IMPORT CRISIS & PRODUCT SHORTAGES LOOM
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IMPORT CRISIS & PRODUCT SHORTAGES LOOM
Each year I try to write and inform our customers as to what is happening on the China supply side of the Fireworks Industry. This year we have many factors that will affect the fireworks business both short term and long term.
Things changed quickly for the fireworks producers in December 2019 when an explosion at a factory pretty much stopped all producers until most recently. A full three-month lull in production is not something that the fireworks producers can endure and still keep on schedule to supply the US market in a timely manner. Even though production has resumed after the Coronavirus epidemic. An extra six weeks of lost production occurred. Normally the factories would have been in full production after the Chinese New Year holiday had concluded.
Before the epidemic became news, we had already known that issues existed between Chinese customs officials in both Jiangxi and Hunan. They had stifled shipments and each are refusing to allow the long stand practice of combining goods made in each province on the same shipping container. This problem is yet to be resolved. In addition, China has had more than their share of port closure issues that have had the main ports of Beihai and Shanghai closed and reopened numerous times this year. This seems to have resolved at the moment but this has been a reoccurring problem in the last 12 months.
At the time of this writing, some shipments that are loaded have been delayed up to several weeks as container shippers have not had enough general cargo goods to keep the container line vessels full enough to allow these vessels’ to leave port. Therefore, they continue to delay shipments and the cargo ship is detained until enough volume is secured to fill the carrier’s vessels. There are still only so many sailing dates left between now and May 10th which is the likely cut off date for shipments that hope to arrive by June 10th to the US Importers.
China will likely produce many more containers than the space allotted on shipping lines. Because of this undersupply and the reduced sailings we are seeing the costs rise 10-20% higher than last year for the limited sailings available. There is likely no solution to the reduced numbers of sailing left in the next 60 days.
That alone will likely make the supply shortages situation on the US side even more severe as we get to the selling and shipping portion of our season. Add this to the fact that we expected the season to have a decent increase in demand as a result of the Saturday, July 4th holiday.
We now have the possibility of the Coronavirus delaying the normal traffic as no one is sure at this point how long this epidemic might affect the American market. It is normal for us to have transportation issues in the late spring has all carriers bringing the goods to our warehouses much use DOT Certified Hazmat drivers. It is a wait and see plus cross your finger situation.
I expect we will make it through this season but the underlying issues of total reliance on China as the sole supplier of the US market is going to be an issue going forward. The China government has been trying to reduce the number of factories making fireworks and pretty much forcing the smaller entities out of business. Yet every year we seem to have ongoing issues with China customs and local mandates that are stopping production for significant periods of time. This means fewer days every year to produce fireworks for the American market. Also, having only two ports to send shipments is also another recipe for disaster.
The fireworks industry is an industry of change. I have seen significant changes to our supply chains in my tenure in this business. After this season I am sure many of the major importers will look to other spots in Asia as well as South America to see they can get another region of reliable suppliers for the US market. This season is exceptional as to the number of circumstances that have come together to squeeze the supply chain. I don’t believe that we have seen the end of supply issues with China.
I am hoping that the issues of the present day get resolved with some haste and we get to have the weekend holiday season that we are all looking forward to. But there is no doubt that the fireworks industry people for the US market must start to look to other areas of the world to supply some of our needs. Our reliance on China for 100% of our supplies is not doable for the long term!
We will need to diversify supply chains for us to truly have a second or third option in case of another China meltdown during the production season. We as suppliers cannot expect using one country for all our goods is a sustainable model.
As with all businesses we need to be open to chance. The day of the holiday is a pretty good indicator of what is coming for the season. But drought and regulators can quickly throw a wrench into a smoothly going season. Supply-side is just as important.
We will get through the 2020 season. Hopefully, it will be just as good as we previously expected. Rest assured the industry will have many additional problems going forward. It’s just a part of the business that we have become accustomed to. Change opens opportunities for all of us. “Change is inevitable. Successful companies just do it sooner”. It’s time to welcome it.
Our best wishes for a “great” July 4th season!