The price pressures on the supply chain only continue to grow as Pilkington has announced that they are going to reintroduce their Energy Surcharge, which was dropped in 2014.
Glass has been one of the fenestration sector materials most affected by the current supply chain problems and has seen some of the most dramatic increases over the past 12-18 months.
Pilkington statement
This is the official statement from Pilkington via their website:
Pilkington UK are facing exceptional cost pressures in many areas impacting materials, manufacturing and logistics. Energy (Gas and Electricity), plus Carbon allowances, will add many millions of pounds of additional costs to the business throughout this year.
We are required, in the current market conditions, to temporarily re-introduce special measures in the form of an Energy Surcharge (ES).
The scheme will use Brent Crude Oil (in $) as an indicator of energy prices and apply an exchange rate factor.
The closing value of IPE Brent Oil Price on Thursday 15th July was $ 73,29/barrel. As a consequence of this rate and taking into account the currency exchange rate factor, the Energy Surcharge rates are set as shown below. These will be held until end January 2022 and then reviewed.
All deliveries to all customers on or after 1st October 2021 will also include the additional Energy Surcharge.
Energy Surcharge for Upstream Customers
Surcharge per Load (1st October 2021 – 31st January 2022)
18 – 30
Tonnes15 – 18
Tonnes
12 – 15
Tonnes
9 – 12
Tonnes£1,800.00 £1,499.96 £1,200.04 £963.96 Energy Surcharge for Downstream Customers
Surcharge per kg (1st October 2021 – 31st January 2022) 9p Energy Surcharge for Downstream Customers – IGU Products Only
Surcharge per kg (1st October 2021 – 31st January 2022) 18p
The changes take effect on October 1st, meaning companies that have placed orders before then, but will be getting delivery after the 1st October will likely lose money on those purchases.
Pilkington has pegged the price of the Energy Surcharge to the price of oil, but also the currency markets. It means that even if the price of oil drops $10-$20, the surcharge may not be lowered if the value of the Pound Sterling changes too. It allows Pilkington to keep to the higher price brackets.
At the moment it’s is not clear whether Guardian or Saint-Gobain will introduce something similar. As we know, both companies are in the middle of upgrading their float lines, which are still works in progress. It is not clear when both will be back up and running. However, as there are only a handful of glass systems houses in the sector, it is fair to assume that if one company brings back in the Energy Surcharge, then the rest may follow before too long.
These new price increases, on top of previous material cost rises, will only add further inflationary pressures down the supply chain. There will be growing concerns as to how much more the public is willing to pay for new windows and doors. As I mentioned in a previous post, there is a ceiling at which homeowners will hit. We just don’t yet know how far away we are from it.
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