Claims of monopolization, cliques and cartel behaviour have been around in our industry for as long as I can remember. And with good reason. You only need to look at the pricing patterns of the biggest glass companies to see that. This time round though the behaviour of the guys right at the start of the PVC chain, the chemical companies, is the focus of attention from the rest of the industry. Mike Rigby of MRA Marketing the latest to vent his frustrations.
“Concentrated producer power”
The issue has been raised by Mike Rigby in a recent letter to the editor of online fenestration news website Fenestration News.
In his piece, he explains how the chemical companies at the very top, the companies who provide syscos with their raw material, have been using their concentrated producer power to impose price increases:
Recently Europe’s PVC converters’ have been protesting noisily against upstream suppliers doing just this. The suppliers, they say, are using their highly concentrated producer power to impose unwarranted price increases.
EPPA, the European PVC Window Profile and Related Building Products Association, said its members were highly concerned about an “unprecedented wave of over 30 ‘forces majeures’ events in the past four months.” ‘Forces majeures’ include plant shutdowns for a variety of reasons, some planned and some accidental. One of these was a large fire. “Price rises of 10% have been imposed and further increases have been announced.” As there is no link to oil price trends and 30 is a suspiciously and conveniently high number, the “converters (systems companies and profile extruders) question the legitimacy of these declarations.”
Got to admit, 30 events in the space of four months is rather a lot. One a month you could probably understand, but this equates to around two events a week. That’s some serious bad luck!
Not bad luck
Of course there’s no bad luck involved. Over 30 ‘force majeures’ in the past four months is a quite obvious smoking gun to deliberate activities. These activities are what will have a direct impact all the way down the supply chain, from syscos, through to fabricators, ending with installers who will at some point very soon by forced to either take on the chin a price increase from their fabricators or pass it on to the consumer. Not very fair is it?
Other industries, banking in particular, have come under scrutiny in recent years for foul play in their own sector in order to benefit the greed of certain companies and individuals. It’s high time that the authorities, whoever they might be (probably EU), take a good long look at the practices of the companies that supply our industry at the very top. And while they’re at it they might as well take a look at the start of the glass supply chain too, as many suspect the very same behaviour as what has been described in Mike’s letter.
As for the price increases, a conversation I had earlier on today with someone who knows what is going on explained that these price increases are already being implemented at the top of the chain. So it probably won’t be long until those increases filter down. Whether they are as high as 10% will remain to be seen. It probably won’t be that high in reality, I reckon we could see a 5% increase for installers in the coming few months.
Will anything actually get done? Probably not. I only remember one hefty round of fines for glass cartel activities but that was quite a few years ago now. The appetite for any action doesn’t seem to be there, although on the face of it it wouldn’t be that difficult to prove. So we’ll just have to be obedient I guess and let the boys at the very top dictate what happens.
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