MANY WILL be familiar with the huge price hikes for householders using gas, widely reported in recent weeks as the wholesale price of gas hit a record high on 6 October.
In fact, wholesale prices of gas have increased by 250% since January, and by 70% since August. Now, the same pressures on wholesale gas prices are affecting clay roof tile manufacturers, which use huge gas-fired kilns to fire clay tiles.
One, British-based clay tile manufacturer is warning its customers to expect further increases in the cost of its roofing products. Tudor Roof Tiles says that since March 2021 the price it pays for gas has increased from 40 pence a therm to the current £3.00 – a 650% price rise.
In normal times the company has been able to absorb wholesale cost rises through operational and administration savings. However, it says the current, unprecedented cost rise in commercial gas, which is expected to remain at the same rate in the longer term, has left the firm with no choice but to increase its selling prices.
The increase in the cost of the business’s handmade clay tiles were put into effect from 1 October 2021 and were implemented across Tudor’s entire product range. The company is also warning its customers that cost quotations will be valid no longer than five days, due to “spiralling costs”.
Unprecedented Escalation of Costs
Tudor Roof Tiles are not alone in the industry. UK handmade clay roof tile specialist manufacturer, Dreadnought Tiles Managing Director, Alex Patrick-Smith explains that gas has historically made up around 25-30% of the company’s manufacturing costs at a price level of around 50 pence per therm.
The price of gas on the wholesale market is ranging now between £2.20 and £2.30 for the months to the end of March 2022.
Alex Patrick-Smith comments, “This amounts to a huge, unprecedented escalation in the cost of manufacture. The percentage that gas makes up of our manufacturing costs will likely be over 40% for this winter.
“Last Wednesday prices spiked at £4.00 a therm, but thankfully have fallen back from that level, this pricing coupled with the extreme volatility makes managing production extremely difficult.”
Dreadnought Tiles has been able to bring forward some of its gas purchases, but doesn’t buy all of it forward as their demand for gas varies according to which products they are making, as well as external factors like weather conditions (temperature impacts on the volume of gas consumed).
Long Term Vulnerability
Alex continues, “Prices are trading at £1 a therm for next winter and £0.79 for winter 2023, so there is a sense that once we get through this winter we will be through the worst. However, this gas crisis highlights the vulnerability that this country faces as we have chosen not to invest in long term storage since the closure of the Rough facility. This decision was taken by the government who argued LNG will replace the need for storage, but LNG cargoes are heading to Asia and not coming here at a rate to make a difference.
“Inevitably these cost increases will need to be passed on, however we are currently absorbing the increased cost which is very painful for the company. We have decided that we do not want to let down customers who have already placed orders with us, so we are not cutting back production but we are hoping that the price of gas will come back down significantly.
“We are investing to cut our energy consumption but there is only so far we can go, as we need to fire our tiles to over 1150 degrees in gas kilns in order to impart both the durability and aesthetic characteristics synonymous with our products.”
Other roof tile manufacturers declined to comment on the price pressures of rising gas costs adding to the record roof materials price rises seen this year. Last week, Roofing Today reported August’s construction materials prices have increased by almost a quarter (23.5%) compared to last year.
Meanwhile, the slowdown in August’s construction activity was attributed to difficulties in obtaining materials and their rising prices. This follows warnings by the National Federation of Builders that materials prices rises and shortages threaten the continuation of housebuilding.