The transportation costs for chemicals and palm oil in Asia have been significantly impacted by the continued upward trend in November. This increase could affect the flow of transportation for chemicals and palm oil for the remainder of the fourth quarter.
Increase in Transportation Costs
The transportation costs for liquids have risen from September to November despite fleet growth. This comes as the break before the Diwali festival in India has ended, and it is expected that these rising costs will harm transportation flows. In the two weeks leading up to October 28, signs of transportation costs for chemicals and palm oil have increased across most trade routes within Asia.
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Palm Oil Exports and Weather Impacts
The transportation costs for palm oil shipments from Southeast Asia to India and China have risen to their highest level in over three years. Palm oil exports from Malaysia increased by 43.2 percent in the first half of October compared to the previous month, reaching 58.3 percent. This increase is due to warehousing activities ahead of the Diwali festival and rising crude oil prices as feedstock for biodiesel.
The El Niño phenomenon, which causes drought in the Asia-Pacific region, is expected to affect palm oil production in Malaysia and Indonesia until 2027. These factors have led to increased palm oil trading activities in India and China.
However, regarding the transportation of chemicals, supply and demand forces are diverse, and signs of transportation costs in this sector are unstable. Meanwhile, gasoline trade continues to bolster signs of transportation costs for chemicals on south-to-north routes, which still perform better than transportation cost signs on north-to-south routes and within East Asia.
Despite existing challenges, tanker space is expected to remain tight in November and even beyond. Ships carrying mixed gasoline cargoes are currently waiting more than 10 days to load at the petrochemical hub.
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