Dear customers & partners,
Although we are experiencing tough times in our plants in India, particularly in Coimbatore, the Jacobi team is able to give back to the local communities and support the people in many different ways to get through this difficult time. Our close relationship with the communities and their authorities helps us to continue operations and enables us to help the communities; it is a great collaboration which all stakeholders benefit from. In the pictures below, the Jacobi team is handing out lunch boxes to families who are waiting outside the hospital, hoping to get good news about their loved ones who were diagnosed with COVID-19 and taken to the hospital. The family members are anxiously waiting outside, often without food and water. I feel grateful that Jacobi is able to give back.
Other actions we have taken include:
- We provide medical advice and support for all employees and their families
- We help the local hospitals by donating medical supplies and auxiliaries
- We provide food for employees who are tested positive and are quarantined
- We provide post-COVID psychological counseling and re-validation support
- We continue educational (medically) and vaccination programs in both plants; so far, 101 employees have received their first dose of vaccine
We continue to put safety first in our plants and continue to enforce strict social distancing, wearing masks and sanitizing measures. Despite highly stressful circumstances, our people show great commitment and resilience. Tamil Nadu remains in full lockdown. We are running our plants in “skeleton-mode”. Anticipating the Government may extend the lockdown for several weeks, the situation remains quite fragile. I feel very proud and of the level of commitment and spirit displayed by the team! In Sri Lanka, country-wide lockdown is enforced. The government is hopeful that the spread of the virus will be contained through strict measures. Our plants in Sri Lanka are running at full capacity under “skeleton-regime”, 12 hour-shifts with fewer people per shift, as we still have 65 people in quarantine. The Sri Lankan coconut supply chain is badly affected: numerous coconut factories have closed down and collection of shells from households has stopped. Due to measures taken by the government t,hings are
expected to normalize in June.
Due to the extreme conditions in India and Sri Lanka, our projects in these locations are being delayed but we will catch up as soon as the situation improves.
The severe disruption of global shipping has continued to worsen since last week. There is not enough vessel space to meet the demand caused by increased economic activity in USA and Europe, and the container shortages and port congestions add to delays. As a result, costs have moved up even more. Because of the huge scale of the disruptions, we expect this situation to remain for the at least the rest of this year and probably into next year. In the meantime, our logistics teams continue to make every effort to find any available vessel space to maintain our supply line in these extremely difficult times.
Below is the update of the matrix showing the scale of delay risk on the various regional routes from our Asian plants. The main trend from the last report is further reduced vessel space from the Philippines causing longer shipment delays, especially to North America and Australia, but also becoming worse to Europe. This has caused global supply chain to adjust production planning at our plant in the Philippines and transfer some production to other Jacobi factories from which it is easier to ship to North America. Having multiple production plants in several countries makes this possible.
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 supply chain team will work in a close team effort with the sales teams 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 May 2021, the following table shows the average USD increases on the main routes from Asia to the destination regions. Costs to Europe from China and the Philippines have increased further and are now over 6 times what they were in August 2020. Costs to North America from India and Sri Lanka have also increased again.
Looking to the future, it is impossible to predict but to give an indication of the short-term trend in cost, the following table shows the direction of cost: up, down or stable, expected to be experienced in the next 2 weeks. This shows that on nearly all routes costs are expected to increase even further.
We have already been informed that rates from China to Europe will increase by a further USD 1,300 per 40’ container to USD 12,000 from the start of June. The trend of costs to Europe from China is best illustrated by this graph:
Jacobi group policy is to continue using all available vessel space despite these high costs. Our overriding objective is to secure supply to our customers. As the additional freight costs are expected to stay longer than initially expected, it is important that the whole value chain is fully aware of these additional costs that will remain. In my view, a discussion throughout the value chain has to take place, making sure that no one is “squeezed”. In the end, consumers will have to pay the price. This is expected to drive up inflation worldwide. Given the extremely high and increasing raw material, freight and other costs related to the pandemic, we will be forced to implement a price increase of 10% as of July 1 2021. We highly appreciate your support to enable us to continue reliable supply in these difficult times.
Thanks you for your support and cooperation.
Stay safe, stay strong.
Remko Goudappel CEO