How Global Freight Costs Affect Petrochemical Trade

The global petrochemical market is highly sensitive to logistics. A container freight rate increase of just 10–15% can significantly reduce profit margins for exporters. Since petrochemical products like polyethylene (PE), mono ethylene glycol (MEG), and base oils are shipped in bulk, freight costs often represent up to 30% of the final landed price. Understanding how these costs impact global trade is essential for both suppliers and buyers.

2. Key Factors Driving Freight Costs

Several elements contribute to the volatility of freight prices:

3. Freight Costs and Export Competitiveness

For exporters in the Middle East, particularly Iran, freight charges play a defining role. For example:

• Polyethylene (PE100B) exporters see competitive advantage erode when shipping rates to China surge.

• Base Oil SN150 prices in India often fluctuate depending on seasonal tanker availability.

• MEG exports to Turkey become more attractive due to shorter distances and lower freight charges compared to Asian routes.

Thus, freight costs not only shape pricing strategies but also determine target markets.

4. Case Study: Middle East to Asia vs. Middle East to Europe

• Asia (China, India, Vietnam): High demand but long distances → higher freight cost impact.

• Europe (Turkey, Italy, Spain): Moderate demand but shorter transit → more stable landed cost.

Exporters often prioritize regions with lower logistics expenses to maintain competitive petrochemical prices.

5. How Exporters Can Mitigate Freight Risks

To remain competitive, exporters apply several strategies:

1. Long-term Shipping Contracts – locking in stable rates with carriers.

2. Flexitank and Bulk Options – reducing per-ton costs for chemicals.

3. Diversified Routes – avoiding congested ports or politically unstable regions.

4. Regional Hubs – using UAE free zones as re-export bases.

These approaches help balance freight volatility with consistent supply to international buyers.

6. Future Outlook

Global freight costs are unlikely to stabilize soon, given fuel market fluctuations and continued geopolitical tensions. However, exporters that adopt flexible logistics strategies and maintain transparent petrochemical prices will secure stronger positions in Asia and Europe.