Freight costs have surged 4.5 times! Geopolitical factors are disrupting the crude oil and chemical markets, driving costs to skyrocket!

Due to geopolitical disruptions, freight rates on several transoceanic oil routes have soared by multiples. Data shows that for large tankers from the Gulf of Oman to China, rates have jumped to 4.5 times the baseline, translating to about $11.50 per barrel; daily rates for large tankers from West Africa to Asia have climbed to $411,000, and routes from the U.S. Gulf to China have reached $270,000/day. The skyrocketing shipping costs directly raise domestic crude landing costs, and with domestic port crude inventories at low levels, local refineries are rushing to restock, which has driven domestic crude prices sharply upward. On September 14, the Shanghai crude SC2610 contract historically broke through the 900 yuan/barrel mark, with a daily increase of over 10%. Even though there was a slight pullback on September 16, it still closed near the 900 yuan/barrel high.

International crude oil continues to maintain strong momentum. Reports that Saudi Arabia’s Yanbu port on the Red Sea has suspended loading, that some European customers were forced to cancel September crude oil orders, and that alternative export routes through the Strait of Hormuz are obstructed, have continuously unsettled market sentiment, with international oil prices holding steady above $100 per barrel. The input of overseas costs has become the core driving force behind the current domestic energy and chemical market trends.

With crude oil costs rising strongly, coupled with generally low domestic chemical inventories and tightening spot supply, domestic chemical spot and futures prices have simultaneously reached new phase highs. Since August, the Goldlianchuang Chemical Industry Index has risen sharply, with the growth rate significantly outpacing that of international crude oil. As of September 15, the index closed at 7514, surpassing the historical high of 7224 set during the coal market rally in 2021. Many segment-specific chemical spot prices have also broken through the 2021 price ceilings.

Market contradictions are particularly pronounced in the methanol sector. Some integrated MTO enterprises have abandoned the purchase of external raw materials and instead sell methanol raw materials externally, indirectly reflecting limited production profits in the downstream olefin sector. Enterprises are more inclined to directly realize the high-price benefits at the raw material level, further confirming the significant pressure on downstream production processes.

Geopolitical shipping risks remain a key variable in determining the peak costs of crude oil and chemical products. If disruptions in strait shipping continue, maritime freight rates are likely to rise rather than fall, and the cost side will continue to provide strong support to chemical products. However, it should also be noted that the downstream sector’s capacity to bear costs is approaching its limit, and the suppressive effect of high prices on demand will become increasingly apparent. The future market trend will depend, on one hand, on fluctuations in raw material prices and freight rates caused by changes in the geopolitical situation in the Middle East, and on the other hand, on whether downstream sectors can absorb the currently high raw material costs and whether there can be substantial improvement in demand. Under the interplay of strong cost support and weak demand reality, the chemical market is highly likely to maintain high-level volatility, and the redistribution of profits along the upstream and downstream sectors will become the main focus of industry attention going forward.