Around this time four years ago, the COVID pandemic and the threat it would pose to every aspect of our lives was becoming clearer. At the turn of the new year in 2020 it was still very much a China problem, and the worst of the effects of it were being felt in the supply chain, where the fenestration sector was beginning to run short of hardware because of factory shutdowns in China.
As we know, later on in the pandemic, as restrictions lifted, the spending floodgates opened and domestic and international supply chains collapsed under the weight of consumer demand. The fenestration sector felt the full force of that.
Four years on, for reasons that are very different, we could be about to see a new wave of price increases.
Houthis and the Red Sea
I am sure we are all aware of the rising tensions in the Red Sea as Houthi rebels continue to fire missiles and drones at commercial shipping in the Red Sea. As this is being written, it appears the UK and US are about to launch strikes on the Houthis in an attempt to eliminate their capability to launch these strikes.
As a result of the attacks on commercial shipping, companies have been avoiding the Red Sea and re-routing their ships around the Cape of Good Hope, which is adding 15-20 more days to their journeys and of course, this is making things more expensive.
The Red Sea is one of the most important shipping routes in the world, with 15% of global trade passing through that route. It then leads to the Suez Canal, which again you might remember became blocked after a vast container ship became grounded, clogging up a supply chain that was already broken. Although we are not seeing a situation like we did in COVID where the entire global shipping apparatus was crippled, disruption in the Red Sea, which looks like it is about to get a lot worse tonight, is more than enough to send shipping prices, and in turn prices of goods to us in our sector, higher.
Indeed, we are already seeing other articles in other trade media outlets warning that things may already be turning. In a piece by Mila Managing Director Richard Gyde to Window News, he said:
If the current situation continues for much longer, the vast majority of UK importers are likely to be looking at delivery delays and rising transport costs – because it doesn’t just take longer for containers to arrive here, but also longer for them to be shipped back empty ready for their next cargo.
At the moment, shipping container costs are nowhere near the record levels we saw in the pandemic, but we’re already being quoted prices which are up 175% compared to last year, and we are hearing talk of the dreaded freight surcharges once again.
See full piece here: https://www.windownews.co.uk/an-early-warning/
The situation in the Red Sea isn’t going to get better in the immediate future. In fact it is rapidly going in the other direction, and with other countries in the Middle East threatening retaliation for any action taken by the UK and US, the whole region could be off limits for a while.
Communication is key
We have to take lessons from our experiences during COVID. We learned, although this should never have been alien to any of us, that communication is absolutely vital if there are going to be delays or price increases. Customers down the supply chain have to be told as far in advance as possible to any changes to their trading arrangements.
The timing of this is pretty difficult. The UK is still suffering from anaemic growth, subdued spending as well as it being post-Christmas. The idea of having to tell customers of more price increases on our products just when things had settled down and surcharges had started to be removed will be sickening to many. But as global instability continues to rise, this may be something we have to swallow and deal with, whether we like it or not.
Not only that, this is going to be a further distraction. War is a terrible distraction, and if we wake up in the coming days to something much uglier and much larger, that is certainly not going to work in our favour. Add to the mix that this is an election year and spending tends to slow down as we head closer to an election, which at this point looks set to be held around November or December of this year.
If you think that the disruption in the Red Sea is more hype than anything else, it is worth noting that as of the time of writing, Tesla has announced that production out of it’s factory in Germany is suspended due to a shortage of components for their cars. It’s real and it is happening. It may get worse.
Not withstanding all of that, if you want to exploit five fantastic opportunities the UK fenestration still has in 2024, click here: https://www.doubleglazingblogger.com/2024/01/five-opportunities-in-fenestration-in-2024/
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