While we’re all preoccupied by the progress (or lack of it) in the Brexit negotiations and the impact that is having on consumer confidence in the UK, it’s easy to think that the biggest headwinds facing the window and door market are coming from Europe.
From a hardware perspective though, it is the Chinese market which is arguably presenting us with bigger and certainly more pressing challenges.
The issue once again lies in metal prices and the fact that China now has such huge influence on both the supply and demand of our raw materials – namely zinc, aluminium, nickel and brass.
When the Chinese close many of their zinc mines, for instance, – as they have done recently in response to government crackdowns on pollution – then supply is restricted and zinc prices rise. Similarly, with the Chinese construction market continuing to boom, the surge in demand that is creating for aluminium is also making aluminium prices rise. It looks like a win-win situation for the money market speculators helping to fuel the boom, and a lose-lose situation for companies like us who produce components in metal.
Zinc, aluminium and nickel prices are being characterised by what the metals markets like to call ‘sustained upward momentum’, but what for us actually means zinc prices at a 10 year high of more than $3000 a tonne (up 26% in just 3 months), aluminium prices at a three year high of over $2100 a tonne and nickel challenging $12,000 per tonne (a three month high).
Alongside the fall in the value of the pound since the Brexit vote, this is placing extreme pressures on all of the UK’s hardware suppliers, regardless of whether they supply product from the Far East or not.
At Mila, we’re doing all we can to mitigate the increases by focusing on any further incremental efficiencies we can make in our supply chain, and we’re constantly looking at how we can value engineer our products to take out any unnecessary materials and processes, and continue to focus on efficiencies such as automatic assembly and robotic linishing and polishing. But, the reality is that this alone will not be enough to counter the cost hikes we are now facing. I’m sad to say that I believe future price rises will be inevitable and, while I recognise completely that these are never popular, I think it’s my duty as a responsible supplier to alert the market to what lies ahead.