Freight restrictions could hit Europe April plastic conversion capacity on lack of labor: sources

London — Truck freight restrictions aimed at halting the spread of coronavirus could limit or close some European polymer conversion capacity in the first half of April as converters risk losing manpower to self-isolation or illness, according to European polymer market sources.

The coronavirus border restrictions have already made the task of shipping chemicals and polymers more complicated and thus more expensive as deliveries take longer or are delayed, but converters worry the spread of the illness could risk business or operational continuity in April.

A converter described the situation going into April as one of hand-to-mouth buying behavior, as a result of the uncertainty about demand for some segments, particularly those that depend on the automotive or other parts of the economy that have been shut down by the lockdowns. In addition, although demand for flexible packaging has been strong, one that had been boosted by grocery and food stockpiling in March, it was uncertain whether that demand would be maintained once supply chains adjusted to the lockdowns.

"Not too many companies are needing material because a lot of companies sending their employees home as they don't have a lot of orders on their books. The next 14 days are the most important here," the same converter said Friday.

Sources pointed to a correction in April pricing that will take into account the slump in energy prices seen thus far in March as well as the wider demand destruction from the COVID-19 lockdowns.

"The most optimistic guys will say they can wait and then it can be that the prices can rise again," the converter said. "The problem is that you cannot find enough containers. Due to the coronavirus, all containers stopped in China. Workers could not de-load containers around and that means they are still not here in Europe. We cannot afford and cannot deliver due to the container situation."

"Suspension of [EU] freedom of movement is the big problem. We in sales are not facing a big problem with the movement of trucks. We calculate a little more transit time. We can find trucks and drivers but we are not inviting in any Italian drivers. As long as the drivers have not been to Italy and have not touched Italian ground it is not too much trouble to get loading from [some producers] as long as they have not been to Italy. Spain is also not an important market as we unload by containers there," the same converter explained.

The converter pointed to particular problems that other polymer converters encountered last week, the further East deliveries are made. "There's a big problem in the Poland-German border, with 5km of traffic for trucks only," the converter said.

"They are very restrictive but our drivers may take another way. It lasts a little longer but it is possible to move cargo. There's higher implication of costs and you have to pay a little more for the waiting time but this is only 5-10%, so not much."

Earlier this week resin buyers pointed to higher costs and lengthier journeys.

"More [truck drivers are] waiting...at the borders in Poland and Germany, but also in the south, in Slovenia, and also Hungary closed their borders," polymer producer said last week." Also, it's a question of cost. You have to pay more so someone has to pay the additional duration of the trip, so pricing is being amended."

According to a polyethylene trader, the Rotterdam-Poland route was normally Eur30-50/mt depending on the Poland location, but logistics and transportation firms had been forced to increase prices by as much as 60-70% since last week: "April could be more if coronavirus intensifies, and this seems to be more than likely," the trader said."

Some sources pointed to terminal operators enforcing manpower changes that stymied or limited the logistical capacity of chemical companies by imposing a halving of their logistical capacity and thus doubling the time taken to process deliveries in some European hubs. One chemical supplier pointed to the extra cost that running their operations in this way implied, forcing them to increase storage facilities in order to maintain normal operational and delivery/loading capability.