Recently we have announced that our prices will be increasing from late October 2021. The decision was made with reluctance and will be implemented because current market costs and conditions mean that higher material and supply-side costs will remain as the standard for the foreseeable time. We want to maintain the high quality of materials and services that have awarded our products their reputation so, price rises must occur to meet those aims.
So what are the higher operating costs we face?
The recent global pandemic saw a dwindling in demand for many raw materials and services but conversely an exponential increase for others. As demand for many goods and services lay fallow for some time, supply chains and stocks dwindled and with staff unable to attend some premises and finding themselves isolating away from workplaces or on furlough schemes the usual workflows and production lines declined and productivity dropped massively.
Now, as construction, e-commerce and allied industries roar back to life in the wake of COVID-19, demand is now outstripping supply for essential raw materials. Several raw materials costs are now at an all-time high, with further price rises forecast for the rest of 2021.
Raw Materials: Cardboard, Timber and Packaging
Cardboard and timber are used extensively in our packaging and for carriage of products to our customers and also for items and materials supplied to us.
Cardboard prices have skyrocketed, rising more than 50% due to a global shortage, largely affected by the change in shopping habits as a result of the pandemic. Consumers have been unable to journey to shops and high streets to shop and have instead, resorted to e-commerce and making purchases on the web. This of course, leads to logistic and transport considerations as consignments of goods are now driven and delivered directly to the consumer, packaged in cardboard and recyclable paper.
Cardboard has seen a drop in output due to staff shortages at European paper mills and lack of capacity planning across the industry but paradoxically an increase in demand with larger e-commerce retailers buying up large stocks of corrugated cardboard to stockpile and utilise for their business. An unfortunate element of panic buying has ensued throughout the market with smaller players concerned that they will not be able to secure a reliable supply and over-ordering. This has directly affected the costs for cardboard that we use to package our products.
Timber that we use in the pallets, protective stillages and other packaging elements that secure our glass and aluminium products has also been affected by global shortages with resultant price increases.
Softwood materials are becoming scarcer, a factor affected by climate conditions, natural infestation and legislation and licencing conditions in certain geographical forest areas. A boom in home improvement and DIY as people stay at home and develop their abodes has spawned an increase in construction and demand for timber, affecting the capacity of kiln processing required to heat treat timber to meet market needs so, timber prices have increased by 70-100%.
Raw Materials: Glass, Aluminium and Steel
The raw materials from which we produce our unique Glass balustrade, Juliet Balcony and Curved Glass Door products have also increased substantially in recent times.
The intense heats required with firing and finishing our high-quality toughened glass need large amounts of fuel to generate them and therefore are very susceptible to changes in the price of energy. There have been rising energy costs in international markets with five price increases in the last eight months and an energy surcharge to facilitate renewable energy sources coming into effect in October 2021. The impact on glass production has seen costs rise in the region of 35% – 40%.
Aluminium & steel prices too have been affected by shortages and increase of the raw value of the metals on the London Metal Exchange (LME). Added to that are increases in costs for processing and extruding the raw metals into the shapes required for our handrails, base rails, doors and fittings. Recent times have seen aluminium price increases in the region of 20-25% and steel around 20%.
Shipping and Logistics Costs
A global shortage of shipping containers has also been an unfortunate consequence of the pandemic situation with many carriers charging increasingly higher rates for their freight containers and shippage companies needing to increase charges across key international routes correspondingly. Many containers have been employed as temporary storage for goods and products that have had nowhere to go during the slowdown and have supplemented overflowing warehouses. Transport of single use PPE, lightly used before COVID has burgeoned exponentially.
Immediate lack of equipment and the ongoing ramifications of coronavirus, added to unforeseen factors such as the recent blocking of the Suez Canal, have squeezed supply chains, pushing capacity to bursting point and a shortage of labour of trained crew and dockside staff have increased hold-ups and a backlog of freight that shippers need to clear. This has driven freight costs up like a rocket in 2021 with a composite rate of eight popular European and Far East trade routes showing a near 300 percent rise since the start of 2020. Many stressed shippers have been forced to accept one-sided negotiations with the freight carriers with broken agreements as operators take advantage of massively lucrative spot rates.
Domestically, transport and logistical and delivery costs in the UK have been affected by a shortage of HGV drivers and fuel. Changes with e-commerce shopping patterns have further boosted demand for couriers, pushing these costs ever upward.
The aforementioned shortage of HGV drivers in the transport sphere has pushed up wages with shipping, freight, dock, haulage and logistics needing to recruit staff widely and increase salaries. Attracting manufacturing staff in a period of record job vacancies has also increased production costs which encompass workers in the UK as well as suppliers internationally.
THE GOOD NEWS!!
Our durable, made-to-measure and beautiful products and systems will remain competitive in the marketplace and continue to offer longstanding value over their lifetime which we are constantly improving by sourcing high-quality materials, expert suppliers and performing design innovations across our product range, enabling you to create your own space with confidence.
Balustrades and Juliets continue to be manufactured in the UK and together with our continued investment in manufacturing facilities, personnel, transport and product development we will ensure that better products and services develop alongside the rise in prices. We trust you will understand the rationale behind the increases, and we look forward to your continued custom.