Raw Material Snapshot:
- Nitrile: Stable, slight increases expected in the near future.
- Vinyl: Increased in the last 2 months, additional increases expected in the near future.
- Latex: Stable
- Poly: Stable
- Oil: Earlier this month, prices climbed, reaching similar rates to December of 2022. The wars in Ukraine and Israel and Palestine have impacted oil prices, causing a recent spike.
- However, prices decreased throughout the week and ended at less than $80 a barrel, the lowest price since July. Experts attribute the decrease to a slowdown in China's oil demand.
S&P Global Oil Index (1 Year)
(Source: spglobal.com)
Capacity:
Capacity is steady, except for vinyl, which is tight. Many broker, pop-up COVID suppliers have exited the market due to the poor product quality and lack of industry knowledge. With excess domestic capacity drying up, purchasers are circling back to their original vendors again, causing an influx in demand.
Chinese New Year 2024 is from February 10th to February 20th. However, many overseas factories will be closed starting in late January. We are increasing safety stock to ensure we have ample inventory to service our customers during the holiday. However, to ensure that product ships before Chinese New Year, please place your purchase orders in Mid-November.
Ocean Freight:
Lead times on the ocean are steady, though they have not yet decreased to pre-COVID levels. On average, it takes 45 days for containers to ship on the water.
Dockworkers at the Los Angeles, Long Beach and 27 other west coast ports ratified a new six-year contract. The new contract came after a year of contentious negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association, which represents the shipping lines and terminal operators that employ the dockworkers. The new contract, retroactive to July 1st, 2022, gives union members a 32% pay increase over the six-year contract. The ports lost an estimated 15% of its cargo volume in the past year due to the labor unrest. Officials expect business to return but are unsure on exactly how much will come back.
Due to the upheaval caused with the west coast negotiations, the longshoremen on the east coast started their contract negotiations well ahead of schedule. They are in talks now, with the current contract set to expire in September of 2024.
Domestic Freight:
Due to the spike in oil, fuel surcharges have increased by 10% since July, which results in higher freight costs. Costs on the west coast, especially California, have increased substantially sometimes resulting in almost double the rate compared to the east coast.
Due to the Yellow Trucking Company and Convey closures, there is an increase in driver capacity.
Commodity Prices & the US Dollar
From at least the mid-1980s until the eve of the COVID pandemic, commodity prices moved predictably with the US dollar. In commodity price booms, the US dollar typically depreciated. Conversely, when commodity prices fell, the value of the US dollar tended to rise.
However, as the economy recovered from the pandemic, this relationship changed. From early 2021 to mid-2022, global food prices rose by around 30%, oil prices increased by around 150% and natural gas prices in some areas spiked six-fold. But instead of depreciating, the US dollar appreciated against almost all major currencies. Then, in late 2022, as commodity prices retraced slightly, the value of the US dollar declined.
Experts believe that the pandemic, unprecedented inflation and war in Ukraine all impacted this relationship shift. Yet a main reason for the shift, experts say, is the United States’ shift from being a net oil importer to a net oil exporter. Because of this shift, they surmise that the change in the relationship between commodity prices and currency is expected to stay, at least for the foreseeable future.
This shift has implications for many domestic companies that are importing goods, as non-US economies could face greater volatility in commodity pricing. Any volatility in commodity pricing overseas will affect the overall pricing of domestic companies importing goods from overseas.
(Source: BIS Working Papers)
Tariffs:
Section 301 tariff exclusions are still in effect until December 31st, 2023.
The tariffs, imposed in an attempt to protect the United States’ intellectual property, affects about two-thirds of U.S. imports from China. However, during the pandemic, certain PPE was excluded from the tariffs as they were desperately needed.
Currently, many disposable gloves, shoe covers and masks are already taxed at a 7.5% rate. This would not change, even if the exclusions ended. However, if the exclusions are not extended, a sizable portion of PPE would be taxed including bouffants, hoods, lab coats, aprons, and coveralls.
We continue to monitor the situation to see if the exclusions will be extended. If there are any questions regarding the tariffs and their effect on specific items, please reach out to your Vanguard Safety representative who will be able to answer any questions or concerns.
Sustainability:
We implemented new shipping initiatives to help decrease our number of outbound shipments. One such initiative was moving more of our volume to shared trucks, thus reducing empty air spaces in the trailers, and capitalizing on better driver and route utilization. In just the first week of the rollout, we increased our pallet density by 29.7% and increased our average shipment by 1,000 pounds.
These initiatives will:
- Eliminate hundreds of dock touches and tens of thousands of miles per month.
- Reduce the number of LTL transit hubs.
- Create a more streamlined receiving process for our customers, with fewer trucks arriving at their facilities.
Sample Room Expansion:
In our continued quest to provide exemplary customer service at all points in the purchasing process, we expanded the Sample Center in our Cleveland facility. The expansion will improve the quality of service to our current and future customers. We are approximately doubling the amount of space dedicated to sample processing in Cleveland, adding thousands of additional square feet of shelving space and optimizing the pack flow. This means more consistent processing times, higher quality of outbound packages, and more process compliance.