Increased Costs in the Market
The industry has faced a significant change with increased costs in the market. Here are four main reasons for the most significant impact on our prices.
- Factory/Office labour
- Currency Fluctuation on imported materials
Material Shortage Increase
In 2021, the Lack of materials, labour, and transport increased the market’s costs. Some of the few reasons why the shortage of materials occurred are:
- 30 – 50% of all the global metal is from China, and their decarbonisation strategy is driving the need for global metals, wind, turbines, and other sustainable methods. The Shanghai Metal Exchange for aluminium contracts is between 400 (dollars) and 500 (dollars) per tonne higher than the LME. This means it costs more to buy the raw materials, and once the product is made, it is sold for less, making its supply to the UK less attractive.
- Sustainability, Electrification, and Urbanisation negatively impacted the increasing costs and reduced availability.
- Pandemic has extensively disrupted the transport system between two huge lines: UK/Europe & China and USA/Canada and China.
Global sheet and extrusion demand remain strong, with practically all extruders already sold out until year-end and some having up to 6 months lead times. The LME reached a record $3,800/t early this month, a 19% increase from the peak in October 2021.
Our supply chain is telling us aluminium could reach $5,000/t by 2025. The instability in Eastern Europe has caused the reduction of natural gas and coal forced power, and increasing global demand will lead to a scarcity of supply.
Our intelligence experts forecast that aluminium will remain high throughout 2022.
Steel has increased again due to high demand and rising energy costs.
While this still affects our anchors, stubs, and arms, we are shielded from the price hikes that steel balcony manufacturers receive. Whilst aluminium is increasing, we use a lot less material weight than is necessary with a steel balcony.
UK Labour Costs
Whilst we haven’t seen any factory or site labour increases, reports are coming in. Factory labour will significantly impact our base costs and will unlikely come down.
We recommend you ask our accredited installers to firm up their installation costs before placing an order from us. Unless stated, their rates remain unfixed. Labour Costs in the UK increased to 109.70 points in the third quarter of 2021 from 107.50 points in the second quarter of 2021.
Our core competency is large volume offsite manufacturing. The simpler the project is, the more capacity we’ll have for our customers.
Each balcony type & unique design detail results in additional working drawings, meetings, and factory set-up time. Therefore, we would like to help clients early on as possible design out both complexity and cost. By rationalising balcony sizes, standardising balcony types, and optimising materials, significant cost savings can be made.
We don’t want to promote bland balconies but to offer balanced design flair and simplicity. In 2022, we’ve had a perfect start securing orders but still have a good capacity.
We are up to record throughput numbers and on track to manufacture 6,000 balconies this year. Our lead-in for design and supply hasn’t changed since 2021. Please speak to us about acceleration options if your project requires a quicker turnaround.
Price changes from Sapphire
We have committed not to take advantage of these increases.
Because of the size and frequency of the cost increases over the last 12 months, we’ve had to make the following changes.:
- Increasing raw material aluminium price increases. We are securing materials for next year and paying up to 18% more than earlier this year.
- Transport costs
- Labour costs
As per our August update, we can no longer provide fixed prices.
Our recommended inflation calculation is our quote cost plus 0.67% inflation per month until the mid-point of installation.
We recommend you re-quote when placing an order, and we can agree on a fixed sum extra. We will no longer be able to price match rates offered in previous quotations.