no good news here
by H. Linens on 18-08-2021
Here is an update on shipping issues, including extended lead times and price increases on deliveries from the Far East, which impacts all retailers and all product types.
In recent weeks shipping costs have escalated beyond all predictions, with some suppliers reporting quotes of $31,000 for a container, compared to $1,500 18 months ago. This has driven up the cost price of all goods. Alternative methods of transport such as rail, road or air freight remain more expensive, putting pressure on sea freight as the main transport route from the Far East.
As businesses recover from the pandemic, there has been a buying boom which has led to containers being in short supply. In some cases, delivery times have been delayed by 6 to 12 weeks due to lack of container availability.
Production lead times have also increased, with many factories having to make changes within their manufacturing plants, resulting in a decrease in productivity. Factories are increasing prices to compensate for the loss in production. Unfortunately, we expect this situation to get worse in the 2nd half of the year when demand for products increases further.
COST INCREASES IN RAW MATERIALS
Exceptionally high demand and low availability of raw materials is having a significant impact on pricing as this example relating to cotton and rubber prices illustrates.
The Raw Material Price Index stands nearly 18% higher than a year ago, led by cotton and rubber prices. Raw material prices are expected to average 10% higher this year, compared to 2020, before stabilizing in 2022. Cotton prices are expected to average more than 20% higher in 2021, compared to2020, followed by a small increase in 2022 (World Bank Commodity Markets Outlook). As a result, we are seeing an unprecedented amount of price increases from suppliers and some availability issues.
HOW HOUSEHOLD LINENS ARE TRYING TO ALLEVIATE PRICE INCREASES
Be assured we are negotiating with suppliers to help absorb some of the cost increases and lower their margins. We are also working closely with suppliers to ensure that any price increases will not become a permanent feature and that prices will drop back when container and raw material issues stabilise.
We appreciate this news is frustrating and most unwelcome at a time when we are all trying to readjust following the various lockdowns. It is a situation that is impacting all industries and businesses of all sizes. You will have heard in the news that many of the large department stores such as John Lewis, Next and Sainsburys are all experiencing similar delays and price increases.
From industry knowledge, unfortunately, we don’t foresee this situation changing in the next 12 months. None of this is Brexit related but that too is an added complication that has led to a breakdown in delivery times from the U.K. as they struggle to come to terms with their status as a Third World country. Household Linens will continue to provide updates via their Social Media outlets. Thank you for your time and your loyal support.