Greensill. Ever heard of it? Until the last few days its likely you haven’t, neither had I. Until the back end of last week when it became clear that the Australian headquartered investment bank that has over $140bn on its books was in serious trouble and went into administration today.

How could that affect fenestration? Let me explain.

A bank, a borrower and Liberty Steel

Greensill Bank is an Australian investment bank with a large presence in the UK. They have (had) a large order book of over $140bn. Banks being banks lend and invest to other companies. One of these companies, GFG Alliance Group, also happens to be one of it’s biggest borrowers. GFG Alliance Group is a metals manufacturer owned by entrepreneur Sanjeev Gupta.

Over the last few weeks, it became obvious GFG Alliance Group was in difficulty and was unable to repay Greensill. According to the FT, GFG owes Greensill £3.6bn. To add to the woes of Greensill, Credit Suisse and GAM Holding, institutions that themselves lent money to Greensill, pulled their money out of the company as it became clear the bank was in trouble and had mounting bad debts. Quite a chain as you can see.

Why does GFG Alliance Group matter to UK fenestration? Within the group of metal manufacturers is a company called Liberty Steel. They employ around 5000 people in the UK. GFG has tried to reassure investors and their group of companies that talks are ongoing to find new backers for the group. According to the Guardian, Greensill was holding out for a pre-pack administration with Apollo Global (equity giant) lined up to pick apart the best bits of the company and leave behind the debt connected to GFG Alliance Group. Talks have stalled apparently so no positive progress there at the time of writing.

This is where all of this could become a problem for UK fenestration. Liberty Steel, owned by GFG which might have the rug pulled from under it because of the Greensill collapse, supply steel to a number of reinforcing companies which supply into the fenestration sector. Talks are apparently ongoing with the Business Secretary Kwasi Kwarteng at what can be done to rescue Liberty Steel. Within what is left of UK steel, Liberty Steel is a huge employer of what is a sector of only 32,000 people now.

It’s important to note at this point that other than Greensill going into administration, nothing is actually decided and settled. GFG Alliance Group and Liberty Steel continue to function. Time however is not endless and with larger financial institutions pulling their funding away from exposed assets, time is of the essence.

Should anything happen to Liberty Steel and they are unable to deliver product to the reinforcement companies who supply into our sector, this is going to have direct results on fenestration. An important thing to note here is that should something terrible happen to Liberty Steel, they are not the only ones who supply steel into the reinforcement part of our sector. But, if you remove one supplier from the chain it is likely to cause disruption to some degree.

This is a story to keep an eye on over the next few days. And perhaps just ask where the raw materials are coming from right now.

Steel prices up sharply

As with most commodities that go into making windows and doors right now, costs are, frankly, out of control. Before the problems with Greensill bank over the past few days, steel was causing headaches for our sector anyway.

High demand coming off the back of lockdown number one, where metals factories were closed and have taken some time to get back up and running, has put continued pressure on raw material suppliers to keep up. As we all know, no one could have expected the massively high levels of demand at the time, and everyone has been on the back foot ever since.

There have been reports of shortages of steel in our sector over the last few weeks. And that’s not the only problem. Steel prices are wildly above where they were compared to March 2020. Back then, steel rebar was $390.50 per tonne. As of yesterday, that has shot up to $620, with 3-month contracts being sold at $642 per tonne. Most of that rise has happened in the last four months. We are now seeing suppliers pass on the increases further down the supply chain in fenestration.

Forecasts for the price of steel in the months ahead see it topping $700 per tonne. That is likely to happen much faster than forecast.

Steel joins a host of other raw materials that are shooting up in price as slow supply coupled with very high demand is now causing numerous problems across the supply chain.

For manufacturers, it’s time to hedge. For installers, perhaps build in a few per cent extra into your contracts to offset any more increases that may appear in the weeks ahead.

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