Fireworks expected to cost more next year

Reduced supply in China, fuel costs said to create ‘perfect storm' in industry
By Jason Morton Staff Writer Tuscaloo News
http://www.tuscaloosanews.com/article/20080629/NEWS/167413062/1007/NEWS02&title=Fireworks_expected_to_cost_more_next_year

Published: Sunday, June 29, 2008 at 3:30 a.m.
Last Modified: Saturday, June 28, 2008 at 10:52 p.m.

The storm is occurring in China, the main supplier of fireworks to the U.S. Bruce Volensky, vice president of sales for Pyrotechnico, which does display fireworks shows, said he's not seen anything like it in his 20 years in the business.

'It's quite unusual,' Volensky said. 'It really is the perfect storm in the industry, as far as price is concerned.'

The fallout, Volensky said, is already beginning to manifest itself in small ways.

'Next year, possibly, the costs could go up dramatically,' he said. Volensky said prices could range from 30 percent to 50 percent higher.

China began decreasing its shipments of fireworks overseas in anticipation of the 2008 Olympics in Beijing later this summer.

Then, about four months ago, an explosion in the Chinese port city of Sanshui destroyed 20 fireworks warehouses. The explosion rattled homes miles away and set off fireworks for more than 24 hours.

Add rising fuel costs — which increase shipping costs as well as the price of the chemicals used to launch the type of fireworks used by the large display fireworks companies — and the Chinese government's recent decision to stop subsidizing fireworks manufacturers, and the forecast points to smaller supplies and higher prices.

Tuscaloosa's fireworks spectacle planned for Friday at Sokol Park should not be affected, Volensky said. The company he works for is providing the fireworks for the Tuscaloosa County Park and Recreation Authority's annual celebration.

The cost of the show will range between $18,000 and $20,000 — about $11,000 of that on the fireworks show alone — paid for primarily through sponsor donations.

But next year's fireworks display could be a scaled-back version.

'I don't think that would stop us from having it,' said Gary Minor, superintendent of recreation for PARA, 'but it could be possible that we would have to find more sponsors or pare back a little on the fireworks.'

Charging admission to view the show would be a last resort, he said.

'We've taken it on our shoulders to do this for the community,' Minor said. 'But unless [the price increase] really became extreme, we likely wouldn't do that.'

Pam Palmer, president of Fireworks of Alabama, which supplies about 100 fireworks stands in the state, said her company is also seeing price increases but does not think it will prove a serious problem to future supplies.

This year, though, she said people intending to buy fireworks for personal use should do so early.

'There is definitely a shortage in fireworks,' she said. 'We won't run out of fireworks, but we may run out of the type you want.'

The main reason is the cost of shipping, she said. Last year, a shipping crate full of fireworks cost $4,800 to ship from China. Today, that same shipment would cost $11,800.

Increases for individual fireworks, from Roman candles to bottle rockets, vary depending on the size of the product. She said consumers can expect to see fireworks going for 10 percent to 50 percent more per item than last year.

'The larger the items,' she said, 'the larger the price increase because they take up more space on the [shipping] container.'

Local stands, though, said they haven't seen any changes in the fireworks supply.

'We've got more than we ever had,' said Brad Hill, 31, of Brookwood, who operates the TNT Fireworks stand in Northport on Lurleen B. Wallace Boulevard.

Hill said he's been operating fireworks stands for about four years now to benefit his church, Apostolic Pentecostal Church in Cottondale.

So has Erick Johnson, 35, of Cottondale. He said the proceeds from his stand, located on U.S. Highway 82 next to Wal-Mart in Northport, go toward The Sanctuary in Bessemer.

The friends were working together on Thursday to get Hill's stand stocked in time for the weekend's anticipated sales rush. Both men said they had seen no effects of the fireworks shortfall, except for some increased prices.

'But that's nothing new,' Hill said. 'They do that every other year, anyway.'

Reach Jason Morton at jason.morton@tuscaloosanews.com or 205-722-0510.

