The global chemicals industry, an essential part of various sectors such as agriculture, construction, and electronics, has been significantly affected by the surge in sea freight costs over the past few years. As maritime logistics handle most global chemical shipments, increased freight rates have amplified challenges such as supply chain disruptions, operational inefficiencies, and pricing volatility. 

Rising Freight Costs

Sea freight costs have risen sharply since the pandemic, with the Shanghai Containerised Freight Index (SCFI) approximately 115 per cent higher than pre-pandemic levels as of late 2024. For example, routes from Shanghai to South America have seen rates doubling to over $9,000 per twenty-foot equivalent unit (TEU), while Shanghai–West Africa routes have surged by 137 per cent. 

Factors Contributing to Increase in Freight Costs 

Geopolitical Tensions: Conflicts in regions like the Red Sea, and Houthi attacks have disrupted key shipping routes, increasing transit distances and fuel costs. 

Climate Impact: Low water levels in the Panama Canal have added congestion and delays, compelling ships to reroute. 

Operational Costs: Rising bunker fuel prices and insurance premiums have inflated transportation expenses. 

Impact on the Chemicals Industry 

1. Rising Raw Material Costs: Chemical manufacturers heavily rely on imported feedstocks. Increased freight rates have escalated raw material costs, directly impacting profit margins. For instance, a 30 per cent rise in freight costs on key trade routes significantly inflate input costs for manufacturers. 

2. Disrupted Supply Chains: Port congestion and longer shipping times have led to delayed deliveries of critical chemicals like fertilisers and specialty materials, disrupting downstream industries. 

3. Shift in Trade Patterns: Some companies are exploring nearshoring or reshoring production to minimise reliance on expensive and unpredictable maritime logistics. 

4. Market Adjustments: Many companies have passed on increased logistics costs to consumers, resulting in higher prices for end-use products like plastics, adhesives, and paints. 

Coping Strategies Adopted by the Industry 

Optimising Logistics: Firms are consolidating shipments and adopting intermodal transport solutions to reduce costs. 

Alternative Shipping Options: Air freight, though costlier, has seen increased use for critical shipments. 

Investing in Technology: Companies are using AI and analytics for better demand forecasting and supply chain visibility. 

Broader Economic Implications 

Elevated freight rates are not just an industry-specific problem; they contribute to global inflation. UNCTAD estimates a potential 0.6 per cent rise in global consumer prices by 2025 due to persistent shipping cost hikes. Vulnerable economies reliant on imports, such as small island nations, face even steeper price increases, further challenging trade sustainability. 

Conclusion 

The chemicals industry is navigating an era of heightened sea freight volatility, underscoring the need for resilient supply chain strategies. As structural weaknesses in global logistics persist, the industry must innovate to mitigate risks and adapt to shifting economic landscapes. Investments in localised production, sustainable shipping methods, and robust trade infrastructure will be key to future stability.