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How shipping delays are impacting July 4 fireworks

A fireworks shortage is causing concern ahead of July 4. Atlas PyroVision Entertainment CEO & Artistic Director Stephen Pelkey joins Yahoo Finance Live to discuss.

Video transcript

AKIKO FUJITA: Well, supply chain snags are threatening to derail some July 4th celebrations this weekend. A backlog at some of the US ports leading to a shortage of fireworks just days before the holiday celebrations. Let's bring in Stephen Pelkey, Atlas PyroVision Entertainment CEO and Artistic Director. Stephen, there's a lot of people who are concerned. Because remember, last year, all the celebrations were canceled. This is supposed to be sort of the big bounceback in terms of July 4th celebrations. What are you seeing in terms of supply? And what's the key disruption that's leading to the limited supply.

STEPHEN PELKEY: Yeah, I mean, there is a shortage on a variety of levels, like everybody we have heard in the news. 2020, the fireworks industry experienced a record increase in consumer fireworks sales, nearly doubling from $900 billion in 2019 to $1.8 billion in 2020. So naturally, you're going to have a disruption of having a lot of those companies try to resupply at those levels. With the continuing ongoing global shutdown and having probably only about 70% of the ships in operation, the ports just aren't able to handle it. Because globally, you just don't have a lot of this infrastructure that is completely back in service.

So whether you have shutdowns of factories inside China, whether you have increased cost in shipping, which is now matching anywhere between 250% and 300% increases. So you have additional companies that even if they are able to ship fireworks, they're either waiting on a ship outside the port, or they've decided not to bring in all of their inventory, because they don't want to pay the high cost of shipping due to the port delays and high shipping cost.

ZACK GUZMAN: Yeah, I wonder how much that's going to do to pricing. Obviously, we saw kind of some weird dynamics play out last year when we saw a lot of those shows, as Akiko was mentioning, get shut down to maybe some of those fireworks, aside from the ones that you need a license to handle there, made its way to the retail segment. But I'm curious what all of these concerns and kind of congestion might do to prices when it comes to this year's 4th of July.

STEPHEN PELKEY: Yeah, you bring up a great point. And the consumer industry really didn't have any competition for-- in the fireworks industry when you have the sector of the professional display industry that still had all of their stock. So they weren't really placing a demand in shipping in 2021-- later in 2020 or 2021 because they haven't used their stock. Now that all those displays are coming back, now those consumer companies are going to have to compete with space for professional display companies looking to resupply.

So those-- most of us are in good shape. There are going to be some problems with popular items that the consumers may want. The only way to get around that is if you're going to need fireworks for the 4th of July, buy it early. If you're going to need fireworks in August or September, buy it now. Because there may not be those items or even any of the particular items that you're really interested in. And then after that, it's really the worry is 2022--

AKIKO FUJITA: Hmm.

STEPHEN PELKEY: --as-- because this is really going to take about 8 to 12 months to really work itself out to correct these port congestions and rail service congestion.

AKIKO FUJITA: So it sounds like you're saying sort of the traditional celebrations that we've seen on a bigger scale, the professional ones that you point to, that's going to pretty much go off this weekend as planned. What about on a consumer level, these individual stands that we see? Is there likely to be a shortage there?

STEPHEN PELKEY: Yeah, the individual stands are going to be hardest hit because a lot of the major suppliers of consumer fireworks are handling a lot of their needs. And naturally, there's going to be some reluctance to supply the smaller vendors because there just isn't enough to go around. So many of them have already experienced some of that.

And then in addition, as you mentioned earlier, you have anywhere between the 5% to 8% increase in raw material costs. So the average cost has gone up FOB from China 5% to 8%. Plus, you have a 200% to 300% increase in shipping. So what used to only cost perhaps $10,000 to import a container from China now is getting anywhere between $25,000 and $30,000. That's a pretty tough number when you're trying to bring in a total value in a container of $45,000 or $50,000. That's nearly-- just over half the cost of the container.

So you get-- most retailers, most professional display companies are trying to spread it out over all of their product lines because there are going to be some commodities that just can't absorb a 50% to 60% increase. So you're going to see price increases anywhere between 15% and 20%. And that's going to be the norm over the next couple of years.

ZACK GUZMAN: Yeah, it's been interesting to watch kind of fireworks come and go over the last few months here in the pandemic. But very interesting dynamics playing out. Appreciate you hopping on here to chat it all with us. Stephen Pelkey, Atlas PyroVision Entertainment CEO and Artistic Director, thanks again for the time.