milan — The effects of the Red Sea attack are reverberating around the world, and Italy’s luxury furniture and home industry is beginning to consider its options.
Earlier this week, the International Monetary Fund reported that as of January 21, cumulative 10-day traffic through the Suez Canal was down nearly 50 percent compared to the same period last year. Since Houthi-led attacks on ships of major international shipping companies such as MSC, Maersk, CMA CGM and Hapag-Lloyd in the Red Sea, cargo from around the world has been diverted to South Africa below and around the Cape of Good Hope. .
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Italy, the world’s eighth-largest exporter and center for luxury furniture and decorative goods companies, is beginning to realize the impact of the conflict on the movement of goods to key markets in the Middle East and Asia. According to a report released on January 19 by the Bank of Italy (Italy’s central bank), about one-third of the country’s fashion imports, including components such as textiles and leather, transit through the Suez Canal. The furniture sector is not far behind. Approximately 15 percent of all furniture, ceramics, glass, and wood products have made the same voyage.
Design Italy, which has been at the forefront of the furniture e-commerce boom, said the crisis has so far had a limited impact on the luxury design industry. Founded in 2019, the company represents 140 brands, including Cassina, Poltrona Frau, and Driade, and ships products to more than 100 countries.
Roberto Ferrari, founder and CEO of Design Italy, is known for his experience in guiding Italian companies into the digital space through his work as an investor, consultant and chief digital and innovation officer at merchant bank Mediobanca . He explained that while the luxury goods industry has the advantage of not being dependent on raw materials from China, companies are bracing for higher transport costs for exports in the short term.
“In the medium term, we need to see whether this crisis will be prolonged and how the entire international logistics and supply chain network will be affected. As a result, production and shipments will take longer and possibly “It’s going to be more expensive,” he said.
Rising costs are already a reality, the IMF said in its latest Middle East and North Africa regional economic outlook released on Wednesday, saying: “Fares on routes connecting Europe and the Mediterranean to China have increased by 40% since mid-November. Prices have skyrocketed,” he said. This is thought to reflect an increase in insurance costs due to increased security risks and an increase in transportation costs due to longer transportation routes. ”
Artemest, an online site with more than 50,000 products made by 1,400 artisans, said its contingency plans were already in place. The company was founded in 2015 by jewelry designer Ippolita Rostagno and Artemesto’s creative director and CEO Marco Credendino. Credendino said goods destined for the Middle East and Asia would be sent south of the African continent by sea or air, or both. .
“Artemest manages the global transportation/logistics of 1,400 artisans and producers. At the moment, the Suez Canal crisis is still under control. We face this problem in two different ways. One is the significant increase in the cost and time of sea transport, but we continue to use sea transport where possible,” Credendino said. Air freight is used when customers use global logistics partners and have tight deadlines.
At the World Economic Forum in Davos, Switzerland, last month, Houthi attacks on commercial maritime traffic were a top concern, with Jesper Brodin, chief executive of Inka Group, which owns most IKEA stores around the world, CEO) said retailers would still continue to cut prices despite transport disruptions, according to Reuters
Analysts in a Jefferies equity research report said that while IKEA is considering supply route options, delays and availability constraints for certain products are inevitable. “IKEA generated $6.3 billion in sales across more than 50 stores and e-commerce sites in the United States in the 12 months ending August 2023.Given its size, IKEA’s customer Some will find it takes longer to transport,” Jeffries said. Analysts looked at major publicly traded companies, including Hooker Furniture, Berners Furniture and A-America Furniture, and found that companies are already beginning to realize the impact of rising container costs and prices.
Overall, “investors should expect a temporary increase in inventory levels due to shipping delays and higher air freight costs, but few executives are suggesting it will be material,” Jeffries continued.
As industry leaders monitor the situation, businesses are also bracing for further increases in energy costs. The Bank of Italy said crude oil, refined petroleum and processed metal products accounted for almost 30% of purchases from abroad.
“If the risk of attacks on commercial ships remains high in the first months of 2024, the need to plan alternative routes will result in longer delivery times for goods imported by sea from Asia (and, as a result, production chains). (with an impact on shipping costs) and sea freight rates will rise further,” the bank said.
Carlo Urbinati, founder and president of Veneto-based luxury lighting company Foscarini, said the impact of the COVID-19 pandemic on Italian exporters and luxury companies has been significant for small and medium-sized manufacturing companies. He commented that the impact would be similar to that of the previous year. It supports the backbone of Italian companies.
“This will impact costs, availability and timing in the same way we more or less experienced with the pandemic. As we saw with the pandemic, costs have spiraled out of control.”
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