From: Mark Mitchell, chair, Cornwall Group.
Don’t expect glass prices to tumble, or for stability to return to the market following the government’s recently announced energy support package for businesses.
Energy surcharges imposed by the glass manufacturers will likely remain in place for some time yet, and global pressures on gas supply will continue through the winter.
In September, the government announced an emergency support package for businesses to help with the cost of energy. It pledged to cap the wholesale price of energy at £211 a megawatt hour for electricity and £75 a megawatt hour for gas, which is less than half the wholesale prices anticipated this winter.
The changes will apply to new contracts from 1 October, and to fixed contracts taken out since 1 April.
There is no doubt that this energy cap for businesses is good news. We are an energy intensive business, and we have seen our energy bills rocket in recent months.
For example, our combined energy bill was approaching £250K per month, where previously it was £60K per month. These costs have to be passed down the supply chain in the form of price increases because they simply cannot be absorbed by us or our suppliers. And it is important that our customers keep an eye on input costs from all suppliers because they don’t want to be left holding the can.
The energy surcharges imposed by the glass manufacturers are not currently affected by this price cap, and there is no sign of them being lifted.
The government price cap for businesses was supposed to calm an uncertain situation, but the only certainty we now have is uncertainty. While we can manage our own energy prices a little more confidently, we are still at the mercy of the glass manufacturers who impose often unpredictable surcharges with little notice.
Also, while Western Europe is suggesting it is well placed for gas supplies this winter, that remains to be seen, and a harsh weather winter will naturally put a huge strain on supplies. That, coupled with recent apparent sabotage to main gas links into Europe, will inevitably keep wholesale prices high.
Additionally, Far East demand remains high for gas, causing ongoing spikes in pricing impacting on global prices.
So, while the support with energy cost is welcomed, it will be a few months yet before we see what the full impact will be. Meanwhile, we’ll be waiting to see what happens with the energy surcharge, because greater clarity on that will benefit us all.
The Cornwall Group has customers across three divisions – merchanting, manufacturing and trade counter – with separate boards managing separate sets of demands. This means we have a very targeted approach to the individual needs of the industry and are not adversely affected by challenges in one area. This puts the group in a financially strong position to weather economic storms while investing for future growth.
