HIGHLIGHTS
- Following a sharp increase in freight rates, wood prices also increased. From April until now, the price of eucalyptus wood by shipping has had 3 increases, at 25 USD/m3, while shipping by sea container increased to 32 USD/m3.
- When the price of input wood materials along with the freight rate increases gallopingly, export furniture manufacturers will have to renegotiate the price of goods with their import partners.
FULL ARTICLE
The price of imported wood has increased because of transportation costs
The end of the year is always the time when major holidays take place around the world, whereby people’s demand for goods also increases, which means that the logistics industry will have to bear a great responsibility in meeting the demand. demand for goods. But so far, problems such as shortage of containers, lack of warehouses, and lack of labor force have not been completely resolved. Those problems have pushed up freight rates and businesses supplying raw wood have also been greatly affected.
According to Mr. Phan Van Phuoc, Director of Tan Phuoc Co., Ltd., from the end of 2020 until now, the return container freight has increased 4-5 times compared to the previous one, the current freight rate ranges from 3000 – 4000 USD/cont. Following a sharp increase in freight rates, wood prices also increased. From April until now, the price of eucalyptus wood by shipping has had 3 increases, at 25 USD/m3, while shipping by sea container increased to 32 USD/m3.
Mr. Phuoc added that his business both produces furniture products and supplies wood materials for many other businesses. Regarding production materials, the enterprise has prepared raw materials for production until April 2022, but only accounts for 30-35% of the total wood warehouse.
If in the next two months, Tan Phuoc does not import wood, the supply of some customers will be interrupted and there may be a local shortage of raw materials, the peak will be in March 2022. In cases where customers do not accept the price increase, this business must accept to lose the market, because selling at a lower price, they will suffer heavy losses.
Setting new prices for export timber
When the price of input wood materials along with the freight rate increases gallopingly, export furniture manufacturers will have to renegotiate the price of goods with their import partners.
According to Mr. Nguyen Chanh Phuong, Vice Chairman of Ho Chi Minh City Fine Arts and Woodworking Association (Hawa), there will be two main measures for businesses to deal with this situation. Firstly, businesses will increase the price of wood products according to the price of raw materials. Currently, businesses are negotiating with partners to increase product prices by 10-15%. Or, businesses will have to restructure products, choose strong products, available materials, and low production costs to protect profit margins.
Despite being in conditions affected by the epidemic, many families still pay attention to furniture, many businesses receive orders until June 2022. However, businesses are still wary and do not dare to sign orders that are too large or too long-term because of the unstable price of freight and raw materials, and high risk.
Businesses have not anticipated the increase in raw material prices as well as freight rates, so they are facing difficulties with old orders. Accordingly, businesses must agree with customers on an appropriate price in the spirit of sharing between the two parties because the characteristics of furniture products are made according to the size and design of the order. But if the price is high, customers do not receive the goods, the business will fall into a situation and will have to suffer losses anyway.
In the future, to limit the increase in raw material prices, businesses can buy together and bid together for raw material areas to reduce production costs. As for manufacturing enterprises, 2-3 months of raw material storage time is safe because prices are not stable, importing in large quantities will affect working capital and may cause problems. interruption of some other activities of the enterprise.
Phan Quyen
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