Chinese factory closures, Jan-June 2023
During the following holidays, Chinese factories may be closed. Chinese suppliers may be difficult to reach or slow to respond during these times:
Upcoming Chinese Holiday
Golden Week in China is a week-long holiday that will begin on Saturday, October 1st and end on Friday, October 7th. During this time, Chinese suppliers may be difficult to reach or slow to respond.
Minor slowdown expected as China celebrates International Workers' Day
China will celebrate International Worker's Day (also known as Labor Day). Factories will generally be closed from 5/1 - 5/4 which may mean that you won't be able to communicate with your suppliers over that period. This should not cause any significant delays and factories plan around this closure to minimize disruption.
New increase in the cost of corrugated
The price of corrugated packaging is expected to increase between 8 - 14% over the next 1-2 months. At the start of 2022, North American producers of containerboard began announcing price increases as a result of consumer demand and wider supply chain issues. The increased cost of containerboard, the largest material component of corrugated products, is the main driver of rising prices.
There is some optimism that 2022 will not see as many price increases as 2021, but this is dependent on improved stability in the industry.
If you'd like to know more about the different cost drivers for your boxes, see this guide.
You can also visit the Lumi Corrugated Tracker for live updates.
Potential delays due to COVID-related closures in China
Regions of China — including Shenzhen and Shanghai — have shut down due to a rise in COVID cases. Since offices and manufacturing facilities are on lockdown in these areas, there may be production delays. We recommend messaging your supplier(s) in China to find out if any of your orders may be affected. Read more about China’s lockdowns.
Lunar New Year 2022
All factories in China will close between 31 January and 6 February for the Spring Festival (commonly known as Chinese New Year or Lunar New Year). Typically effects of the shutdown will be seen from mid-January as many people extend their holidays.
Ports will also close briefly so you should plan for your packaging to leave by the third week of January to be certain that they will be in transit before the holiday. Speak to your suppliers or freight forwarder about air freight if you have an urgent shipment, although costs usually rise dramatically at this time of year.
Different industries often stagger the closures so you should communicate with any active suppliers about their specific dates. Although the official holiday lasts for one week, some factories can be closed for up to 4 weeks.
Plan ahead
We recommend ordering earlier and higher quantities than usual for this time period. You can also combine air and sea freight to make sure you hit your timelines. Alternatively, the marketplace has a great selection of US suppliers who can quote for you.
Post-CNY Delays
When factories reopen, they often have a production backlog and minimal workforce. This means that delays are likely after CNY, so it is best to get full transparency from your suppliers before you place any new orders. This is exacerbated by potential supply chain issues as materials suppliers may be closed for longer.
Timeline
Electricity rationing expected to reduce capacity in China
Power outages and electricity rationing in China is expected to reduce capacity, increase lead times, and increase costs from factories in China.
Manufacturers in China have reported that electricity may be rationed in the coming months. In some regions factories have been temporarily closed while in others they are subject to a 50% rationing of supply.
This rationing is driven by a combination of coal shortages and the enforcing of environmental targets.
In practice this will mean higher prices and longer lead times. This will add to existing delays seen at Asian and US ports although that is expected to improve once China returns from the Golden Week holiday.
If you need to order from China in the next 3 months, make sure you discuss this with your supplier so that you have a clear understanding of the timelines. You may also want to explore US manufacturing alternatives as there is no guarantee that the volatility won’t continue through 2022.
Over 700 US factories have joined Lumi in the last 6 months with wide availability across products. Explore suppliers in the United States on Lumi.
Price increase for paper-based products
Manufacturers on Lumi are reporting that North American containerboard mills have implemented yet another $50 per ton increase on linerboard and $60 on medium. This is the third price increase of this kind since November 2020. Visit the Lumi Corrugated Tracker for live updates.
Historic demand fueled by consumer spending and a shift to ecommerce home deliveries is behind the increase. Paper supply remains tight, there is a shortage in labor and other input costs, such as freight, continue to rise.
Price increases vary by manufacturer, but range between 7 to 12%. Please message the manufacturers you work with to understand how the price increase impacts your products.
Port congestion is causing delays
Shipping times from Asia to the US are continuing to rise as we approach the holiday season. Ports across the US and China are struggling to meet the current capacity needs, which is leading to delays in departure and arrival for goods. The Los Angeles—Long Beach hub is the most severely affected with more than 50 ships unable to dock. Other major US ports have seen backlogs over the last few months.
You can expect to see a 2-4 week delay in ocean freight shipments. If your goods have not left Asia yet, you may want to consider partial air freight.
Golden Week closures in China
China will celebrate Golden Week from 1-7 October and the major ports will be closed.
In Q3 2021 the cost of paper-based products will increase, likely between 7-11%.
Four of North America's largest six integrated container board producers announced price increases in June. Increases will roll out from mid-July through September.
Materials impacted: Virgin corrugated medium, liner board, and SBS will rise $50-70/ton effective mid-July. Pricing for recycled fiber is also expected in increase for the second month in a row starting mid-July.
Products impacted: All paper products produced in the US, including boxes, paper collateral, paper mailers, publications, paper stickers and labels, paper tape, paper tubes, and paper void fill.
What's driving the increase? The latest industry wide increases on all fiber substrates are driven by increasing demand and raw material costs.
More to come: Delays in the supply chain have created even more strain, reducing material availability. This may may stretch lead times from material manufacturers to paper manufacturers, and the delays could trickle down to customers.
