Company News

Dear customers & partners,

Chemically Activated Wood-based Carbon

Recently, we have seen a sudden and very steep cost increase for producing our Colorsorb HP series of chemically activated wood-based carbon. This is due to a 100% cost increase of yellow phosphorous, feed material for phosphoric acid which is a key raw material to produce this product range The Chinese authorities have installed energy- and emission quotas which have led to sudden and significant reductions of production output for many producers of wood and coal-based activated carbon. Unfortunately, we see no other option than to increase our prices for chemical wood activated carbon with immediate effect, similar to what we have implemented for coal-based activated carbon. The volatility of chemical costs is unfortunately another challenge caused by the recent global supply chain crisis that is affecting several of our products.

Ocean Freight

The Ocean Freight situation continues to deteriorate – of the 520 ship movements planned on global major routes in the next 4 weeks, 37 have been cancelled. Capacity out of Sri Lanka and India remains greatly reduced causing the very steep increase in shipping rates to North America from those 2 countries. Routes to North America from the Philippines also continue to be very difficult. Inventory of finished goods at our factories are at the highest volume ever due to these delays in outbound shipments. The situation will only improve when demand drops or shipping capabilities (containers and vessels) increase. It is very difficult to predict when this will improve or in what form and when a new normal will arrive.

It is currently so difficult to find vessel space for our finished goods to reach our Customers in a timely manner, that I’ve instructed the sales team to discuss the possibility for our Customers to arrange their own transport in case they may have better agreements in place with the shipping lines than we have. This could be valid for large corporations shipping substantially more containers across the globe than Jacobi. Several of our big accounts have already switched to FOB incoterms.

Severe port congestion in the China/East Asia region continues with a knock-on effect globally because China is the main source of ocean freight movements. The biggest impact on Jacobi is that sailings from China to India have been much reduced, leading to an increased cost on that route, but more harmfully, it has resulted in the shipping lines being short of empty containers in India and outward vessel space which has caused the problems in outbound shipping from India. The same issue is felt in Sri Lanka. The ongoing COVID-restrictions in Vietnam are causing more difficulties and higher costs in shipping out from our factory there. Severe port congestion continues in many destination areas, especially North and South America, Africa and Australia – Long Beach California currently has a record number of ships anchored outside awaiting port entry – with long delays in berthing/unloading of ships extending overall vessel transit times. This reduces capacity as it reduces the number of vessel sailings. Also, it continues to lead to container shortages as containers are tied up on vessels for longer and so less available for reuse. At the same time, ocean freight demand continues to be high, especially in North America with many users worrying about pre-Christmas deliveries and so bringing forward shipment requirements earlier into Q3.

The impact on Jacobi’s supply chain is much longer overall transit times from factory to destination, with continuing difficulty finding vessel space, especially to the USA, and no route space currently available to West Coast ports and South America. Please find below the delay risk table by origin/destination region which shows the most severe delays are to North and South America and Africa, and there are some specific destinations, such as Durban, South Africa and Auckland, New Zealand where no route is currently available from China.

To address these challenges, wherever possible Jacobi’s Global Supply Chain team adjusts weekly production output from our multiple production plants to take advantage of the most cost effective and efficient shipping routes to minimize shipping costs and delivery delays. The overall impact of port congestion, container shortage and increased demand is a continued upwards pressure on costs for most routes. Despite the escalating costs, Jacobi policy is to continue using all available shipping spaces to maintain continuity of supply in such challenging conditions.

To illustrate the scale of the cost-uplift in USD for Jacobi from Q3 2020 (reference point) to September 2021, the following table shows the average USD increases on the main routes from Asia to the destination regions. Further to the large cost increases to North America from India and Sri Lanka over the last 2 weeks, the main changes from last week are higher rates from India to Europe, China to South America and Sri Lanka to the Middle East. There are now 11 routes with over 500% increase from this time last year, compared to 5 a month ago.

Until the August, the largest increases since Q3 2020, both in USD and % terms, were mainly on routes to Europe, especially from China, the Philippines and Vietnam. This latest cost table shows the rapidly increasing costs now being suffered on routes to North America. The largest of these on average are equivalent to an additional average freight cost of approx. $700 per MT. Most routes continue to have an increasing cost trend, with the rate from China to Europe increased by another $500 for the second half of September, having remained flat for the previous 3 weeks. Inland haulage rates are now also increasing significantly, especially in the USA, which is adding even more to the increase in overall freight cost to final inland destinations. The recent rapid increase in the cost trend from to North America including much increased current rates for the second half of September is shown below:

Manufacturing Asia

Fortunately, infection rates continue to come down in the Ben Tre region in Vietnam which is now under “Decree 15”. However, restrictions at the Industrial Park are still enforced and authorities are very careful relieving them: this is putting a strain on the team. We continue running the plant at 50% and are closely monitoring the situation while planning the next steps. Ho Chi Minh City remains under strict lockdown.

In India, our teams have reached 50% vaccination rate (2 doses). Both factories in India continue to run flat out. Due to the outbreak in Kerala, we do see infection rates go up in Coimbatore, but our plants are fully prepared to deal with it. Shipping out finished goods as well as importing coal raw material remains most challenging as the container and vessel capacity to and from the Indian ports are still drastically

The COVID-situation in Sri Lanka is improving but the lock down has been extended till October 1, 2021. The plants continue running at full capacity but shipping out of Colombo remains most challenging.

The situation in our region in The Philippines is gradually improving. However, shipping out of The Philippines remains a big challenge.

The situation in China is unchanged and overall, the ocean freight crisis and accumulation of unshipped finished goods at our plants are an enormous challenge for Jacobi in terms of health & safety, operations, operating cash flow.

Stay safe!

Remko Goudappel CEO
Jacobi Group

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