Prices for fireworks skyrocket

Sunday, June 29, 2008
Palm Beach Post
http://www.palmbeachpost.com/business/content/business/epaper/2008/06/29/m1a_fireworks_0629.html

Fourth of July revelers rejoice: The sparklers are safe. The shows will go on.

A warehouse explosion in China prompted a slowdown in fireworks shipments, but the blast won't snuff out area celebrations. Despite national angst that a fireworks shortage could cancel community festivities and darken backyard parties, stores are stocked with bottle rockets and Roman candles. Cities say their fireworks spectaculars are ready to go.

Jordon Paniagua strolls the aisles at TNT Fireworks in West Palm Beach. The Big Bang package is on sale: Buy one at $799.99 and get another for just 99 cents. TNT ordered its fireworks before the warehouse explosions in China and is stocked for July 4.

Fireworks light up the sky during last year's Fourth of July celebration in Stuart. Despite the delay in fireworks shipments and the accompanying rise in cost, Jensen Beach based-Creative Fireworks said its Stuart event this year and its shows in Indiantown and Port St. Lucie are a go.


Mini Artillery Shell were $7.99 last year, but this year they're $10.99.


Pop-Its were 75 cents last year, but this year they're 99 cents.


Morning Glory was $6.99 last year, but this year its $7.99.

But that's not to say shoppers won't notice a difference in their pocketbooks as they grapple with spot shortages and higher prices for July 4 celebrations.

Brian Grummer, for instance, didn't have trouble filling up his cart at TNT Fireworks in West Palm Beach.

The 30-year-old from Greenacres is planning a trip with friends to Lake Placid, Fla., for the holiday weekend, so he went in search of "big, loud, aerial stuff."

"I like the big stuff," he said. "We should have a good show."

The tab for his stash of missiles, artillery shells, rockets, Roman candles, fountains and firecrackers: nearly $330.

"Folks can expect to dig a little deeper for their fireworks this year," said Julie Heckman, executive director of the American Pyrotechnics Association, a Bethesda, Md.-based trade group for the nation's $930 million fireworks industry.

In fact, pyrotechnics purveyors are facing their largest single-year price increase this July, with some companies pushing up prices as much as 30 percent, said William Weimer, vice president of B.J. Alan Co. in Youngstown, Ohio, which has Phantom Fireworks stores across the country, including 10 locations in Florida.

Phantom has increased prices about 15 percent this year, Weimer said. He points to several factors, including higher transportation costs, a weakened dollar and soaring inflation in China.

Nearly all of the nation's fireworks - both consumer and professional - are made in China.

The supply scramble started with an explosion in February that destroyed about 20 warehouses in the Chinese port city of Sanshui. The accident led to a ban on fireworks shipments at all Chinese ports except two, clogging the pipeline of both consumer and professional pyrotechnics to the U.S.

"It shut down our primary transportation route," Heckman said.

The U.S. government has been working with Chinese officials for months to resolve the transportation woes, she said. China's restrictions on fireworks production and shipping because of the upcoming Summer Olympics in Beijing added additional strain.

"That's not going to help us with July Fourth," she said. "If the product wasn't on the water weeks ago, it isn't going to get here on time."

Heckman estimated that 20 percent of the Fourth of July fireworks will not get here in time: "Everybody is short on something."

Most big chains stocked up early

Mom-and-pop retailers are hit hardest, which may mean fewer roadside tents. Most of the larger fireworks chains order months in advance and are stocked for the Independence Day rush.

Sky King, TNT and Phantom all have year-round locations in Palm Beach County and the Treasure Coast, and many of the area fireworks tents are TNT vendors.

"Our orders were placed before Thanksgiving. Our merchandise was on its way here before the explosion," said Willie Micco, co-founder of Sky King, a Treasure Coast chain with 16 locations including Delray Beach, West Palm Beach, Stuart and Port St. Lucie.

At the TNT Fireworks store in West Palm Beach, shelves are stacked to the ceiling with mortar kits, poppers and rockets. Prices, though, are up about $5 to $10 on several of the larger assortment packs and power-packed aerial fireworks, said manager William Taylor.

