Beginning in 2020, the various sub-sectors of Pan-Home Furnishing have started a new round of price increases, including ceramic tiles, sanitary wares, finished furniture, flooring and coatings and so on , which are without exception, and there is no shortage of Carpoli, Chivas, Kohler, TOTO, Armstrong, Nature and other well-known first-line brands. Analysts pointed out that the main reason behind the successive wave of price increases is the rise in raw material prices under the background of global central banks' flooding, followed by the steadily rising transportation costs, increasing levels of environmental protection control, and high labor costs.

Global central banks release water

Prices of the stock market, bulk commodities, industrial raw materials rise across the board

In the past 2020, in response to the impact of the epidemic, the central banks of some advanced economies have substantially expanded their balance sheets (note: balance sheet expansion is an act of central banks to expand the scale of their balance sheets, which is a loose monetary policy), which the market calls " Global central banks are releasing water." Statistics show that in 2020 the balance sheets of the Fed, the European Central Bank and the Bank of Japan will all expand by more than 30%, with a total expansion of US$8 trillion, which is equivalent to "recreating two Federal Reserves."

In the general environment of "opening the gate and releasing the water", the rise in stock prices and prices is inevitable. As of late December 2020, stock indexes in at least 11 countries and regions around the world have created historical or 30-year highs. As of February 18, 2021, US stocks, European stocks, Japanese stocks, and British stocks are still showing an upward trend.

From the perspective of commodities, the 2020 CRB Commodity Composite Index (Note: Commodity Research Bureau abbreviation, CRB index is an index reflecting spot commodity transactions by the U.S. Commodity Research Bureau) rose close to 9%. In terms of categories, the price of metal commodities has risen by 20%, oil, industrial raw materials, and livestock have also risen by more than 10%. Textiles and food have a relatively small rise, but they are also in an upward trend. During the Spring Festival of 2021, non-ferrous metal prices generally continued to rise, and the prices of copper, zinc, and tin all hit new highs in recent years.

Whether it is the rise in the stock market or the rise in prices of bulk commodities and industrial raw materials, it will inevitably be transmitted to various industries and drive prices in various industries, including the home building materials industry.

You "increased" but I will appear on the stage

Involving tiles, bathroom, paint, finished furniture, flooring, etc

Starting from March 2020, dozens of ceramic companies in Jiangxi, Guangdong and other production areas have collectively raised their ex-factory prices. As a result, the prices of small-size ceramic tiles have increased by an average of 0.1-0.5 yuan per piece; 600×600mm antique tiles have increased by 0.3-1.5 on average yuan/piece; ceramic tiles of 800×800mm or above will increase by 1-5 yuan/piece on average.

Stepping into April 2020, Kohler and LIXIL Japan announced the price increase starting from April 1. The price-increasing products involve multiple categories such as toilets, integral bathrooms, bathtubs, and faucets. The price increases range from 1% to 15%.

In October 2020, a number of finished furniture companies represented by Chivas issued a price increase letter to dealers, which increased the ex-factory prices and suggested retail prices of some products by up to 10%.

Also in the fourth quarter of 2020, the paint industry, which had originally stable prices, started a huge price increase. Hundreds of companies including Carbo-Li, Bardez and other well-known brands collectively issued price increase letters, ranging from 1%-10%.

In January 2021, after American Armstrong, Mohawk and many other floor companies announced price increases, the increase hit 10%, and there will be an increase in the future.

The highest price increase of upstream raw materials exceeds 150%

The upholstered furniture, coatings and wood products industries are most affected

Analysts pointed out that up to now, the "price hike" has spread to various sub-industries of home building materials, and the surge in upstream raw material prices is the main reason for this round of "price hikes".

In 2020, the prices of bulk raw materials in the upper reaches of the home building materials industry chain will not only rise sharply and involve a wide range, but also increase in many rounds, especially in the fourth quarter.

According to data from the National Bureau of Statistics and public media reports, in November 2020, the purchase price index and ex-factory price index of my country's main raw materials were 62.6% and 56.5%, which were 3.8 and 3.3 percentage points higher than last month, both of which were high in the year. In the surge of raw material prices, copper rose by 38%, aluminum by 37%, zinc alloy by 48%, iron by 30%, stainless steel by 45%, and plastic by 35%. In addition, the price of sponge increased 7 times, the price of cartons increased 5 times, and the price of accessories increased 2 times. Most of the raw materials related to the home building materials industry chain are increasing in price.

The price increase of upstream raw materials will eventually be transmitted to downstream home building materials companies after a period of time difference. However, due to the different rising rates of different raw materials, the impact on the cost of downstream home building material manufacturers and the retail price of the terminal is also different. In contrast, the coatings, upholstered furniture and flooring industries are more affected by rising raw materials.

In the second half of 2020, the price of upstream raw materials for upholstered furniture will start a "rogue" mode. From July 2020 to the end of January 2020, as an important raw material for sponge foam, the price of flexible foam polyether has reached a historical high, with an overall increase of more than 120%. It is also one of the raw materials for furniture production. The price of polyether rigid foam will also hit a record high in 2020, with an overall increase of more than 60%. As the main raw material for sponge production, MDI and TDI also rose significantly. MDI increased by more than 150%, and TDI increased by more than 60%.

In addition to the software home furnishing industry, another industry that is more affected by rising raw materials is the coatings industry. In 2020, the prices of raw materials such as epoxy resin, titanium dioxide and TGIC in the upstream of coatings will soar. The price of epoxy resin will rise by more than 20%, the price of titanium dioxide will rise by about 20%, and the price of TGIC will rise by about 40%.

Specific to the wood products industry, with the advancement of my country's environmental protection strategy, our country's wood output has been showing a downward trend, but the demand for the wood market is still growing, and nearly 80% of wood raw materials are imported. Starting from September 2020, the price of imported solid wood lumber has continued to rise in a wide range, and the price of some wood species has even increased by more than 40%. At the same time, due to the shortage of wood supply at home and abroad, the price of boards at the end of 2020 has increased by nearly 18% compared with the end of 2019. The price increase of solid wood and boards is bound to trigger chain price increases of related downstream products such as furniture, floors, and wooden doors. 

Environmental protection, logistics and labor costs are rising simultaneously

The pan-home furnishing industry’s "price increase" therefore cannot stop

With the implementation of the most stringent Environmental Protection Tax Law in history, more than 30 provinces (cities, districts) have successively announced the specific use tax amount and number of items of environmental protection tax on air pollutants and water pollutants. In order to further achieve the goal of control and win the battle to defend the blue sky, 48 provinces, municipalities and regions including Hebei, Henan, Shanxi, Shandong, Shaanxi, and Sichuan will initiate warnings for severely polluted weather and tighten control and introduce policies to limit pollution in 2020. For household building materials companies that emit high pollution, the increased environmental protection control will undoubtedly further increase the operating costs of the companies.

How to share the adverse effects of rising costs in multiple dimensions

Will become a new test facing home building materials companies

From the perspective of gaining greater market share and maintaining terminal price stability, both upstream home furnishing building materials manufacturers and downstream channel distributors are actually reluctant to raise prices easily. For many home furnishing companies, the most turbulent price increase in history from 2020 to 2021 is not for the pursuit of higher profits, nor is it for the next stage of marketing to build momentum, but a last resort-- the strategy of survival in a very period of time. 

With the fall in raw material prices, the improvement of the epidemic prevention and control situation and the recovery of economic fundamentals, the momentum of rising prices of household building materials will be curbed. However, from a long-term development point of view, the operating costs of enterprises caused by the external environment will continue, and enterprises must use internal efficiency improvements to dilute the operating pressure caused by rising costs.