In mid-March, a fire broke out at LyondellBasell’s Bayport Choate chemical plant in Pasadena, Texas. The site produces propylene oxide (PO), a key ingredient in a virtually indispensable material for the design industry: polyurethane foam. It stuffs seat cushions, sectionals and sofas—and serves as the protective packaging those items are shipped in.
The Texas plant—the largest PO facility in the world, with an annual capacity of up to 600,000 tons—announced that part of the complex would be shut down for repairs, greatly reducing the factory’s output. Suddenly, the availability of a raw material furniture manufacturers rely on to fulfill their orders is in question. Naturally, they are feeling the effects.
“We have different vendors for cushion products, but typically they’ll buy foam from only a handful of people who produce the foam itself,” explains Corey Teague, president of North Carolina–based furniture brand Huntington House. “So when those handful of manufacturers run into chemical shortages, they increase the pricing, and then it starts making its way through the system.”
After the fire, suppliers quickly informed their partners that foam prices would be increasing 10 to 20 percent across the board. The good news for manufacturers—and their customers—is that foam typically comprises a relatively small portion of an item’s cost. “Foam makes up probably 5 to 8 percent of your total cost of a piece of furniture, so if [the price] goes up 20 percent, it’s really only impacting your bottom line by a percentage point or two,” says Trent Wright, head of manufacturing at Coley Home. “Even [if] it goes up a lot, the overall impact of your cost should not cripple you.”
Still, the fire comes amid a slew of other challenges that have chipped away at manufacturers’ margins—spiking oil costs, the result of the conflict in Iran, have only added fuel to the fire. That coupled with the shortages and increased costs of foam have further cemented preexisting plans for increases. “The foam made the increase that we’re about to take inevitable, because it really pushed us over the ability to eat it,” says Tim Newlin, president and CEO of Ohio-based Norwalk Furniture, which recently announced a 3 percent price increase that will go into effect in June. But the key driver, he says, is gas prices rather than foam: “Everything that ships to you from a supplier is going up because of inbound freight.”
Meanwhile, war-induced pressure on European supply chains and price increases tied to the shortage of another important chemical—toluene diisocyanate, or TDI—is compounding the tension as demand for American sources surges. “At the moment, we remain hopeful that we and other financially strong foam buyers will not experience supply shortages, though much depends on the speed at which the damaged facility can be brought back online,” says Alex Shuford, CEO of North Carolina–based Rock House Farm, the parent company of Century Furniture, Hancock & Moore, Hickory Chair, and Highland House.
For some manufacturers, the problem isn’t the rising cost of foam, but simply getting it in the first place. Bigger players are able to point to the volume of their business, pressuring suppliers to keep their orders coming as usual. For smaller manufacturers, the possibility of a foam allocation—where only a percentage of a manufacturer’s order is delivered due to shortages—has been top of mind. “Some suppliers are putting customers on allocation. [If] they receive 50 percent of the foam that they received before, then our vendor has to decide, ‘Who gets that foam?’” says Wright. “It becomes: Are you the best customer? Fortunately for us, we have a very good personal and business relationship with our supplier, and even though we’re receiving a price increase, we’re not too worried about allocation. But I do think the allocation part is going to hit the industry as a whole, which will certainly drive lead times longer and hurt the bottom line, because you’re not able to ship the dollars that you would normally.”
To circumvent the potential for future allocation, many suppliers rushed to purchase foam in bulk immediately after the fire in an effort to ensure they had enough to fulfill orders in the near future. “We work with some of the bigger cushion manufacturers, and they all started buying as many buns of foam as they could,” says Nathan Copeland, president at Highland House. “The idea was that, one, it’s at a lower price point. And then two, they were trying to keep us from being put on allocation.”
That foresight was imparted by past experiences. In February of 2021, an ice storm blew through Texas and damaged several chemical factories. The shutdowns, which were exacerbated by power outages, sent shortages rippling throughout the industry—at a time when pandemic-fueled orders were sending business for furniture brands through the roof. “We were put on rations of foam,” recalls Copeland. “At the time, business had ramped up so much that we needed to be at 120 percent of our normal allocation, because we needed [foam] to be able to fill every order. Those allocations really did hurt everyone in our business. They were hoping it would last for maybe eight to 10 weeks, and it ended up being closer to 20 weeks.”
Even with its challenges, the current situation is faring far better than the 2021 crisis. “We had originally anticipated October [High Point] Market as a time frame for when things would kind of return to normal,” says Teague. “And then that got updated to August. The last we heard is that it’s more like June or July now, so the story has gotten increasingly better. We’re optimistic that it’s going to get resolved sooner than we thought.”
