by While sources say they are holding the line during market, the price of oil and other materials impacting the supply chain is making it hard to hold off much longer
HIGH POINT — Price increases that are tied to petroleum and other increased raw materials costs are on the horizon potentially impacting buying activity at market and in the weeks that follow.
While many sources contacted for this story say that prices will be stable at market, some manufacturers and importers are implementing them soon after, starting as early as the end of the last week in April and continuing through the middle of May.
The range of price hikes, particularly related to the cost of foam used in upholstery, has been estimated between 3% and 7% with some falling either higher or lower. A 5% percent increase on a fabric sofa wholesaling at $500 would raise the cost to retailers by $25 and raise the cost of a $1,000 sectional by about $50. For the consumer, that could potentially add $50 to the price of a sofa and $100 to the price of a sectional.
The biggest culprit in the cost increase is foam, which sources say has risen as much as 30% or more in recent weeks largely because of a fire in mid-March at a Texas plant that supplies chemicals used in foam production.
“This facility is a primary producer of chemicals used in foam production, and the disruption has created immediate shortages and cost increases across the industry,” one upholstery manufacturer told customers in a letter issued April 17. “As a result, the cost of petroleum-based inputs used in foam and cushioning materials has risen sharply, affecting domestic upholstery manufacturing nationwide.”
Sources that have spoken about the issue with Home News Now said the shortage of materials to produce foam has some companies on allocation, or reduced supply.
However, as business has been soft, this has not been as big an issue as when the same plant was impacted by a pipeline freeze in early 2021. At that time, during the height of the pandemic, demand was so high for furniture, that the allocation situation was more pronounced, shortening the supply in a way that curtailed production.
Today, sources note, the main issue is more about petroleum-related price increases for foam used in sofas, sectionals and other seating.
“We are not doing anything for market; I can tell you that,” said Universal Furniture President Sean O’Connor of upholstery price increases at market. “It will be post market and that is actually something I have heard from quite a few folks. They are just looking to get through market.”
At the time of this interview, he said that the company was still working on setting its prices for post market. But he believes it will be an issue that impacts most if not all the domestic upholstery industry.
“You may see a variance of more than 3%-5% depending on people’s labor and what they’ve done in the past,” he said. “If they haven’t adjusted or had a price increase in some time, it may be more.”
He said Universal is leaning more toward a surcharge more than a price increase because “I don’t want to change prices and then do it again in July,” he added of the potential for ongoing tariffs.
The cost of Chinese fabrics, which one source said has risen as much as 15%, is another factor impacting both domestic and imported upholstery alike.
Finishing and packaging materials such as Styrofoam, which are largely petroleum based, also have been impacted by rising costs, some of which are tied to the war with Iran and the resulting limited supply of oil through the Strait of Hormuz.
In an April 14 letter to customers from company President Terry England and Vice President of Sales Mike Andrews, upholstery manufacturer England Furniture told customers that elevated oil prices and disruptions to international trade routes have dramatically impacted the cost and availability of many raw materials used in the furniture industry. “The result for manufacturers has been skyrocketing costs for items such as fabric and packaging which are produced using petroleum,” the letter stated.
The letter also mentioned the mid-March fire at the LyondellBasell plant, which has disrupted the supply of a critical component used in the manufacture of polyol, a key ingredient in polyurethane foam. “Foam producers have moved quickly to adjust pricing and regulate supply,” the letter stated. “Factoring in the impact on energy costs and fuel prices, it amounts to a perfect storm being felt on all levels of the U.S. economy.”
Because of such factors, the company said it is raising its existing surcharge by an additional 3% to a total of 5% that takes effect for orders entered into its system starting April 28, a day before the end of the April market.
Some increases have taken place earlier. Upholstery manufacturer The M|T Co. said that because of the lowered global supply of petro-chemicals to produce polyurethane foam and other products, it is seeing large price increases from its main foam suppliers, “with more increases likely in the coming weeks. Other components are also on the rise as a result of transportation costs and other supply constraints,” company President George Jordan told dealers in a letter issued April 15.
As a result, the company is implementing a 5% surcharge for all orders received after April 20. “We are hopeful this is a temporary situation, but additional increases are possible should more foam increases come in the months ahead.”
Jordan added that “as of today, foam allocations/shortages are having a limited impact on our production, but the possibility exists that shortages may reduce our ability to maintain our current supply output in the future. We are working closely with our suppliers and are optimistic we will be able to maintain current output levels.”
Tim Newlin, president of upholstery manufacturer Norwalk Furniture, told Home News Now that the company is on allocation from one of its foam suppliers that produces a very specific type of foam for its line. However, he said that with another key supplier “we are well within the allocation and we are fine.” He added that Norwalk cuts a good amount of the foam it uses in-house, which also helps maintain a good supply of what it needs for its custom orders.
“At least we are not buying cut foam,” he said. “If we were buying everything cut, it would be a worse situation.”
He noted that the company also is not increasing prices at market but likely will have to adjust prices after market.
“I am meeting face to face with all my suppliers before I make a call, and that is why I am holding off,” he said, noting that like others, he has heard that prices industrywide are increasing in the 3%-7% range.
He said that foam is the main thing impacting prices, but that transportation costs also are likely having an impact on the costs of finished goods.
“This is because of the inbound freight to get it to us with gas prices being where they are at,” he said. “I know that foam is the bigger issue, but I also think there will be inflation because of gas prices.”
Price increases are not only impacting domestic producers, but also importers of upholstery and case goods.
Tim Donk, vice president of sales operations and marketing at case goods and upholstery resource Legends Home, said the company is in the midst of trying to figure out its pricing, just having recently been hit with increases “on materials we didn’t even know about. It’s just price increase after price increase. So it’s hard to know what to do.” The increased materials costs, he noted, impact both its domestic and imported products.
However, he said that price increases won’t take effect before May 1, with the average being around 5%.
“Pricing will be as it is today at market,” he noted. “If you can’t answer that question, you just cost yourself a sale.”
Nico Gaviria, CEO at case goods importer Martin Furniture, said that a number of factors are having an impact on the cost of its product mix, which is mainly from Vietnam. While the spike in oil prices is impacting the cost of finishing and packaging materials, it is also significantly raising the price of gas in Vietnam, a factor that continues to impact local wages.
As part of its effort to determine its final pricing, he said, it needs to be judicious for both itself and its customers.
“We have to do very good math to make sure we are not losing money,” he said. “The other thing is that we have to make sure we are not putting too much pressure on the market. If you increase something by 10% and your demand goes down by 20%, at the end of the day you are actually losing money.”
Even a 5% increase, he said, could have an impact.
“The real question is does it stop the consumer from buying or does it make the consumer go buy something else?”
On a positive note, he said, no one in the industry is immune from the issues impacting the cost of materials and finished goods, which at least helps make it more of a level playing field.
“My guess is that everyone is in the same boat,” he said. “The whole world is going through the exact same thing. They are feeling the pain of oil. We are all in this together for better or worse.”
