Raw Material Snapshot:
- Nitrile: Stable, increases expected in the near future.
- Vinyl: Increased the last 2 months, additional increases expected in the near future.
- Latex: Stable, but we are entering wintering season which could affect costs
- Poly: Stable
Section 304 Tariffs Extended Through May, 2024
Section 301 tariff exclusions were recently extended until May 31st of this year.
The tariffs affect about two-thirds of U.S. imports from China. They were initially imposed in an attempt to protect the United States’ intellectual property. However, during the pandemic, certain PPE was excluded from the tariffs as they were desperately needed.
Many disposable gloves, shoe covers and masks are already taxed at a 7.5% rate. The extension has no affect on these products, and they will continue to be taxed. However, a sizable portion of PPE is still excluded from the tariff including bouffants, hoods, lab coats, aprons, and coveralls. We continue to monitor the tariffs and will provide updates as the situation unfolds.
Major Carriers Suspend Transit Through the Red Sea and Suez Canal
Missile attacks on cargo ships by Houthi rebels along the trade route has led major carriers to avoid the Suez Canal. MSC, Maersk and Hapag-Lloyd paused all shipments until further notice. Normally roughly one-third of all global container cargo passes through the Suez canal as it is the main waterway to connect Europe with the Middle East and Asia.
While Vanguard Safety does not utilize this lane for our shipments, the ripple effect will have major industry implications. Increased global transit times will likely lead to equipment shortages and rate increases as the industry is stretched thin.
Panama Canal Bottlenecks Continue
The severe drought continues to wreak havoc on the Panama Canal and its throughput capacity.
Water levels in Gatun Lake, the rainfall-fed principal reservoir that floats ships through the canal’s lock system, have declined to unprecedented levels. Authorities say that October’s recorded precipitation was the lowest on record since 1950, and water levels dropped 5 feet from their normal average.
Unfortunately, this is Panama’s “rainy” season, and is when water levels typically increase. Therefore, the bottleneck is expected to get worse before it gets better. This drought has led to tonnage restrictions and fewer vessels transiting the shortcut each day, causing delays. The canal, which normally handles an average of 35 ships a day, recently cut down to 22 per day. If the drought continues, the number will reduce further to 18 per day on February 1st in order to conserve water heading into the dry season.
Carriers are communicating additional usage fees and extended lead times to navigate containers though the canal. For more information, please contact your Vanguard Safety rep.
Considerable Domestic Driver Capacity
Driver capacity has opened up, even in congested locations like Los Angeles. Cheap, flexible trucking capacity allows retailers to negotiate freight rates and transport goods over long distances at lower costs. Yet, it squeezes an industry, and drivers specifically, which operate on razor thin margins. The more than 1 million domestic trucking firms vie with a seemingly endless number of competitors to land freight contracts.
Previously one of America’s most heavily unionized workforces, the trucking industry deregulated in the early 1980s in response to the soaring cost of goods during the economic crisis of the 1970s. The deregulation saves consumers an estimated $28.4 billion each year. Since then, though, trucking salaries have decreased by about 50%, while only 20% of drivers are now unionized. While unionization was beneficial to many of the members and carriers at the time, it was extremely hard for new carriers and members to gain entrance into the industry.
Nowadays, many carriers push drivers to lease their vehicles. Rather than just receiving a paycheck, in this model, drivers make regular payments toward eventually owning the truck. This model reduces the carrier’s risk and seems like an attractive option to drivers. However, because rates are currently so low, many drivers are underwater on their leases, paying their entire salary toward the lease.