Letter from the CEO – What the heck is going on with Imports?
When the pandemic first arrived in February of 2020 and the government began to force closure of private businesses, we knew something different was amiss. Little did we know the sequence of events to follow over the next 14 months would bring us to our current, extremely difficult situation.
While we have not raised pricing since October of 2019, that option going forward is not in play. Regrettably, price increases are coming, we’ve absorbed the costs as long as we could to avoid impacting our customers, but there is no getting around it any longer.
In the past 14 months as an importer, we have faced the following barriers:
1. Ports were slowed to a crawl due to labor shortages in USA, Taiwan, and China. We saw the beginning of these effects are far back as October 2020, and they have gotten progressively worse each month. We expect container delivery delays to extend into the 3rd Quarter of 2022.
2. Shipping companies in March of 2020, due to lack of traffic, placed many vessels in drydock to perform long needed maintenance and repairs. This made perfect sense back then; no containers had left Taiwan in the month of March 2020 as importers stopped all inbound releases while they evaluated the impact of the pandemic and business closures. This contributed to the global supply chain issues as ships became unusable, and containers taken out of rotation.
3. In the same 14-month time shipping costs from overseas have gone up over 350%. These costs have not subsided and must be passed on in the form of a price increase.
4. Although material costs were relatively stable during 2020 (we had a 4% increase in material costs we did not pass on, which was caused by a decrease in the valuation of the US dollar by 8%). Now we are seeing large increases coming for the balance of 2021, mainly caused by raw material costs rising and other inputs like increased costs of cartons, labels, bags, increased labor cost to perform functions such as heading, threading heat treating and plating; which also require their own raw materials inputs that have gone up approximately 4% in the past 14 months. To make matters even more complicated, worldwide demand is exceeding supply now. The increases are going to get large. Very large.
5. We have two primary screw relationships which we have maintained for 30 plus years. Our partners are very worried about the instability of the market combined with pending shortages. Both have warned of future delays and the difficulty in meeting shipping times, along with impending raw material bottlenecks.
Combine this with freight overseas time lengthening from a standard of 22 days to the painful time of over 60 days. We are being told to expect price increases starting on orders after June 1. These increases are going to be large. Far more than we normally see on a regular basis, but as explained above, the inputs are undeniably going up, so must the cost of finished goods. We are expecting increases between 15-18%, which will not come into effect fully until the newly ordered product begins to ship and arrive. We will take all of this into account when determining the price increase required.
In closing, this has been a painful experience for all of us. We appreciate your patience and understanding as we walk through this path together. We are preparing our price increase to be announced on June 1, 2021. It will go into effect August 1, 2021. This price increase will be valid until Feb 1, 2022.
We will have a better handle on the impact of the cost increases to understand what we need to do going forward. We are going to minimize the increases as much as possible, but as stated above, some of those are directly related to costs which we have been paying for over 12 months. Those costs will be the major driver of the upcoming announcement.
Respectfully and Humbly Submitted,
Gregory M. Wiener
Quickscrews International Corporation