Rising material costs equal higher product pricing
Arise in the cost of lumber has undoubtedly affected the category. “Reduced supply of raw materials has driven up pricing significantly in the last six months, particularly in solid wood,” Buchanan said. “This is requiring all producers to raise prices.”
Raw material supply isn’t the only factor prompting the price increase. A lack of logging, reduced demand and unusually bad weather since the start of the year have all worked their way into the pricing equation (FCNews, March 8/15).
Reduced logging efforts have materialized in several ways. With the poor state of the economy, demand fell, as did pricing. “A tremendous number of sawmills have been shut down over the last two years,” Poland said. “Therefore, our lumber prices have increased considerably since the first quarter of 2009.”
Mannington also cited supply issues as grounds for pricing increases. “The rise in raw material costs is driven by a lack of harvesting of timber,” Holm said. “Typically we harvest lumber for our Alabama factory within 25 to 50 miles but with the lack of demand resulting in a lack of harvest, we currently have to gather materials from as far away as 250 miles. For us, the cost has become getting the materials.”
Some manufacturers are holding off on increasing prices as long as possible, noting consumers will be less than pleased. “Recognizing that the consumer market is more price driven than ever, Anderson is doing everything it can to avoid having to pass these costs on,” Woolsey said. “However, we would not be surprised to see an across-the-board industry price increase in the first half of this year.”
Indeed, that is just what is going on. “We are seeing unprecedented inflation rates in raw materials,” Call said. “This has led to announced price increases by the large players, and quiet but certain increases by second-tier hardwood flooring companies. As this gets pushed through retail to consumers, everyone in the industry will benefit.”
One company that is not raising prices is Mirage. Robitaille told FCNews that the company is doing all it can to help the consumer in these tough times and will hold the line on pricing, at least for the next couple of months.
However, Mother Nature has thrown another variable into the mix: unpredictable, and at times crippling, weather. “The cold and wet winter has made it extremely difficult for loggers to harvest timber, which has tightened the lumber supply and increased prices even further,” Poland said.
Editor’s note: For full coverage on the rising cost of materials, read the Page 1 article in the March 8/15 issue.