Date: January 25, 2021
January 19, 2021
Subject: Ronco PPE Update and General News
Dear Ronco Customer,
As we begin the New Year trust you, your families and friends are safe and Covid-19 Free. Just a year ago we were learning of the Covid-19 virus outbreak in China, and how our lives have changed since! New ways of working, restrictions on freedom of movement, methods of shopping for goods and services and the realization that we have struggled to protect the most vulnerable in our society, are all things which bear a new perspective for us Canadians.
On behalf of RONCO I would like to thank you for your continued business and understanding over the last 12 months during the year of the pandemic. We have adapted and are now tasked with a continuation for the next 9 months until all Canadians are inoculated with vaccines.
Below is our latest update to share with you.
The Wild West of PPE January 2021
Covid Outbreaks in the Far East. Malaysia experienced Covid-19 outbreak in November resulting in the Malaysian Government closing many production factories including world’s leading nitrile producer Top Glove, 28 of 41 Top Glove factories were closed. Almost overnight the price of nitrile rose sharply as Top Glove customers looked for alternative factory options. Malaysia employs foreign labour to work in their factories. The shutdowns raised attention to the overall worker safety and living conditions (overcrowded domiciles).
On a side note, Top Glove was featured in a CBC Marketplace exposé about the working conditions at Malaysian glove factories and PPE companies in Canada who source products from them. RONCO does not buy gloves from Top Glove.
We estimate that Malaysian factories are at 70% operating capacity currently.
China’s northern province of Hebei has been under lock down for the past 2 weeks. This area of China encompasses some port cities and is a main manufacturing zone for disposable gloves. The major city in this area is Shijiazhuang with a population of 11 million people. Mandatory testing is being conducted and travel is restricted to only people who have tested negative for Covid-19 for a prior 3-day period. A new field hospital is being built to handle Covid-19 positive patients in an expedited fashion.
These outbreaks in Malaysia and China are some of the worst in several months and point to reduced output in the short run.
A fall-out of the spring shutdowns in the Western economies was consumers returning to stores with empty shelves when businesses and first wave restrictions were lifted. This was true for durable goods, furniture, textiles, and all things imported from China. Consequently, retailers scrambled to place replenishment orders, and this put tremendous strain on transportation systems. My reference to this is the “Pandemic Bulge” in the supply chain. Shipping demand is above capacity to supply, and although the issues have persisted for the last few months, it is concurrent to the busiest shipping time of the year…the run-up to Chinese New Year (CNY). Typically, CNY runs for two weeks with the manufacturing disruption lasting for the entire month of February. Factories usually struggle getting to pre-CNY running rates due to labour shortages, (workers do not return or find other jobs). It is yet another perfect storm, leading to extreme shortages of empty shipping containers (all headed to western countries).
Shipping companies are charging premiums to have a pre-booked container delivered to factories. It has come to the point that production schedules are being rearranged based on container arrival as against regular on order queues. During normal operations containers can be pre-booked with 2-week lead time, this is now at 4 – 6 weeks. Factories are jammed with finished cases waiting to be picked up. Once a container with finished goods makes it to the port the next challenge is securing space on an ocean-going vessel. Bookings are extremely tight, and we hear of “Tea Money” payoffs to get cargo loaded on the vessels. Price ranges on 40’HC which used to be between $3,000 to $4,000, now cost over $8000. This is another discouraging consequence of the pandemic, where it seems all involved are trying to cash in while they can. Once landed in Canada, our ports are congested and getting intermodal transport is difficult which leads to further delays.
The result of the of the transportation delays is that we anticipate product shortages late February and into March. At the time of writing, RONCO has 12 containers that are delayed by two weeks or more from leaving our factories.
Our supply on disposable gloves is good subject to the above transportation delays. Given the potential for supply interruption we have decided to keep disposable gloves on allocation for the time being.
RONCO has launched our RONCO Earth Bio-degradable Nitrile gloves, the first product in what will become our bundle of environmentally friendly products. Your RONCO Territory Manager has the details and will be in touch. On balance we see more shortages and inflation coming through on nitrile vs. vinyl, the latter being in relatively good supply with fewer transportation delays.
RONCO has opened a new PPE production facility near our Concord office. In November we announced our first medical mask machine was operational and celebrated with a grand opening. We received a grant from the Ontario Government to kick-off this capability and coupled with our research and technology partnership with McMaster University, the future is bright for innovative new products to offer to the Canadian market. We will have four mask lines running by the end of Q1 this year.
Bouffant caps are in good supply and please note that for now we are sticking with the machine-made style due to lower cost and improved hygiene. Once pricing eases we will begin to offer the man-made styles again.
Industrial Gloves and Body Protection
RONCO has good supply of these PPE products and we are actively growing our business. In 2020 despite the pandemic, we launched six new cut protection glove products in our PrimaCut line, including our Nutech Glove, which is manufactured without glass or steel filaments in the yarn and is a very comfortable lighter gauge glove to wear. Perfect timing to support the online shopping and warehousing boom; this glove will cost effectively protect workers right across the country.
During the first quarter of 2021, we estimate that 15% new capacity will be installed in China. This additional supply will have a positive impact on pricing once raw material providers catch up with factory supply needs. The vaccine roll-out across the world will reduce overall demand in the second half of 2021. Coupled with the increased production supply, pricing should begin stabilizing and easing late Q2 and progressively in the second half of the year. Vinyl has already begun to stabilize. Nitrile pricing is more complicated and continues to rise currently due to heavy demand with worldwide vaccine rollouts and second wave outbreaks requiring PPE for healthcare staff. It is estimated that 30% of the nitrile lines are down currently (Covid shutdowns in Malaysia). Nitrile raw material shortages to supply existing demand and new factories are also contributing factors to price escalation.
Non-woven and other body protection products prices are easing, and we passed along decreases in January.
To summarize, Head, Body and Industrial Glove products are not subject to allocation and are readily available. We will continue to see unevenness in the disposable glove market for the first half of 2021. Disposable glove shortages are anticipated after CNY and into March due to transportation delays. Covid-19 outbreaks pose a threat to secure supply as factories deal with outbreaks and shutdowns in Malaysia and China. Attaching links for your further info.
Ronco will continue to work hard on your behalf to secure product and repair the supply chain.
Thank-you for your business and support.