Chemical Logistics From China: A matter of point A to point B?
The chemical logistics market is changing rapidly. More hazardous commodities being exported overseas each day. China is now among the top three producers of base chemicals, and the production of some chemicals is now exclusive to China. That means many companies now depend on this country. If you are not buying chemicals in China, at some point in the future you will have to in order to stay competitive. Importing chemicals from China isn't without it's fair share of problems, however.
One of the most important steps in buying chemicals from China is often overlooked. After finding a supplier and overcoming the challenges, now comes chemical logistics. While traveling across China, I have witnessed several accidents. I have seen chemical trucks caught in traffic collisions, package leaks during transportation, and cargo that is mislabelled. This article aims to help you avoid chemical logistics problems when you buy chemicals from China.
I have first-hand experience in arranging chemical logistics from China. Since 2007, Kemcore has shipped thousands of tons of chemicals each month from China. The issues discussed below are drawn from my experiences and those of my colleagues and clients.
Transporting Chemicals in China
Trains in China cannot haul dangerous chemicals. Chemicals can only be moved by road transportation (inbound and outbound). In the past, the Chinese logistics business was dominated by state-owned enterprises (SOEs). Today, a combination of local and foreign third-party logistics companies operate in the export logistics service market. Inbound China logistics costs are very high. Inbound logistics in China is a segmented industry serviced by only a few national companies.
Factories don’t own trucks, they outsource transportation.They do, however, retain a bit of management control. For example, sodium cyanide requires a transport license and police patrol to the harbor. It is the factory’s responsibility to apply and secure all the necessary documentation and permits. Sodium cyanide can be used to produce weapons of mass destruction. Factories must be careful that it doesn’t fall into the wrong hands.
How To Choose a Logistics Provider
Safety and security are very important factors to consider when you choose a logistics provider. Most chemicals are hazardous or classified as chemicals of security concern. The provider you choose must have a proven track record in handling hazardous chemicals.
Chemicals like ammonium nitrate that are used in making explosives are potential terrorist targets. Attempts to steal or divert it are possible. An experienced carrier is prepared for this, as well as for spills, collisions, and other safety hazards.
- Reliability: Punctuality, flexibility and adequate capacity. You will lose market share if your shipments are repeatedly delayed or unreliable. Your clients will start to look elsewhere.
- Cost: Chemicals are commodities, thus price sensitive. A price difference of $10/ton makes a difference.
- Shipment tracking: You should closely monitor your cargo movements. This ensures that commercial documents are processed and dispatched on time. Any delays may result in demurrage fees, etc.
- Quality management
- Hygiene standards: This is only important if you are shipping food-grade chemicals.
- Special storage: This is particularly applicable to sodium cyanide. Sometimes it is necessary to store cyanide temporarily at the port in case of vessel delays, etc. This requires special storage solution.
- Qualifications: Hazardous chemicals require special handling procedures. Your service provider is required to know how to handle them appropriately.
Classification of Chemicals
Chemicals are divided into 9 different classes based on the hazards they represent. These are then subdivided based on the nature and characteristics of the chemicals. For example:
Class 1: Explosives
Class 2: Gases
Class 3: Flammable liquids, etc.
In addition to class and division, some dangerous cargoes are also assigned packing groups based on the level of hazard they present. For example:
|Level of Hazard
|Very Hazardous Substance
|Moderately Hazardous Substance
Arranging Chemical Logistics in China
Before asking for a freight rate quotation, you need to have your material safety handling documents. The bare minimum that your booking agent requires includes the CAS number, UN or class number, and gross weight. You can always download this information from our website.
You also need to decide the following:
- Incoterms – FOB, CFR, or CIF
- FCL & LCL – In most cases, you can not load two or more chemicals in one container.
Depending on your handling requirements at destination, you may prefer to use pallets. Beware that if you do, your loading quantity will be lower. Expect to pay higher prices per ton (compared to non-palletised packing). Some factories may charge an extra $30 per ton for pallets.
Remember to check fumigation laws regarding wooden pallets. Ensure your supplier uses strong and good quality pallets. Poor quality pallets can fail in many ways. The wood can buckle under excessive weight and protruding nails can tear your packages. Be cautious, as some suppliers will use poor quality pallets to boost their profit margins.
