Every week, every month the prices of all our raw materials continue to rise. Resin, steel, glass, hardware, composite door slabs. You name it, they’re all going up, as is the cost of transport and labour. Oil is at a six-year high. Steel is going to the moon in an almost vertical fashion. Iron ore is at record highs. All the things we need to make what we sell and install are going upwards with no sign of letting up.
But at some point, they will begin to level off, and perhaps fall back. If and when that happens, will prices at the consumer level begin to fall back? Should they return to pre-pandemic levels?
When will prices stabilise?
Each time we ask that question the answer seems to get pushed back further and further. Some say when furlough ends in September. I think that’s a bit premature, even if there is a spike in the unemployment rate. Some say in Q1 or Q2 of 2022. One systems company believes we could be at the start of a three-year cycle of higher demand for home improvements.
If we find it is the latter, then we can expect prices to keep rising, then perhaps level off at those highs for a while. The reason why prices for pretty much everything is rising so high and so fast right now is down to supply and demand. The general public, both in the UK and around the world are spending freely. After limited activity for a year and a half, with Government support and loans added in, there is a lot of disposable income to spend right now.
Consider also that globally there are parts of the world still to open up. It’s easy to forget that places like Malaysia, the Philippines, South Africa, South America and others are still dealing with very high case numbers and sadly deaths. But as other parts of the world eventually open up, their economies will also start to cause a further drain on global raw material resources.
The point at which prices will become more stable and stop rising will only happen when the public both here and in other parts of the world slow down their spending. Right now, there is no sign that this is about to happen. Indeed, in the home improvement sector, including fenestration, the naturally busy summer months are only going to bring further spending. In the longer term, I think we should start to see demand becoming more stable somewhere in mid-2022. That would equate to two years of high levels of spending from the end of the first lockdown in May 2020.
Installers would be the first to see any kind of drop in spending levels from the public. That would then filter up to fabricators a few weeks later, then systems companies a few weeks after that. It means that whilst installers will be the first to see any sort of change in trends, the effects it has on the price of raw materials wouldn’t be seen immediately.
That then begs the question: will prices come back down?
Up for good?
It has become clear that the public can stomach buying new windows and doors at these higher prices. The argument that consumers won’t tolerate rising prices is dead and buried.
For years, our industry has debated within itself that prices needed to rise as we had held their natural inflation back by keeping prices artificially low through poor quality sales methods. Well, now we have those higher prices, albeit way faster and immediate than we could have predicted. But they are here and homeowners seem willing and able to purchase at these higher prices.
That leads me to believe that there is not a chance in hell prices will come back down. Why would they? Companies up and down the supply chain are able to sell at higher prices, hopefully commanding a healthier margin than in the last few years. Who would give that up?
I do not foresee suppliers giving up their surcharges so readily. Whilst they might roll them back and “cancel” them, it’s perfectly reasonable to expect them to compensate that and their base prices will go up. Giving with one hand, taking with the other. But again, if we are passing these higher prices to end-users and they are willing to buy at these higher prices, why reduce them?
One or two companies might turn to dropping prices as a USP once things settle down, but I suspect that many of us will be reluctant to roll back those increases. We are now at a price point we should have been a while ago. Hopefully, we will learn to sell based on quality and service, therefore being able to command a better price with a healthier profit margin. We need to use this as an opportunity not to slip back into our old ways of selling on price only and driving costs back down again.
For me, prices are up for good.
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