Raw Material Snapshot:
•Nitrile: Continues to increase. See below for more information.
•Vinyl: Stable
•Latex: Stable
•Poly: Stable
•Oil: $85 per barrel.
Freight Rates Continue to Climb
Container spot rates continue their upward trend on Asia-North America routes, even after three rounds of General Rate Increases (GRI) in May and June.
Ocean freight rates heading into the end of June have nearly doubled since April. Longer transit time on the water due to the Red Sea issues have resulted in container capacity shortages. “From the Far East into the U.S. West Coast, it is likely spot rates will surpass the level seen at the height of the Red Sea crisis earlier this year, which demonstrates how dramatic the recent increases have been,” said Emily Stausboll, senior shipping analyst at Freight Intelligence Firm Xeneta.” A lack of containers and limited capacity is driving rates to levels we have not seen since the post-Covid crisis two years ago.
Starting July 1st, we expect another 20% ocean freight increase to the East Coast and Midwest, and a 12% increase to the West Coast. Our sources are not expecting improvements looking ahead into summer. There are public forecasts warning of ocean cargo rates going up to $20,000.
Another impact we are seeing beyond the cost increase, is an increase in total actual inbound lead time. As a result, we continue to increase our planned lead times to do our best to get in front of disruptions and maintain service levels.
Section 301 Tariffs: Some Exclusions Set to Expire and Additional Tariffs Announced after USTR Review
The office of the United States Trade Representative (USTR) announced on May 28th that some PPE from China previously excluded from the section 301 tariffs are expiring. The tariffs, which went into effect on June 15th, impact CPE gowns, PEVA gowns, polyethylene sleeves and vinyl sleeves. These items will now be tariffed at a 25% rate.
Originally, exclusions to the section 301 tariffs were put in place during the pandemic, because PPE was desperately needed.
A portion of the PPE from China that was set to expire this May is still being excluded from the tariffs until May, 2025. This includes bouffants, hoods, lab coats, aprons, and coveralls.
Additional Tariffs Announced
After a 4 year review of China tariffs, the USTR announced recommendations to add or increase section 301 tariffs for products in sectors that the USTR concluded are either dominated by China, or where the United States has made significant investments.
Most notably, the USTR recommends imposing tariffs on both nitrile exam gloves and face masks at a 25% rate. While the USTR recommended imposing the 25% tariff on face masks this year, the nitrile exam gloves tariff isn’t expected to go into effect until 2026.
The USTR report also makes recommendations for establishing an exclusion process, however, the exclusions will only target machinery used in domestic manufacturing.
To Summarize:
• As of June 15th, CPE gowns, PEVA gowns, polyethylene sleeves and vinyl sleeves have a 25% tariff.
• Bouffants, hoods, lab coats, aprons and coveralls are still excluded from the tariffs.
• Industrial nitrile gloves from China already have a 25% tariff under the current Section 301 tariffs.
• Nitrile exam gloves are already tariffed at 7.5%, and are expected to increase to 25% in 2026.
Click here to read more detailed information issued by the U.S. Trade Representative regarding the new tariffs.
New Cleveland Warehouse Up and Running
Our new warehouse in Cleveland, Ohio is up and running. All stock was transferred from our old warehouse, and we began shipping orders from our new location in April.
Our warehouse team has, and continues to, work tirelessly to uphold the Vanguard promise of fast shipping which exceeds industry standards. We would like to thank our customers for their patience as we worked through the move.
The new warehouse, located at 5300 Lakeside Ave E, increases our capacity by 40%. It will also provide better tracking, and faster and more comprehensive customer service.
Drought Eases as Panama’s President-Elect Vows to Focus on Canal’s Water Level Concerns
The president-elect of Panama, Jose Raul Mulino, put water levels at the country’s canal as one of the most important items on his agenda. Mulino said he will push lawmakers to approve a law enabling the Panama Canal to build large water reservoirs to combat the droughts that have severely restricted traffic over the past 12 months.
The Panama Canal Authority aims to increase daily slots to 32 vessels this month, stating that full operations will only resume next year, after the worst drought in recorded history. However, experts believe the worst of the drought has passed. Total transits in April were up 6% month-on-month.
Maersk Expects Red Sea Conflict to Absorb up to 20% of Ship Capacity
A.P. Moller-Maersk A/S expects that the shipping industry this quarter will spend 15% to 20% of its Asia-to-Europe vessel capacity on sailing south of Africa to avoid the Red Sea.
Maersk believes the effects of the conflict “are widening.” Container spot rates for shipments from China to the eastern Mediterranean rose 3% in early May, the most since the middle of January. This indicates that capacity shortages could be dragging on longer than expected.
Uptick in Nitrile Raw Material and Glove Production Lead Times
Pricing for Nitrile Butadiene Rubber, the raw material used in nitrile disposable gloves production, continues to increase.
Nitrile Butadiene Rubber cost is up 40% since Q4. Levels are now at the highest price we have seen since the pandemic.
There have been multiple reasons for the uptick in costs, including higher than normal oil prices, a greater need for nitrile in most industries, and labor shortages in Malaysia where a substantial portion of Nitrile Butadiene Rubber is farmed. Additionally, energy shortages and staffing concerns at manufacturing plants have also contributed to increased overall lead times.
We will continue to monitor pricing and production in order to provide the best customer service possible.
Baltimore Bridge Collapse: City Says Ship was Unseaworthy Before Leaving Port
The city of Baltimore sued the owner and operator of the Dali container ship that crashed into the Francis Scott Key Bridge on March 26th, saying it had an “incompetent crew” and set sail despite receiving warnings of the ship being unseaworthy.
According to the documents filed, city officials say the ship’s parent company, Grace Ocean Private Ltd, and its operator, Synergy Marine Group, were “potentially criminally negligent” after causing the bridge collapse which killed six workers and disrupted shipping and traffic at the port of Baltimore.
The city says the collapse was caused by the owner’s carelessness, negligence and recklessness, “and as a result of the unseaworthiness of the ship.” Before leaving port, officials allege, alarms showing inconsistent power supply on the Dali sounded. However, the Dali left port anyway, despite the unseaworthiness of the vessel. The lawsuit also claims that the ship had an incompetent crew onboard who “failed to comply with local navigation customs” and lacked proper skill and training.
The lawsuit asks for damages to pay for the replacement of the bridge, to cover the costs tied to the interruption in transportation and cleanup, and for the two companies to be held liable for the increased maintenance costs incurred from police and public service workers. Vanguard Safety does not use the port of Baltimore for any of our shipments. While we surmised that the disruption may cause increased lead times at other East Coast ports, we have yet to see much of a difference.