Bill Smith

A COVID redux? Furniture importers sound alarm on rising container rates

HIGH POINT – Ocean container rates are continuing to rise, and concern is rapidly growing among furniture importers.

Spot rates have now risen close to 60% in six weeks, currently sitting at an average of $4,801 per 40-foot container, according to tracker Drewry. That’s 202% higher than the same week last year. Average rates from Shanghai to Los Angeles are $6,025, while Shanghai to New York sits at $7,299.

Furniture importers expect prices to keep rising, with some reporting paying as much as $7,000 for a container from Vietnam to the West Coast, and as high as $9,000 to the East Coast.

Bill Smith

“It’s like COVID redux,” said Bill Smith, president of freight forwarder and broker CV International. “Since May especially, at every two-week market cycle, there have been $1,000 increases.”

Smith said rates are rising for a multitude of reasons.

“Retail and business are better than projected,” he said. “It might not be the case for furniture, but it is in other sectors. Another thing is with the Red Sea and Suez Canal being effectively closed. Very few container operators are willing to ship their vessels through there. The majority have rerouted around Africa, which soaks up a lot of the extra capacity that was added to the market.”

There’s also concern over carriers manipulating things to increase prices, as well as not honoring contracted rates.

“It’s extremely unfortunate,” he said. “We contract a large percentage of volume on fixed rates, and those rates aren’t being honored. Those are levels that are supposedly locked in when freight was a lot lower. How they can do that is the big question. I’m sure there will be protests lodged with the FMC, but will it help, I don’t know. Carriers may be prioritizing more expensive spot freight and putting lower contracted on hold.”

Furniture importers have expressed concern over the entire situation, especially as of late. One has added a surcharge, another says it’ll have to add one eventually, others haven’t committed but likely will have to implement one, and others are determined to hold out.

Flexsteel is one that will implement a surcharge beginning June 19.

David Crimmins
David Crimmins

“We’re having real issues getting capacity at contracted rates and we’re forced to move to open market rates to ensure continued flow of goods and strong service levels for our customers,” Vice President of Sales David Crimmins told Furniture Today.

“We’ve hit the point that we can no longer absorb it,” he continued. “We absorbed substantial costs related to ocean freight increases in the winter and early spring, and we were hopeful they’d come down. We saw some relief, but over the past month it has become too much of a burden. We will continue to adjust and are hopeful that capacity returns and rates lower to ‘normal’ levels.”

Crimmins said the surcharge covers a $3,000 to $4,000 premium depending on product mix.

“We’re at that level of real costs now and are expecting a rise in rates mid-June and again early July,” he said. “Our view is that the uncertainty and rapid fluctuations are here to stay.”

Upholstery supplier Kuka Home hasn’t added one yet but said it’ll end up having to.

Matt Harrison
Matt Harrison

“It is bad,” company President Matt Harrison told Furniture Today. “I’m hoping it will be short lived and get back down by October. I have to do a surcharge, yes, but I’m holding as long as I can.”

Martin Furniture imports case goods from Vietnam and Malaysia. The company hasn’t committed to a surcharge yet but plans to decide soon.

“Rates have definitely been going up and in thousand-dollar increments,” said company founder and CEO Gil Martin. “Currently they’re creeping up from $6,000 to $7,000 a container from Vietnam to Long Beach.

Gil Martin
Gil Martin

“I reached out to some fellow distributors for retailers who work in Asia, as well as Costco and Wayfair suppliers. They all had similar increases going on. Some have already started a surcharge based on a cubic foot price. They haven’t been well-received.

“The challenge is getting containers that are under contract or paying the current spot rate,” Martin added. “But when will they start going down, and what will the cap be? Long story short, we’re going to wait a few weeks before making a decision.”

Whole home supplier Bernards is determined not to add a surcharge.

Micah Swick
Micah Swick

“I’m beside myself,” said Micah Swick, president. “I’m dejected. Contracts don’t mean anything again. Shipping costs have gone up astronomically. But even at current prices, we’re having trouble getting containers.

“I’m not implementing any surcharges. I suspect my competitors will have to. We will hold out as long as possible. I really believe we can outlast the current situation. I really believe this is temporary. The amount of capacity still exceeds demand and the economy remains slow.”

Others, such as A.R.T. Furniture and Universal, acknowledged rising prices but say the impact hasn’t been too severe yet.

Roger Turnbow
Roger Turnbow

“Yes, we are seeing a problem,” said A.R.T. President Roger Turnbow. “Rates are rising fast. They might be rising continuously every 30 to 60 days. Unless there’s a shift, we expect to see rises to the end of the year, not to the pandemic level, but any increase during a challenging time is going to be a hit to your gross margin.

“We do contract rates and are currently looking at consistent pricing,” he added. “We have not been negatively impacted yet.”

“We are seeing and hearing about early ‘peak season’ rate increases from Asia from only one or two of our current suppliers and it is only on the flow of goods outside of our contracted rates,” said Sean O’Connor, Universal president.

See also:

  • Ocean container rates rise again; 3 furniture execs say it’s a growing concern
  • Flexsteel’s numbers on the rise in Q2, but it plans to close a Ga. plant

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