The latest Simonis Storm Securities report has highlighted that glass bottle prices will likely continue to increase due to energy, raw material, capital equipment and labour costs rising since last year.
The firm said that until glass bottle shortages in South Africa are alleviated, this will lead to higher beverage and alcohol prices in Namibia as most locally consumed beverages and alcohol products are imported via trucks from South Africa.
“In addition, higher diesel prices will also add upward pressure to beverage and alcohol prices in Namibia. Raw materials used in furniture manufacturing (e.g. wood, steel, fabrics, etc.) have increased significantly since the pandemic.
“The South African glass industry, dominated by Consol and Isanti Glass, is experiencing rising demand across certain beverage and food categories. Current orders exceed pre-pandemic levels, which has resulted in supply shortages since last year,” said the firm.
Consol indicated that supply constraints result from repeated lockdown rules enforced and associated alcohol sale bans in South Africa over the past two years.
This resulted in glass manufacturers being forced to curtail production, impacting essential stock builds in advance of peak trading periods.
Inflation Report January 2022 2 In 2021, Consol’s Board approved reinstating the furnace expansion project at their Nigel plant in Gauteng.
The expansion will add 100,000 tons of production output that will greatly assist in relieving the current glass supply shortage, with production expected to commence in 2Q2022.
However, increased production will not immediately reflect lower consumer prices as it takes a while for demand and supply forces to be balanced.
The Furniture category is the fourth biggest driver of local inflation, rising 4.7% annually on average per month in 2021.
In the past 12-months, some of the sub-categories has seen double-digit monthly annual growth such as carpets and floor coverings (10.3%), household textiles (10.1%) and others at high single digits such as glassware, tableware and utensils (9.1%) and goods/services for routine household maintenance (4.0%).
Nictus has switched from importing furniture from Asian markets to South America and Europe.
This was due to delays and container shipping costs being longer and costlier in Asia than elsewhere.
This is consistent with our Global Supply Chains Report, which indicated that shipping delays and costs had increased more significantly in Asia compared to the EU or US.
Another issue is that furniture cannot always be loaded compactly into containers, thus increasing the number of containers needed to transport bulky furniture items.
This means that Nictus incurs additional logistics costs in price and quantity.
Their shipping costs have increased from US$3,000 to US$12,000 over recent months, thus being one of the biggest contributors to rising furniture prices.
Raised diesel prices also added to the rising costs of transporting imported furniture from the Walvis Bay port to Windhoek, but this cost is minimal compared to shipping costs.
Nictus sales have been above budget forecasts since the pandemic outbreak, with demand sustaining elevated prices.
Among other factors, remote working arrangements could increase demand for furniture as individuals set up home offices or households decided to renovate or decorate their homes due to being more homebound.