This week’s communication focuses on Ocean Freight again. Our manufacturing plants are operating at full production and producing product per our order confirmations. However, the ability to ship product has been an on-going issue which is becoming more challenging every week. These challenges impact both promised delivery dates and the cost of shipping.
Expected Delays for Deliveries
Below is the weekly update of the matrix showing the scale of risks of delays on the various regional routes from our factories in Asia:
The table shows expected delays of over 15 days for most deliveries to North America and Australia. Delays for deliveries to Europe are also increasing with shipments from Vietnam now in the severe category. We should expect other shipment points to also move from medium to severe in the upcoming weeks.
The reasons for these significant delays on over 90% of our shipping routes are as follows:
- Increasing congestion in ports, caused by mainly COVID19 related labor shortages
- Repositioning of empty containers
- Routes with stop-offs to tranship onto another vessel suffer further delays because of problems at
the intermediate ports
- Routes with stop-offs to tranship onto another vessel are suffering further delays because of problems at the intermediate ports
- Last minute ocean carrier diversions due to destination port congestion
- Ports are restricting dates they will accept cargo during the Christmas/New Year holiday season.
No improvement is expected for several months and the situation could even worsen especially for shipments from China as the Chinese New Year approaches. Delays must be expected on all shipments.
Please check for current best advice of the possible impact on any open orders with critical timing and anticipate delays and longer transit times when making future orders. Our Global Supply Chain is working closely with
our sales and customer service teams to ensure your orders are prioritised and we effectively utilise available vessel space in order to minimise delivery delays.
Increase in Cost of Shipping
The table below provides a quick reference of the average percent increase in the cost of ocean freight from Q3 to December 2020 on >400 routes used by Jacobi to ship product from Asia. These costs are continuously changing therefore revised tables will be issued weekly. Cost changes for routes not shown in the table can be provided on request.
The significant increase in ocean freight cost was unexpected and there is reason to believe there could be further increases in the weeks to come as shipping lines are raising prices on more routes where they have to cut back sailings because of congestion at the destination port such as Felixstowe in UK. In addition to the higher container shipping cost, shipping lines are also adding a Peak Season/Exceptional Surcharges such as China starting December 15 of USD 1,000 per container.
Due to the extreme situation in Ocean Freight, we are forced to charge you for a part of the additional freight costs with immediate effect as of December 1, 2020. We’ll do it in a transparent way based on real cost increases. We have been absorbing the additional costs from the start of Q3 and highly appreciate your support going forward until the situation “normalises”.
It will take a very close X-functional team effort between you, our Sales, Customer Service, Logistics and Supply Chain teams (both regional and global). We will do all in our power to get through the coming period and serve you in the best way possible!
Our Asian factories are running full without major disturbances. However, the big logistic challenges we face result in an accumulation of finished goods inventories on our sites of more than 1000MT, waiting to be shipped.
- In India and the Philippines, the number of new daily COVID19 cases is stable. Our 2 employees who tested positive will soon be back to work, so will the dozens of employees in quarantine in Philippines.
- Sri Lanka is going through its second wave of COVID19 and the situation remains fragile.
- In China, the City of Tianjin has the situation under control, although widespread testing was done following the isolated cases of 3 weeks ago.
- Similarly, Vietnam had a few COVID19 cases in Ho Chi Minh City after 3 months without any cases, but the
authorities have reacted swiftly.
- All our capital expenditure projects are progressing well despite small delays with contractors and logistics, and our Nova factory in India has successfully completed ISO 9001, 14001 and 45001 audits this week – Congratulations team NOVA!
- Production in Japan, the USA and Europe is running at full steam.
Thank you for your continued support!
Stay safe and take good care,
Remko Goudappel CEO
Jacobi Carbons AB