2020 started out like any other year; full of hope, promise and expectation. In January Forestry Timber was proudly participating at Domotex – an international flooring trade show – in Hannover Germany. Little did we know the world would be turned on its ear in the coming weeks by a (thus far) unstoppable virus.
Lockdowns Lead to Pivoting
With many cities, states, and countries going into full or partial lockdown, international travel all but stopped. Restaurants closed their doors – the more fortunate ones pivoting their businesses from dine-in to pick-up and delivery to survive. Retail stores did the same – opting to fulfil orders online rather than shutter their doors for good.
The abrupt halt to both business and vacation travel – not to mention the shift to working and studying from home – has led to an increase in people feeling the need to have their homes outfitted to better suit to being at home all day, every day. Add to that stimulus packages provided by some governments to keep economies afloat and there has been a massive increase in demand for consumer goods.
Making Homes More Workable
With people at home 24/7 and little to no access to services, priorities have shifted to making their homes more suited to work and downtime. People are renovating their homes and redecorating to create spaces more suited to their needs. From new engineered hardwood flooring to new furniture, electrical goods and décor – demand is high.
The increase in demand for consumer goods translates to an increase in the demand for shipping. According to an article on the American Shipper website, ports along the US west coast are congested, with ships waiting significantly longer to unload their cargo. Add to that a labour shortage as dockworkers are testing positive for COVID-19 and a worldwide shortage of available shipping containers leaving container shipping fleets stretched beyond capacity, and we’ve hit the proverbial perfect storm.
Shipping Delays and Freight Rate Increases
Shipments that might have taken 8-12 weeks from order to delivery are now expected to take up to six months. An article in the Financial Times states a reported increase in shipping costs of up to 300%, leaving manufacturers the unenviable task of either raising prices to cover the significant increase to ship their product or absorbing the loss – neither of which are viable, long-term solutions.
Importers are weighing whether it’s worthwhile to continue to place orders so as not to run out of available stock or to try and wait it out in the hopes that the recent massive increase in shipping costs is just a blip on the radar and that prices will normalise.
There are risks to deferring orders; however. As people spend funds formerly earmarked for travel and leisure, an increase in shipping times coupled with the increased demand for hardwood flooring has the potential to leave distributors short on stock – opening the door for consumers to look elsewhere to have their needs met.
While most consumers have yet to see the ripple effect of the increased pricing and slowdown of container shipping, it won’t be long before the price of goods start to increase significantly.