Apologies for the gap between this and my last commination in November last year . I would normally do this on a quarterly basis- but there have been many challenges during this period that have prevented me from writing to you.
As a business we have, like yourselves, been faced with extraordinary circumstances that I believe will be with us for at least the medium term.
Inflation and the cost-of-living crisis just dont seem to be going away any time soon.
In order to retain staff (we have been losing some long standing members of staff , due to other industries offering higher salaries) we have had to give a substantial increase from the 6th April to make our salaries competitive and attract quality staff.
If anything, this is our greatest challenge as we cannot make anything without them!!
Notwithstanding this we have had further increases in the interest rate , Utility bills , New Rateable values and a weak pound . Now even the banking system is in turmoil.
For the first time I can remember, overhead increases are dominating our business decisions rather than raw material costs.
We have to be mindful that whereas in the past we would normally “ absorb” these, that is just not possible now or in the future. I think we are in a new era of high overheads and the continual decline in living standards is not sustainable for the country.
This will make manufacturing in the UK harder and harder as support is not forthcoming. New machinery has almost doubled in price -with lead- times around 18 months.
For us the market is holding up better than our forecast. It remains to be seen if this positive situation will continue for the rest of 2023?
Softwood
Russian Timber continues to be unavailable. We do not see this source of raw material being an option for probably the rest of the decade.
Fortunately, our Scandinavian partners are able to supply the volumes we require. Certain sizes are more difficult than others as the demand for pulp is high and mills will make residue chips rather than cut some of the smaller dimensions.
We have paid a small increase for our second quarter volumes – but will not be increasing our prices for this period.
It remains to be seen if demand does drop and prices fall – but due to the Russian situation I don’t think this will happen- things as you know can change very quickly.
As ever we will keep you updated
Chipboard
Chipboard remains very stable and volumes are available.
Due to energy costs, we don’t see the prices coming down. Be it that the reductions in the gas and oil prices flush through to industry (they always seem to take an age to come down – but days to go up !!!) we could then see reductions.
The energy price cap I am sure is keeping increases in check.
If anything, reductions will be next year – but no doubt by then there will be some other crisis.
MDF and HDF
All our MDF/HDF is imported from Europe.
Prices have fallen back slightly and we have been able to move over to 5mm Ottoman baseboards and reduce prices.
Again, this industry is heavily reliant on energy and no doubt Europe will be first to take advantage of the recent falls.
At the moment we are talking to an alternative source of MDF/HDF. The initial discussions are very positive and are hoping these talks will lead to our being able to reduce prices further.
Actions and Pistons
A weak Pound is not allowing us reduce our action and piston prices
Although container cost are back around, or below pre pandemic levels the reduction in shipping cost in no way compensates us for the weak pound.
Again, we are talking to alternative sources as importing from China could become problematic if the global community decides to react to them supporting Russia – or invading Taiwan.
All the best.
Kind Regards
Mike