Some items have jumped more, such as the Mega Burst 13-piece assortment that was $140 and is now $170. The store couldn't get some items from Florence, Ala.-based TNT's catalogue this year, but sales still are rolling in, Taylor said.

Taylor estimates his average customer spends $100 for Fourth of July fireworks, but some buy by the cartload.

The Big Bang is a roughly 7-foot-tall box of fireworks that sells for $799.99, with a second one priced at 99 cents. This month, Taylor sold four in one day.

Most area events will take place

For the super-size community shows, the delay in fireworks shipments also is squeezing professional firms. Industry leaders say some cities might have to scale back or even cancel their fireworks displays this year.

But again, most of the city-sponsored shows in Palm Beach County and the Treasure Coast are put on by larger firms that stocked early.

"All of our July displays will go on," said Ana Esturilho, manager of Zambelli Fireworks' Boca Raton office.

The New Castle, Pa.-based firm will produce 60 Fourth of July shows in Florida this year, Esturilho said, including West Palm Beach, Boca Raton, Lake Worth, Wellington and Greenacres.

Brookhaven, N.Y.-based Fireworks by Grucci, which handles the Delray Beach and Boynton Beach shows, keeps a two-year inventory on hand, said producer Philip Butler. On the Treasure Coast, Jensen Beach-based Creative Fireworks said its shows for Stuart, Indiantown and Port St. Lucie are a go.

Most of Fourth of July celebrations will be unscathed, but fireworks retailers are already worrying about New Year's Eve festivities. And many fear shortages and price increases will be a larger problem in 2009.

"You may be paying 20 to 30 percent more and still not getting what you ordered," Micco said.

Oil Shocker

We thought this was an interesting article about the rising cost of transport. Current freight rates for a 40' fireworks container to European Mainports are now nearing US$10,000

Stung by Soaring Transport Costs,
Factories Bring Jobs Home Again
Wall Street Journal
http://online.wsj.com/article/SB121331934552070357.html?mod=googlenews_wsj
By TIMOTHY AEPPEL
June 13, 2008; Page A1

The rising cost of shipping everything from industrial-pump parts to lawn-mower batteries to living-room sofas is forcing some manufacturers to bring production back to North America and freeze plans to send even more work overseas.

"My cost of getting a shipping container here from China just keeps going up -- and I don't see any end in sight," says Claude Hayes, president of the retail heating division at DESA LLC. He says that cost has jumped about 15%, to about $5,300, since January and is set to increase again next month to $5,600.

HOMEWARD BOUND

• The News: Soaring fuel prices are prompting some U.S. companies to bring overseas production back closer to home.
• The Background: Higher oil prices are part of a larger wave of inflation hitting manufacturers in low-cost countries as wages rise and regulations tighten.
• What's Next: Don't look for U.S. factory jobs to soar, but the bleeding could slow. Mexico may be the biggest beneficiary.The privately held company, known for making the heaters that warm football players on the sidelines, recently moved most of its production back to Bowling Green, Ky., from China. Mr. Hayes says the company was lucky to have held onto its manufacturing machinery. "What looked like an albatross a year and a half ago," he says, "today looks like a pretty good asset."

The movement of factories to low-cost countries further and further away has been a bittersweet three-decade-long story for the U.S. economy, knocking workers out of good-paying manufacturing jobs even as it drove down the price of goods for consumers. But, after exploding over the past 10 years, that march has been slowing.

The cost of shipping a standard, 40-foot container from Asia to the East Coast has already tripled since 2000 and will double again as oil prices head toward $200 a barrel, says Jeff Rubin, chief economist at CIBC World Markets in Toronto. He estimates transportation costs are now the equivalent of a 9% tariff on goods coming into U.S. ports, compared with the equivalent of only 3% when oil was selling for $20a barrel in 2000.



"In a world of triple-digit oil prices, distance costs money," Mr. Rubin wrote in a recent report. He figures that for every 10% increase in the distance of a trip, energy costs rise 4.5%.

