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Chinese New Year’s Effects on The Global Supply Chain

Chinese New Year and it’s effects on Global Supply, specifically fireworks.

Fourth of July, USA.  Bonfire Night, UK.  New Years Eve, Global.  Lunar New Year, China.  These, and many more holidays and festivals are celebrated every year with pyrotechnics.  In many countries and towns, end users go to their local shop, and purchase these hand crafted articles that produce colorful light and noise for their celebrations without a thought as to how they got there.

If you are in the business of selling fireworks though, you should be aware the major effects that Chinese New Year can have on an already stretched, limited supply chain.  Whether your a factory or broker in China, an importer, wholesaler, jobber or retailer of fireworks, this holiday has major impacts that affect supply no matter the date of your selling season.

China is aglow with success, Shanghai, Beijing, Hong Kong, just walking the streets it is apparent in the cars being driven, the clothes people are wearing, and the overall confidence of the people.  In recent years, that success has made it into the interior mainland as well, places where fireworks are made, centered around the city of Liuyang in Hunan.  Liuyang is a tiny city (by China’s standards) Of 1.3 million people.  For centuries Hunan was the countryside, fancy cars and flashy lights were a thing of the big cities.  Hunan and the surrounding areas supply 95% of the world’s fireworks, which equates to more than 10,000 40′ long shipping containers full.

  China’a domestic market has always been a large driving force in the enthusiam and manufacture of fireworks, but demand had already been on the wane in larger cities, where there are restrictions on letting off fireworks outside the Lunar New Year period. Younger consumers in the cities also see fireworks as old-fashioned, they said, and were less inclined to let their children play with them due to a lack of space and safety concerns.   President Xi Jinping’s anti-corruption drive also prompted government departments and state-owned enterprises to tighten the spending of public money, including lavish celebrations and the gifting of fireworks to employees for Lunar New Year.   Tighter safety standards and government regulations have also increased compliance costs.   That has all led to rapid consolidation in the industry in the past two years – from the 946 fireworks companies in Liuyang as of late 2015, 558 remain today, according to the city government’s Firecrackers and Fireworks Management Bureau.

   So, while domestic use inside China is down, the closing of factories has crippled manufacturing capacity at an even faster rate.  Factories that remain open struggle to fill orders to supply the globe, and Chinese New Year is one of their biggest struggles.  The average age of a firework factory laborer is 55 years old, and many are retiring or seeking other jobs every year.  Jobs that are safer, pay better and offer steadier hours such as the Apple manufacturing opening a factory nearby employing over a thousand people, many of who were once making fireworks.  One of the factories major challenges, is that it is common for 30% or MORE of workers to not even return to their jobs after the New Year, leaving them struggling to find replacement help and train them as fast as possible.

Chinese New Year 2019 is February 5th.  Workers will take an average of 23 days off of work during this time.  Before the shut down, factories are careful to dwindle down their powder and component storage, as well as any stock so as not to have to store or warehouse it during the shut down.  This means that once production does fire back up after the holiday, the first days and weeks are spent making powders, stars, tubes, fuse and other components needed to product a final product.  This can leave a 3-5 week gap sometimes in product actually being finished and loaded for shipping and greatly affect the factpry’s scheduling for the year.

 

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Dominator Fireworks China Update – November 2018

