Energy crisis could mean print price surcharges
Wednesday, September 22, 2021
The energy crisis currently impacting a raft of industries across the UK could result in price surcharges for customers of energy-intensive print operations such as heatset web offset, where firms also need to use gas to run their dryers.
The cost of wholesale gas has ballooned by 250% since the start of the year, although consumers are currently protected from the increase by the energy price cap.
The situation is also affecting electricity prices, because of the shift away from coal-fired power stations to renewables, with gas picking up the slack and accounting for about a third of electricity generation.
The UK is also particularly exposed to global fluctuations in energy prices because of the large amount of gas that is imported.
Companies are not protected by the price cap, with British Steel warning that the situation was “spiralling out of control”.
While some print firms may have fixed term contracts in place, those that don’t or that have recently come out of contract have been left in a difficult position.
BPIF chief executive Charles Jarrold told Printweek that printers were already dealing with the most severe cost pressures in a decade, with prices for ink, plates, blankets, paper and logistics all going up.
“The sector has been remarkably resilient throughout the pandemic, reflecting the experience, knowledge, and diversity of the sector. Unfortunately however, as I noted at the time of the recent National Insurance increases, there’s acute cost pressure across the economy as a whole, and our sector can’t escape that,” he said.
“Our Printing Outlook survey is showing that August cost pressure was at the highest level since 2011, and we know there are other real pressures both around critical materials availability and skills. Companies are going to need to think very carefully about their commercial strategies as these cost increases feed through, and we’ll continue to engage strongly with government both to ensure their awareness of the pressure on businesses, and to seek to reduce the impact of some government initiatives that may add very significantly to the sector’s operating costs,” Jarrold stated.
One web offset printer told Printweek that while his business was on a two-year fixed deal at present, it would be a concern if the situation persisted.
“It’s the renewal that’s a worry currently,” he said.
Walstead Group, with three heatset web offset plants in the UK at Peterborough, Bicester and Roche, is understood to have written to customers explaining that it will need to implement a surcharge because of the situation.
Group chief executive Paul Utting declined to comment on the specifics of the surcharge, but said that the energy cost increases were “huge and we can’t possibly absorb them without involving other stakeholders”.
He said: “As of last week gas is four times where it was a year ago and electricity is five times higher.
“Particularly for web offset companies that are large users of electricity and gas, this is a significant problem.”
He said that the increase in gas and electricity alone equated to a 20% increase in overall costs.
“It’s a problem for everyone. Added to the issues around paper, logistics, ink and blankets, all our costs are going up by a double-digit percentage. As an industry we have to share it with customers,” he said.
Jeremy Walters, CEO at Paragon Customers Communications said if the situation persisted it could also lead to competitive disparities.
“If it’s short-term we have enough deals in place so we are protected, but it’s what happens when those deals are up for review. We might find ourselves competing with people whose costs are locked in,” he explained.
“We have some of the strongest headwinds on costs from a people perspective and also from a materials and utilities perspective for a very long time.”
Mark Pfeiffer, commercial director at Prinovis UK, said the gravure and web offset printer was keeping the situation under review: “Clearly the costs increases we are seeing in a range of key direct cost areas are huge. Ink, paper, transport and in particular energy are all getting more and more expensive and will already be having a dramatic impact on our industry.
“We are currently assessing the impact for our business and are working hard to mitigate what we can. Unfortunately mitigation won’t be possible for most of these costs. We believe it is inevitable that these changes will find their way to the pricing we are able to accept and work for.”
UK papermakers are also being impacted.
Andrew Large, CEO at the Confederation of Paper Industries, said: “From our point-of-view electricity and gas are inextricably linked and in a way it’s not really possible to separate the two anymore. It’s yet another increase in costs for papermakers and needs to be seen in the context of all the other costs that have gone up. Clearly it’s damaging to profitability.”
At Green Gas Day earlier this month, the Energy Network Association and gas network companies made the case for the crucial role that other green gases, such as biomethane produced from farm waste and sewage sites, have to play in reducing the reliance on imports and working with hydrogen to meet the UK's 2050 net zero emissions target.