Transportation costs are just part of a larger wave of inflation sweeping global manufacturing, which has also been pounded by higher costs for basic materials, such as steel and resins.



The cost of doing business in China in particular has grown steadily as workers there demand higher wages and the government enforces tougher environmental and other controls. China's currency has also appreciated against the dollar -- though not as much as some critics contend it should -- increasing the cost of its products in the U.S.

Edward Zaninelli, vice president of trans-Pacific westbound trade at Orient Overseas Container Lines in San Ramon, Calif., a major shipping line, says he's heard from customers who are moving production back to the U.S., including a maker of steel pans for car engines.

"I believe a decent amount of production could come back into the States within five years, not everything," he says. "But it won't be because of transport costs -- it'll be because other production costs have gone up and companies have realized they can have better control over their production when it's closer to home."

For many manufacturers, though, oil prices that have hurtled past $130 a barrel have been the tipping point.

Emerson, the St. Louis-based maker of electrical equipment, recently shifted some production of items such as appliance motors from Asia to Mexico and the U.S., in part to offset rising transportation costs by being closer to customers in North America.

Edward Monser, the company's chief operating officer, says logistics costs, which include all the expenses associated with moving goods, became a worry about a year ago.

"That's when it became a dominant part of the discussion," he says, adding that oil then was less than $100 a barrel. "So with oil now at $130, it's even more serious." Mr. Monser says Emerson's larger strategy is to regionalize manufacturing, producing as much as possible within the part of the world where its sold.

But moving production closer to markets won't avoid all the problems associated with rising transportation costs. Manufacturers face hefty surcharges on domestic shipments by truck and train. And already congested domestic transportation systems may have difficulty handling a sudden upswing in demand from manufacturers buying and moving more raw materials and other supplies over U.S. rails and highways.



Moreover, in certain industries the advantages derived from offshore production continue to trump higher transportation costs.

Electronics firms, for instance, are now clustered in Asia and gain a major benefit of proximity to one another.

While many manufacturers are re-evaluating production strategies, there are limits to how many jobs will flow back to the U.S. One problem is that much of the basic infrastructure needed to support many industries -- such as suppliers who specialize in producing parts or repairing machines -- has dwindled or disappeared.

U.S. job losses in manufacturing have averaged 41,000 a month so far this year -- nearly double the pace last year, with sectors such as autos and construction materials tied to the housing slump especially hard hit. In essence, every job added as a result of companies pulling work back home is being more than offset by others reeling from the domestic slump.

Higher fuel costs "may slow the outsourcing of goods in the future, rather than causing a massive shift back of those things that have already been outsourced," says Daniel Meckstroth, an economist at the Manufacturers Alliance/MAPI, a public policy group in Arlington, Va.

A prime example is Craftmaster Furniture in Taylorsville, N.C. The company, bought two years ago by a Chinese manufacturer, once intended to shift 40% of its U.S. production to China by the end of this year or early next year. With the planned move only about half done, that exodus has stopped cold.

"We're getting hit with increases up and down the system," says Roy Kalcain, the company's president. "It's changing our whole equation for where we produce." As recently as a year ago, Mr. Kalcain says he was saving 15% when he assembled sofas in North Carolina using kits of fabric that were pre-cut in China. Those savings are now only 7% or 8%.

When savings fall to far less than 15%, it gets harder to justify having the work done in distant Chinese factories that take 12 weeks to deliver products.

The higher costs are particularly problematic for lower-value goods: The cheaper a product, the more significant transportation costs are in the final price. That may help explain why Chinese exports of such "freight-sensitive" goods to the U.S. are now falling for the first time in more than a decade, according to CIBC's Mr. Rubin.


Bremen Castings Inc., a family-owned foundry in Bremen, Ind., is seeing a wave of customers bringing work back from China and other low-cost countries.

Last month, a pump manufacturer, which had moved more than $1 million worth of metal-casting work from Bremen to China two years ago, called "to reactivate everything," says J.B. Brown, the foundry's president. "They told me the cost of transport from overseas was the straw that broke the camel's back -- and they said they didn't see it going back down any time soon."

