Spreading the cost
Glass Times editor Nathan Bushell reports in the spiralling energy costs.
The glass and glazing industry has had to tackle some very difficult working conditions over the last 18 months, which it has done, largely, with patience and fortitude.
The latest crisis to best this industry – and everyone else – is the spiralling energy costs. There is not a company in the supply chain that won’t be affected, either directly or because suppliers have had to increase prices.
The cost of products and services have already come under extreme pressure, thanks to distribution issues and product shortages, compounded by a shortage of labour.
The saving grace has been that homeowners and other end users have been flexible enough to accept these challenges and even absorb the costs.
The energy crisis, however, takes this to a different level. We are now looking at the squeezing of household finances, as people struggle to incorporate the eye-watering increases in energy prices, coupled with higher interests now looming on the horizon.
Struggling with demand is one problem, but facing no demand at all is a different prospect altogether.
When you think about energy-intensive industries, glass is right at the top of the list.
“Current gas price rises present a situation that has never been experienced to this extent in the glass industry’s history,” Matt Buckley, managing director at Pilkington UK, told me this week.
“Glass furnaces run on gas, and typically operate 24/7, all year round for up to 20 years. Turning furnaces off is not an option. It is possible to go on to hot hold over a longer period of time, but doing so would seriously impact the many industries where glass is an integral supply chain material.
“We’re shouldering £millions of cost increases to ensure that the supply of glass remains sustainable. This has meant the reintroduction of an energy surcharge to help us recover some, but not all, of these cost increases.
“We’re working closely with customers and industry bodies and government to keep track of this situation.”
Steve Severs, managing director at Saint-Gobain Glass, painted a very similar picture.
“Despite the recent investment of £30 million to install a state-of-the-art, energy efficient furnace at Eggborough, and close energy supplier relationships, and the buying power of the Saint-Gobain Group, nobody is immune to the enormous surge in gas prices,” he said. “It is inevitable therefore that these costs have to be passed on through the supply chain, and ultimately through to the consumer.
“As an industry, we must inform and impress upon the consumer, the importance of making their homes more energy efficient and remind them of the financial and comfort benefits that could be achieved with more energy efficient glazing.”
In an article published in this week’s newsletter Mark Mitchell, chairman of Cornwall Group, said the price increases imposed by the float glass manufacturers adds around £1,800 cost to each 20-tonne lorry.
“We deliver at least two or three a day, so that’s an additional £50,000-£60,000 a month,” he said.
Margins have already been squeezed, and this could push some companies over the edge. The only sensible solution is to have an honest and open dialogue with your customers to make sure these cost burdens are shouldered by everyone.