Due to the higher shipping costs, IKEA is considering moving more production to Turkey

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In order to shorten its supply chain, the Swedish furniture manufacturer IKEA is planning to relocate part of its production from Asia to Turkey. Meanwhile, Turkish furniture manufacturers have come under pressure due to rising prices and limited availability of raw materials.

Sweden’s takeaway furniture giant IKEA plans to move more production to Turkey to minimize problems with global supply chains and increased shipping costs, the company’s chief financial officer for Turkey said.

Products it is expected to manufacture and then export from Turkey, including armchairs, bookcases, wardrobes and kitchen cabinets, are currently being shipped thousands of kilometers from East Asia to the Middle East or European markets.

“Due to shipping problems we faced during the (Covid) pandemic, we are trying to produce more in Turkey,” CFO Kerim Nisel told Reuters, declining an estimate of how much capacity could be moved.

“We all saw in the pandemic that diversification is so important,” said Nisel. “It may not be a good strategy to produce items in one country and then try to get them around the world.”

The company has seven branches in Turkey and already exports three times as much as it imports to Turkey, where it currently makes textile, glass, ceramic and metal products for global export.

Nisel said the cost of a container from East Asia rose from $ 2,000 before the COVID-19 outbreak last year to $ 12,000. “It’s more rational to have them made closer to the point of sale. That is why we want to have them manufactured in Turkey. “

IKEA’s move follows similar moves by other European brands like Benetton, which is bringing production closer to home by increasing production in Serbia, Croatia, Turkey, Tunisia and Egypt with the aim of halving production in Asia.

The outlook for Turkish furniture manufacturers

Nuri Gurcan, President of the Furniture Industry Businessmen Association (MOBSAD) said Bloomberg HT (Link in Turkish) in March of this year that they have difficulties in procuring foam, MDF, metal and glass, the most important raw materials for furniture.

“The difficulties in obtaining raw materials and the exorbitant prices of raw materials will be reflected in prices in the coming days,” said Gurcan. “Prices will rise by 20-25 percent. In the past there has been a price increase of 10-15 percent for the same reason. The manufacturer can’t make money and how much longer can they hold out if they can’t make money? This will definitely be reflected in the prices in the next season. “

Gurcan mentioned that in addition to sourcing raw materials, they are also suffering from price increases: “One of the main ingredients in furniture manufacturing, foam, is now 150% more expensive. When we ask why they tell us that foreign manufacturers are working with reduced capacity. They apologize for being 50 percent full. ”We also have major problems with glass and metal. These materials were also sold at greatly increased prices. “

The MOBSAD President said that if the raw material problem persists in the furniture sector, production in Turkey could come to a standstill. “Think of this as an SOS. Urgent precautions need to be taken, ”Gurcan said. “Otherwise we could get to the point of closing factories. We have to get raw materials somehow; perhaps taxes on raw materials should be lowered. We have to be able to import raw materials; As an association, we are checking where we can procure materials. “

Another article in Bloomberg HT (Link in Turkish) from August this year reported that the prices for particleboard MDF rose by 10 to 15 percent.

Koray Caliskan, president of Modoko, a home and office furniture shopping complex, said manufacturers wanted to reduce demand in Turkey and therefore increased prices on a monthly basis; If prices persist until the end of the year, production capacity would drop by 35 percent and plant closures of up to 35 percent could occur.

In June last year, household goods increased by 25 percent compared to the same period last year. In addition, the prices for steel and wood, raw materials for furniture, have risen by 100 percent since the beginning of the year.

Caliskan protested the 10-15 percent monthly price increases for MDF, saying, “Compared to last year, MDF prices have increased by 40 to 60 percent this time in US dollars. In terms of inflation … furniture rose the second highest. “

Caliskan accused MDF importers of producing and importing enough for the Turkish market but of constantly increasing prices. “You have been shipping China fibreboard and MDF in the past few months. We are having a very difficult time in the Turkish market. The export of fiberboard and MDF should be banned immediately. It is a great injustice to send raw materials to one of our biggest competitors, China, and to harass local producers. “

In April 2021, the Turkish competition authority fined the manufacturers of MDF and chipboard in the country (link in Turkish) for plotting to fix prices and thereby violating the law. Eleven companies were fined a total of 271 million Turkish liras (approximately $ 33,089,100).

Source: TRTWorld and agencies

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