Dear customer & partners,
Although vaccination programs are being implemented, the pandemic is far from over: India is going through a second COVID-wave with up to 70,000 new cases per day. Anticipating the Indian Government will soon enforce a new lockdown, we have re-imposed strict measures in our two Indian factories. Fortunately, we have sufficient charcoal inventory and we are confident that we will be able and authorized to continue running our facilities even if a stiff lockdown would be imposed.
The Philippines is also going through a second wave, but the situation in Mindanao is not as critical as in the Manila area and not troubling our operation.
In China, our employees have started to be vaccinated and we allow our team to travel domestically with caution.
In Europe, the strict travel restrictions are delaying our expansion projects for our Ion Exchange Resins production plant in Finland.
We have been able to secure sufficient volume to run at full capacity in all factories thanks to a close collaboration with our suppliers in all countries, but at very high cost. The charcoal market price has reached its historically highest level in India, Sri Lanka and the Philippines at the same time! The long-term supply of coconut shells, the raw material for charcoal, is receiving greater recognition from business and government bodies. Despite a general availability of the raw material, the market remains extremely volatile and subject to sudden shortages due to patterns of heavy rain and drought, COVID-related disruptions and a constant high demand. We work closely with our suppliers to continuously improve the Sustainability of charcoal production to reduce its environmental impact and at the same time enhancing the security of raw material supply. As Jacobi is a recognized leader in the sourcing of charcoal, I was invited by the confederation of the Indian industry to speak about Jacobi’s journey on Sustainability on March 30. During this virtual session, I had the opportunity to outline our new carbonization technology that will enable our charcoal partners to start producing charcoal in a more sustainable way.
Business continuity plan:
Continuously enhancing our business continuity plan is critical to ensure security of supply and is at the core of our sustainability mission for our Jacobi factories. We are at the moment investing and putting a special effort in:
- Accelerating Capex investments into base capacities – activation, crushing & screening, washing and impregnation.
- Investing in new Innovations that will support our customers’ future needs.
- Working closely with our key customers to ensure that we have more than one production facility qualified for each key product.
- Developing back up supply regions and shipping solutions for charcoal, even at high cost.
Although our production teams are doing a fantastic job keeping up with production, we still face a disturbing situation in ocean freight which is out of our hands and jeopardizes our supply promise to the customer. It is too early to know exactly the scale of the impact of the recent closure of the Suez canal on the already severely disrupted global shipping situation. There will be increased port congestion at all destinations as the held up vessels arrive closer together, already badly affecting Colombo, Sri Lanka. The shortage of empty containers will worsen.
Overall, there will certainly be more delays, longer transit times and upward cost pressure. It is impossible to forecast when the situation will regularise. However, we do not expect things to improve in Q2 yet. Our logistics teams continue to make every effort to find any available vessel space to maintain our supply line in these extremely difficult times. However, this comes at very high cost per container.
Below is the update of the matrix showing the scale of delay risk on the various regional routes from our Asian plants. The main change from the last report is added time on most routes from Sri Lanka and India, because of its dependence on trans-shipping through Colombo.
Please check for current best advice of possible impact on any open orders with critical timing, and anticipate delays and longer transit times when making future orders. The global supply chain team will work in a close team effort with the sales regions to make sure that all available vessel space is prioritised to the most time-critical and important orders.
To illustrate the scale of the cost-uplift in USD from Q3 2020 (reference point) to March 2021, the following table shows the average USD increases on the main routes from Asia to the destination regions. The main change since the last update are further cost increases from Vietnam to Europe and from India to Africa and Asia.
Due to the extremely high freight costs and no expected improvement in the foreseeable future, we have to implement an additional surcharge for freight costs as soon as possible. This is on top of the price increase we’ve just implemented as of April 1 due to the extremely high raw material costs.
Thank you for your support and cooperation in this challenging time.
Stay safe, stay strong.
Remko Goudappel CEO