And the heavier and bulkier goods are, the more sensitive they are to fuel costs. CIBC's Mr. Rubin predicts Mexico will be "the biggest winner of all" as increased transportation costs make China uncompetitive in an ever-growing list of businesses in North America. Even Mexico may be too far for some companies.

Last fall, Crown Battery Manufacturing Co. decided to close a plant it bought in Reynosa, Mexico, and move the jobs to its Ohio home base, adding 25 workers to the 400 it already employed.

"We're shipping batteries, which are big and heavy," says Hal Hawk, the company's chief executive.

Mr. Hawk estimates shipping to customers, who tend to be clustered in the Midwest, was adding 5% to 10% to the cost of the Mexican-made batteries, which he says also suffered from quality-control problems. The smallest batteries are 20-pounders for lawnmowers, but they also make 29,000-pound giants for running underground mining machines in places like southern Illinois.

"They were traveling 2,000 miles to get to those major customers," says Mr. Hawk, and all indications are that fuel surcharges on the trucks would just keep growing.

-- Conor Dougherty

Paulson to raise currency, Tibet with China at economic talks

WASHINGTON (AFP) — Treasury Secretary Henry Paulson will raise US concerns about the pace of China's currency appreciation and Tibet unrest at bilateral economic talks next week in Beijing, a senior US official said Friday.

China's yuan currency has increasingly appreciated in the past two years and that pace "should continue," said Alan Holmer, special envoy for China and the US-China Strategic Economic Dialogue.

The yuan, or renminbi, had gained "a little over 18 percent" since July 2005, he said.

"The accelerating rate of appreciation is significant and welcome and we believe it should continue," he told a news conference on Paulson's trip next week to China.

President George W. Bush's administration has stressed the need for dialogue with China on the sensitive issue, battling US lawmakers' moves to punish China for allegedly keeping its yuan undervalued to support the ballooning Chinese trade surplus with the US that critics say has cost American jobs.

The "best way" to encourage the Chinese government to liberalize its economy is "through intensive dialogue," he said, citing the SED framework and Paulson's talks with the International Monetary Fund and other organizations.

Paulson is set to meet with Chinese government officials, including the newly appointed leadership, next Wednesday and Thursday as part of the Strategic Economic Dialogue.

The bilateral framework to address economic issues of mutual concern was launched by Bush and his Chinese counterpart, Hu Jintao, in 2006.

Paulson's visit will help lay the groundwork for the fourth cabinet-level SED meeting in June in Washington, Holmer said.

The Treasury envoy emphasized that it was "very important" for Paulson to engage the new leadership in China after the National People's Congress earlier this month named President Hu to another five-year term and elected four vice premiers.

"The meeting will be important as new relationships are formed," he added.

Paulson also will take the opportunity to directly raise US concerns about deadly unrest in Tibet with Chinese officials, Holmer said.

"All senior US officials do raise our concerns with respect to Tibet and this trip will be no different," he said.

His remarks came as Bush for the first time publicly urged China to hold talks with representatives of Tibet's spiritual leader, the Dalai Lama, after raising concerns over deadly turmoil in the Himalayan territory.

Bush said that he had told Hu that it was in China's interest that his government "sit down again with representatives of the Dalai Lama" and "urged for restraint" from Beijing.

The protests began in Lhasa on March 10 to mark the anniversary of a failed 1959 uprising against Chinese rule in Tibet, an event that saw the Dalai Lama flee to India where he has since lived in exile.

Paulson is set to address China's Academy of Sciences on Thursday about energy and environment issues and the ongoing collaboration between the two largest consumers of natural resources, Holmer said.

At the third cabinet-level SED meeting, in December in Beijing, both sides agreed to "conduct extensive cooperation" over a 10-year period that will address energy, the environment and climate change.

They said the collaboration would advance technological innovation and the adoption of highly efficient, clean-energy technology, and promote the sustainability of natural resources.