Key Asian wood cost rises
Rubberwood users could raise prices 3% to 7% as soon as June
By Thomas Russell -- Furniture Today, May 10, 2004
HIGH POINT — HIGH POINT — A shortage of rubberwood from Malaysia and Thailand soon could hike prices of furniture using the raw material.
Importers using rubberwood in occasional tables, kitchen carts, casual dining and bedroom sets say they may implement price increases from 3% to 7% as early as June.
David Beckmann, president of case goods importer Emerald Home Furnishings, predicts price increases averaging about 3% to 4% before the July San Francisco market. "It's not huge, but it's still there," he said.
Such increases likely would have the most impact in Emerald's casual dining category, which accounts for about 30% of total volume. The company's bedroom products likely wouldn't be affected because they use a much smaller amount of rubberwood.
Case goods importer 4D Concepts uses rubberwood in dining tables, occasional tables and kitchen carts. President Jeff Riegsecker said 4D implemented a 5% price increase on some products in March. Combined, the items affect only about 10% of 4D's overall business, he said.
The shortage stems partly from China's increasing consumption of rubberwood. That demand is occurring at a time when Malaysia's rubberwood supply has dwindled, with poor harvests reported in some areas.
The Kuala Lumpur Business Times reported in early March the Malaysian government was considering limiting or banning the export of rubberwood because of the drop in domestic supply. In some cases, that already has increased importers' reliance on rubberwood from Thailand.
In a competitive market, importers naturally want to avoid price hikes.
Dan Angus, senior vice president of sales and marketing at Ligo Products, said his company has negotiated with its suppliers to hold prices down.
"We have held pricing for the past five years," Angus said, noting that most of Ligo's suppliers are in Thailand. "We have negotiated with our factories to give us better prices, as everyone has."
But with the price of rubberwood logs up an estimated 15% to 20%, that could become more difficult. Angus guesses there could be an average 5% increase in wholesale costs.
Such increases would hit the hardest in Ligo's casual dining category, 99% of which is made of solid rubberwood. Angus estimated rubberwood also is used in 70% of Ligo's bedroom and 25% of its occasional.
Each wholesaler and retailer has different profit margins that will determine the ultimate cost to the consumer. However, a 5% price increase would add roughly $10 to the wholesale cost of a $199 table and four chairs that retails at $399, and some $20 to the cost of a $399 table and four that retails at $799.
Angus said Ligo may have to hike prices in the fall, but said it's too early to predict how much. "We're going to have to address it," he said. "Eventually it's going to hit. If there is an across-the-board price increase in rubberwood product, most of us as wholesalers and retailers would look to restyle and re-source to keep the sensitive price points."
That's an approach case goods importer Bernards plans to take. National Sales Manager Alan Ferguson said the company uses rubberwood in dinettes, hall trees and mirrors, estimating those products represent about 14% of total sales.
So far, Bernards has been able to avoid price increases or product shortages.
"We're trying to stay in closer contact with our vendors," Ferguson said. "We have planned several trips overseas in the next few weeks to stave off any possible increase. If there are increases, we will find new vendors to offset those."
That's not necessarily going to be easy.
"We've absorbed the increases and have held off as long as we can, but we are in an inflationary mode right now," Emerald's Beckmann said. "It's unusual for us to be talking about inflation. We haven't seen it for years."
