by Sources say the price of oil-based materials such as paints, finishes and foam could rise, but of even greater concern are potential hikes in container rates related to rising fuel costs
HIGH POINT — With oil prices at or continuing to near $100 per barrel as the war with Iran and closing of the Strait of Hormuz drags on, industry sources are bracing for price increases on materials that use oil as a key ingredient.
This, in turn, could impact prices of finished product, some say, noting the increases could start appearing as early as next week’s premarket or at least sometime during the spring High Point Market cycle.
The conflict also could impact container prices as shipping companies use oil costs as a tool to drive up prices as companies continue to negotiate contracts set to renew this coming spring.
While the impact on shipping contacts largely remains an unknown, furniture manufacturers and suppliers overseas have already been alerting the industry to what may be taking effect soon.
Below are some potential oil-related price increase impacting various materials.
+ Paint and other finishing materials — up 12% to 18%
+ Foam for seat cushions — up 20% to 30%
+ Styrofoam used in packaging — up 30% to 40% or higher
Other materials not specifically related to oil prices that could increase in the mid-to-upper single to lower double digits include plywood and MDF (medium density fiberboard). Vietnam labor costs also are slated to rise by more than 7% from last year, sources note.
But the bigger concerns, industry observers note, are oil related. One manufacturer in Vietnam told Home News Now that various solvents used in finishing are increasing by a large percentage and that new prices will take effect starting April 1.
“We don’t know the exact amount yet, but I think the vendors will have to pass the price increase to their customers at least partially if not all,” the source noted. “This will definitely affect the consumer market even worse considering the import tax applied by Trump administration.”
Tariffs have likely compounded the situation for many manufacturers, making it difficult to absorb increases in materials costs.
“I don’t think there will be any choice but to raise prices if the oil does not flow soon,” another Vietnam-based manufacturer told Home News Now, adding that while everyone is in a “wait and see” for a few more days, “it is pretty obvious the USA government has kicked a hornet’s nest and the hornets are stinging.”
The labor costs, while a lower percentage that goes into the finished product compared with raw materials costs, are another offshoot of high fuel prices in Vietnam, causing many workers to voice concerns to their employers. While it’s a lower cost country, the source noted that Vietnam is not immune to world commodity prices.
The challenge moving forward will be for overseas factories and U.S. importers to absorb much if any of the increases as they have already helped their own customers — both wholesalers and retailers alike — with tariff relief.
“Therefore, the war and its oil price event cannot be ignored.” the source noted.
Of course, some also note that suppliers and shipping companies may be using the volatility in oil prices as a ploy to raise their own prices, particularly as oil prices could stabilize as quickly as they have risen.
Regardless, it appears that price hikes are likely coming between now and the next several weeks, causing yet another challenge for the industry ahead, as many say retail continues to be extremely slow.
While its true the industry has remained resilient, stability would be welcome, particularly given the need for retailers seeking to drive more traffic to their stores. The last thing they need is another reason for consumers not to shop for furniture.
