been long established and unbroken for many decades. In the medium to long term, we can expect to see manufacturers source chemical products away from the now higher cost European manufactories to alternative suppliers outside Europe.”

When the conflict broke out,Suttons International immediately stopped all its tanks to and from Russia, adding: “We are continuously working with our customers to provide logistics solutions for transportation of alternative and ethically sourced products from other areas of the globe, to help with the immediate disruptions caused by the sanctions. “

It is also offering customers strategically located bulk storage locations to hold buffer stocks of critical raw materials, helping to offset the unpredictability of the ongoing conflict.

At the same time, it is working with customers to develop the most cost-effective way to move products between the UK and Europe, to help them remain competitive.

Its global network across the US, South America, Southeast Asia, Japan, and China, has at the same time supported any customers unable to retain their existing supply chains and help with the planning and distribution of products from new locations.

It is investing in visibility tools giving an insight into the fluctuations within the supply chain and to more effectively use assets to support customers, keeping their costs down.

Its skilled operations team is aligned to customers’ manufacturing schedules and commercial forecasting to ensure tank availability and vessel capacity to meet customer demand and keep any disruption to the minimum.

The company concludes: “Fundamental changes are occurring across chemical supply chains. The political and economic situation caused by the conflict has cast uncertainty on the long-term viability of the European chemical supply chain, which is still feeling the lingering effects of Covid and Brexit. The high energy costs are a particular frustration which must be overcome in order to stabilise and restore confidence in the industry.”

Tags: Suttons International