Tagged "supply chain"
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.
Expected communication delays for Dragon Boat Festival, June 12-14
Manufacturers in China are preparing for the annual Dragon Boat Festival, which will last from June 12th to June 14th. Communications may be delayed until they return to work on June 15th.
Although not as long as the Lunar New Year celebration, the Dragon Boat Festival is a widespread holiday in nearly all of Asia. Plan on minor disruptions to production and slower responses from factories, freight forwarders, customs brokers and anyone else directly connected to the region.
The Dragon Boat Festival has been celebrated for thousands of years and its traditions are associated with driving off evil spirits, disease, and bad luck.
Tape and adhesive prices continue to rise
Customers may see continued price increases across packaging going into holiday peak season, particularly tape and adhesives. Both the COVID-related ecommerce spike and constricted supply chains have driven up the price of all major feedstock and ancillary components. These factors have put tape producers in a position to dramatically raise prices.
One cause of the constricted supply chain is extreme weather, including February's polar vortex in Texas and Louisiana. This continues to drive up freight costs and disrupt the petrochemical supply chain, straining the supply of several raw material components used in tape.
Year over year, there have been significant price increases on raw material and ancillary cost components as the result of a number of compounded factors.
Raw material costs (Jun 2020 - May 2021)
Other costs (Jun 2020 - May 2021)
We recommend that customers place orders as soon as possible as we expect this trend to continue throughout summer and fall.
Extreme delays ahead for US imports
Trans-Pacific freight delays and extreme port congestion are continuing to delay imports, and may worsen in the coming months as import volumes continue to grow. We will also see fallout from the Suez Canal accident, as resulting congestion at European ports will limit the number of empty containers transported back to Asia. This in turn will reduce the number of available containers available for China to US shipments. Importers should also prepare for higher spot prices as the gap between supply and demand widens.
Lumi recommends placing orders as far in advance as possible and to consider budgeting for air freight in mission-critical cases.