Dominator Fireworks
  • Dominator Fireworks is always trying to improve the customer experience.    Therefore,  we have developed an On-Line Status Tracking tool for  our customers.    If you are a  customer, you can access the tool at www.dominatorfireworks.com/status.html  Enter your password into the yellow box and hit enter.    Look at all three tabs to see product details. 
  • Attached is a new LIVE Stock Report.    This report is linked to a data file on the Dominator Website and should update automatically with new weekly stock levels. You can edit this file, choose items, see the CBM total, then save and e-mail this file to us if you want to add to your order.  In order to see the updated data, you might need to “click on the Enable External Connections button on the top of screen”.   Save this excel file and each time you open it, it should refresh with the latest data.   If the old date is showing, then open Excel, go to “DATA” on the menu, and choose “Refresh All” in the External Connections section.    
  • The USD to RMB Exchange Rate seems to have peaked at 6.98 last week and has now fallen to 6.89.    The Exchange rate tends to move in cycles and once the down cycle starts it’s not likely to reverse again until it bottoms out at the cycle low (last cycle’s low was 6.0).    The  FX rate does have a big impact on cost.   Just in 2 days in rate dropped from  6.98 to 6.89, resulting in a $400 exchange impact on a typical $30,000  container.  If the RMB drops to 6.3 again, then the impact would be $2,000 on a $30,000 exchange.    Below is a chart showing how the rate goes up and down fairly predictably and why it is likely headed down in the coming weeks and back to 6.3 like it was for last season’s shipping season. 
USD / RMB Historical  Chat
USD to RMB FX Historical Exchange Rate
  • Here is a video from a recent customer tour at our Firecracker Factory.  Firecracker production is now the most automated of all items.  Almost all steps are now done by machine except for labeling of the small 16cracker packs.    Check out this interesting video and many others on our Facebook page.  https://www.facebook.com/DominatorFireworks/videos/974945766025290/
  • We are also getting a good start to production.    Below are some QC photos of new production from this week.   Some finished items include American Power 500g, Assault Candle, Killer Skeeters, 200 Shot Staying Power 1.3g, The “C Bomb” 1.3g, Gibby’s Serpent 1.3g, Howling Wolf, Total Dominance, Jumping Jacks, Mega Mini, Raging Bulls, Buzz Balls, and many more!
  •  Congratulations to Dragon Fireworks for their 1st place finish at the 2018 Montreal Fireworks Competition (widely regarded as the world’s most prestigious fireworks competition).  Dragon found themselves short of product due to a container delivery issue and needed very specific, high quality product urgently.   Due to ACE Pyro’s REAL-TIME inventory system they were able to locate suitable Dominator Pro1.4g products to match the needs of their complex world-class script.    Ace Pyro rushed the product to the shoot sight and helped Dragon secure a 1st place finish! Write us for the product used.   https://www.youtube.com/watch?v=h_3D4I2Wdh8
  • Thank you to Fireworks Forever for their “GOLD METAL” awarded in their newsletter to Dominator for early shipment of several of their containers!
  • We are already busy planning for new products.   If anyone is interested in any of these items for 2019, please contact us directly, otherwise look for them on the 2020 price list.  See attached videos and photos below. Here are some examples:
  1. Smoke Helicopter (Vid link below)
  2. Low Cost  Vase Fountain – www.dominatorfireworks.com/qc/20181108-NP19-346.mp4 
  3. Large Whirlwind Spinner – www.dominatorfireworks.com/qc/20181108-NP19-351.mp4
  4. High Output Pull Smoke Grenades (Burn from both ends – Vid link below)
  5. 5 Pack Color Torches
New Fireworks  Products
New Fireworks For 2019


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How to import fireworks from China

How to import fireworks from China. 

In the pyrotechnics industry, many business owners strive to import fireworks direct from China.  Let’s discuss the pluses and minuses of direct import.  Many firework shops are open only during peak sales season, in the USA this can be days before and after the 4th of July, In the United Kingdom it is centered around Guy Fawkes day or Bonfire Night in November.  Much of the world uses tons of fireworks during annual New Years Eve celebrations.

Regardless of the country or season, these smaller shops mostly buy their fireworks domestically, or from a large wholesaler or distributor who is already direct importing from China.  Of course, buying domestically comes with a mark-up versus direct importing, so how do you know when you are “big enough” to take the leap so to speak, and direct import for yourself?  You must first analize the costs, and risks involved, what seems like a great full out discount by NOT paying a distributors mark up might have some hidden snags you had not foreseen.

Importing direct, generally is for large companies moving tons of products monthly.  The larger direct fireworks importers are bringing in anywhere from 100 to 1,000+ containers annually!  The rest of the market between these giants, and the domestic buyers consists of companies importing as few as 5 containers annually. We should mention, there are display companies importing 1.3g fireworks exclusively for displays bringing in only 1-2 containers per year, not for resale, so this article mainly addresses consumer fireworks being retailed.

