Steel shortage hits bed supply
Furniture suppliers to the backpacker accommodation sector are warning of price hikes in the wake of rising steel production costs in source market China.
The Chinese government’s decision to abolish export rebates, introduce tough new labour laws and temporarily shut down most of its steel manufacturing capability during the Beijing Olympics to reduce pollution has led to a gap in supply which the rest of Asia is struggling to plug.
The country’s producer price index jumped 6.6 per cent in the year to February 2008, with more than half of that increase caused by coal and steel. These extra costs are being passed down the production line, through manufacturers relying on Chinese steel to produce bunk beds and other furniture, all the way to Australian consumers – including backpacker hostels. Major importers are turning to other Asian countries to fulfill orders and, with demand outstripping supply, prices are being forced up worldwide.
Australian supplier Sleepmaker, which sources its bunks from Malaysia, is feeling the effects. National Category Manager Phil Ellis said: “The impact of the steel shortage has now reached every corner of the world, including Australia, with reduced supply versus galloping demand making price rises inevitable.”
AMZ Furniture Commercial Bedding Manager Geoff Stern said increased costs out of China would help Australian-made product become more competitive, but agreed prices will rise across the board. He added: “We anticipate the cost of a basic bunk out of China rising by 25 per cent this year, with the Australian equivalent rising by 10 per cent.”
Ellis said he expected inflationary pressure to continue and urged companies looking to upgrade their furniture to act now rather than wait for prices to come down.
“They could be waiting a long time”, he warned.
By Martin Lane · April 3rd, 2008 at 3:45 pm
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