December 30, 2020
As part of our ongoing effort to keep our customers informed on the issues facing the consumer fireworks industry, we are providing this summary on the latest shipping, cost and production news. Our industry is facing a number of challenging conditions that will impact supply and costs for 2021.
2020 was an unprecedented year for the consumer fireworks industry. Product shortages started in late 2019, and with record sales across the US, the demand for production in China is at an all-time high.
The surge in demand for freight from China to the US for the holidays was higher than ever this fall, creating delays and increased costs for all industries. This, along with recent changes in how customs in China handle fireworks has led to dramatic shortages in container space available for fireworks and huge increases in freight costs.
The only two ports in China that handle fireworks are Beihai and Shanghai. Both were closed to fireworks shipments for a period this fall. Currently, Beihai port is scheduled to close on December 31 and it may be March or even later until this port accepts fireworks containers again. Shanghai was closed in November and has recently reopened. Notwithstanding, we have seen a drastic increase in the fees to import containers.
In November we started receiving notifications that containers from China would start incurring additional fees around $5800 per container – a 60% increase in freight cost. We hoped these charges would be temporary and that a solution would be found to bring costs down to reasonable levels for this Spring, but it appears that this new expense will likely remain for the remainder of the 2021 4th shipping season.
Unfortunately, a dramatic increase in the cost of freight is not the only factor working against the US consumer fireworks market. The US dollar is weakening against the China RMB. The exchange rate for the US dollar has fallen from 7.1 in May to 6.5 in December 2020. This means that if a good cost 1000 RMB (Yuan) you would pay $140.85 for it at a 7.1 exchange rate. At 6.5 the same good would cost $153.84 – a 9% increase. In other words, the cost Spirit will pay most of our suppliers to purchase fireworks has increased by 9%. Financial forecasters have predicted that the US dollar will continue to weaken over the next several months.
Finally, fireworks wholesalers across the country were wiped out of inventory by record 4th of July sales. Retailers opening for New Year’s season depleted what little was left of the inventory in the US. This has led to record orders for our suppliers in China. After Chinese New Year, there will be less than 90 days for China to produce all of the fireworks needed for the US market. It is highly unlikely that factories in China will be able to meet all of the demand, which will likely lead to shortages in fireworks for the 4th of July season.
WHAT THIS MEANS TO YOU:
Because our costs have increased substantially, we will be forced to increase our prices. There will be fireworks in the US this Spring, but they will be more expensive. We will have plenty of fireworks on hand by April. We urge you to buy early and ship early this year to secure your product. It may be to your benefit to ship the bulk of your order early in the spring and have the remainder sent in May.
We will release our 2021 pricing in late January. To show our commitment to you and to give you an opportunity to purchase fireworks before prices increase, we will be offering our current stock at 2020 pricing. To get this pricing you must place your order by January 26th, pay for it in full, and accept shipment of the product no later than January 29th.
We understand that this news may come as a shock to many of you. Please understand that we are not increasing our prices to increase our bottom-line. The increase is a direct result of the perfect storm discussed above.
Your account shows our available inventory and the price for those in stock items. Let your sales rep know if they can assist.