How much can you save importing direct versus buying wholesale domestic?  Importing, much like buying wholesale is a volume game, to get the best prices you have to buy a LOT.  The best wholesale prices are lists for buyers that spend at least 100k and more.  Likewise, direct importers who buy 50 or more containers from a single supplier can expect discounts over those bringing in far less product.  The percent discounts on these lower cost lists might not be as great a savings as you would think, as margins are fading fast in fireworks just like many other industries.

So how do you know when your big enough to start importing?  Dominator Fireworks associates recommend that your moving at a minimum 5,000 cartons per year, and even at this level keep the amount of product imported to 20% or less.  The average 40′ HQ (high cube) ocean container holds on average 1,000 cartons of fireworks.  This leaves 4,000 cartons of fireworks to purchase domestically, for several reasons.  One is, you must meet MOQ (minimum order quantities) when direct importing.  Some of the larger importers mentioned earlier might buy 2,000 cases of a single item.  If you are importing one container only, you must buy a minimum number of cartons of EACH item, usually 20 or more cases.  This means that 1,000 / 20 = 50.  So 50 is the number of different items you might get on a small order container from China.  50 items is about 20% of what most stores and stands carry.

Next to discuss is risk, and costs involved importing direct.  Most wholesalers will offer a credit program to domestic buyers.  This is not likely buying direct from China, and the average cost of the products on a container are around $25,0000.   Add to that, the 8-10k freight charge that must be paid before receiving your goods and the up front investment per container becomes substantial for many.  Another factor to consider is government.  The government in some countries has been known to stop entire containers at the ports and hold them for up to months for various inspections.  These inspections can be completely random.

If the above has NOT scared you away from direct importing, give us at Dominator Fireworks a call or email and we will be happy to discuss your personal situation further and help you decide if we would be a good partner in helping you take the next step in your growing business.

 

 

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1,000 Years of Fireworks Tradition Threatened

China is working hard to curb pollution and is making great strides.   However, fireworks is also being used as a scapegoat.

As example, fireworks sales and use were banned in China’s capital, Beijing.   Unlike western countries where bans are largely ignored, there was not a firework to be heard in Beijing this New Year.   However, not surprisingly, the ban had little to no effect on pollution.    The day after the New Year a thick smog blanketed the capital.    The reason is that fireworks smoke can only produce a minuscule amount of pollution compared to the millions of cars, homes and business that relay on fossil fuels to produce energy.

China-Fireworks-banAn exhaustive study of the true causes of Beijing’s PM2.5 pollution was conducted in October 2017 by the Key Laboratory of Beijing on Regional Air Pollution Control, College of Environmental & Energy Engineering, Beijing University of Technology, Beijing 100124, China.

What they found was the weather was the main factor driving periods of heavy smog.   They found no correlation at all to fireworks.  In fact, what they found was that three typical weather patterns caused the heavy pollution: (1) Siberian high and uniform high pressure field, (2) cold front and low-voltage system, and (3) uniform low pressure field.  A PMF analysis indicated that secondary aerosols and coal combustion, vehicle, industry, biomass burning, and dust were the important sources of PM.  Not fireworks.  Details of the study can be found at https://doi.org/10.1016/j.scitotenv.2018.02.151

Sadly, a 1,000 year old tradition was brought to an end in the capital city.

In a statement, the Beijing city Government said officials must “take the lead” in not setting off fireworks or firecrackers.

“Have firm environmental protection consciousness and a sense of responsibility,” it said.

“Proactively guide family members and friends not to let off or to limit the letting off of fireworks and firecrackers, improve air quality together and get into the action of ensuring blue skies for the capital.”

Hopefully the persistence of the pollution will be obvious to the citizens and they will encourage China to return to its rich heritage of using fireworks to celebrate the Chinese New Year.   It would be a true loss to end 1,000 years of tradition all for nothing.

Fireworks stands such as this one below were absent from Beijing city in 2018.

Chinese New Year Fireworks