Amidst the current global turmoil, discussing glass energy surcharges might seem trivial, if not insensitive, considering the immense suffering endured by the Ukrainian people. However, the repercussions of the conflict in Ukraine will reverberate worldwide, and the UK fenestration industry won’t be exempt from its effects. One primary concern currently looming is the impact on commodities.
Recent reductions in glass energy surcharges may soon be reversed due to the escalating conflict in Ukraine. Just last week, it was reported that these surcharges were on a downward trajectory. Unfortunately, the Russian invasion has sent commodity prices, including gas, skyrocketing to record highs. Gas is particularly pertinent to the glass industry, with Pilkington linking its energy surcharge to gas prices. The stabilization observed in the market previously has been shattered by the war in Ukraine, leading to a resurgence in gas prices and likely necessitating a rise in energy surcharges once more.
The surge in prices extends beyond gas to encompass various essential commodities:
- Oil (Brent) – $113
- Oil (WTI) – $111
- Aluminium – $3820
- Nickel – $28,265
- Copper – $10,490
Additionally, PVC resin prices are anticipated to climb again, while steel prices, albeit having receded from their Q3 2021 highs, are on an upward trajectory once more.
Whether it’s oil, gas, electricity, steel, or aluminium, these escalating prices will permeate the supply chain, affecting our sector profoundly. The surge in diesel prices, crossing the 170p mark for the first time, will further burden fabricators and major manufacturers in the UK fenestration supply chain.
Anticipated Further Inflation
The bottom line is that prices are expected to continue rising in our sector. While this has become somewhat customary in recent years, there was a glimmer of hope at the start of this year that markets were stabilizing, and the rate of price hikes was abating. Regrettably, the war in Ukraine has dashed these hopes, and it’s difficult to envision avoiding further price inflation throughout the year.
Previously, my advice has been to ensure that these increases are passed down the supply chain to the end-user, namely the homeowner. I reiterate this advice. However, given the projected worsening of the cost of living crisis, with inflation likely to exceed 10% this year due to the war in Ukraine, businesses should explore avenues to streamline operations to absorb at least a portion of the impending increases.
Behind closed doors, conversations reveal a palpable slowdown in various sectors. While social media might project a different narrative, portraying an idyllic scenario, the reality is far from rosy. Businesses across the supply chain must swiftly assess their operations and identify areas where costs can be trimmed to weather this challenging period.
If inflation indeed surpasses 10%, it would mark the highest rate since 1981. With each passing day of ongoing crises, the economic landscape becomes increasingly unstable, eroding consumer confidence. This underscores the urgency for businesses in our sector to adapt swiftly to the evolving challenges ahead.
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