AN EXAMPLE OF INCREASED COST WITH PALLETISED LOADING: CAUSTIC SODA
|Pallet cost (/ton)
|Loading /FCL (tons)
|1FCL Load (CFR)
Chemical Packaging: A Choice Between 30 kg Kegs/Drums & IBC
Make sure that your packaging is UN rated. Substandard drums have been known to leak during transportation. If possible, you should visually inspect the shipping container and packaging for leaks or potential problems prior to shipping. Leaks can result in a very large fine from the shipping company.
Chemical Package Labelling
Proper labelling is required. Don’t assume your supplier know this. Check your country's regulations on dangerous goods cargo labelling requirements. If you’re not sure what the requirements are, make sure that the shipping name and UN number are clearly printed on the package.
- Each drum or bag should clearly show the weight/volume of the chemical.
- Hazard label, shipping name, and UN number must be clearly marked.
Shipping and Arrival Logistics
You can choose to arrange your own shipping directly with the carrier or through your local or Chinese agent. In most case, you can obtain the best rates when you work with an agent. NVOCCs (Non-Vessel Operating Common Carriers) have long-standing contracts with carriers. This translates into lower rates that small exporters alone would never find.
Chinese shipping agents are cheaper than their western counterparts. I would still recommend you choose your local agent. This gives you better control over the movements of your cargo. If something does go wrong, you can always pop over at his office and shout: "Where's my cargo, dude!?" Your local agent may know better routing and service levels for inbound logistics. This is especially true if shipping inland in Africa. Cargo train service is appalling in some countries, but cheaper. Your Chinese agent will not be aware of the intermittent service.
Freight rates & IMO Surcharges
As a general rule, shipping costs are higher for hazardous chemical products. The shipping company charges extra fees over and above the normal shipping rates. Hazardous chemicals require special handling and planning for the goods at the terminal and onboard the ship.
To get the final rate for hazardous cargo, add the surcharge rate to your basic ocean freight for general cargo. For example:
- Cargo with class 3 & 4.2: USD300-400/20GP
- Cargo with class 5.1: USD500-1000/20GP
- Cargo with class 6.1: USD300-400/20GP
- Cargo with class 8 & 9:USD250-300/20GP
Let's assume the general cargo rate from Qingdao to Durban is USD900/20GP. To find out the shipping rate for chemical cargo with class 3 or 4, the final rate would be calculated as USD900+(300-400)/20GP.
- Class 5, O/F is USD900+(500-1000)/20GP
- Class 6, O/F is USD900+(300-400)/20GP
This IMO surcharge varies from carrier to carrier.
STEPS TO SHIPPING YOUR CHEMICAL CARGO:
- Decide Incoterms with your supplier.
- Choose packaging & shipping containers (20’ or 40’). Different shipping rates and loading quantity. LCL consignments are NOT allowed for hazardous chemicals.
- Find logistics providers (Provide MSDS with your RFQ for accurate quotes).
- Compare quotes and select a provider.
- Confirmation of delivery period. Book space (based on Incoterms).
- Shipment secured. Get ETA & ETD.
- Communication between supplier and buyer agents.
- Purchase insurance in case of damaged/stolen cargo. Normally 110%.
- Cargo sails. Expect vessel delays.
- Commercial documents (aka shipping documents). B/L (Verify details and costs associated with changes, telex release.) CI, PL, CO (email/color copy).
- Pre-Clearance. Duty & VAT paid.
- Arrival at the destination port.
- Inland transportation. If you use a trucking company, the driver must carry MSDS, placards, etc.
- Cargo received.
- Random Quality Sampling: Is it what you ordered? 99% or 10%?
Chemical logistics can be complicated. It involves much more than just transporting cargo from point A to point B. Select the correct provider for peace of mind and make sure the process is transparent. Request up-to-date information and don't skimp on cargo insurance. You need to ensure that your cargo is safe and secure.
Maximize your shipping costs. Chemicals are cost-sensitive, and skipping this step could cost you. Look for volume discounts and different ways of benefiting from multimodal transport options.
Where possible, choose IBC drums for packaging. They are less likely to leak during sea transportation and can save you money - chemicals cost more if packaged in smaller kegs or drums. If the entire import/export ordeal has you feeling overwhelmed, explore our complete mining chemical range here. Kemcore has nearly a decade of experience in managing all steps of chemical importation from China.
What specific challenges are you facing related to shipping chemicals out of China? Share your thoughts and experiences in the comments.
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