BLOG ARTICLE: 12/10/2021

British Ceramic Confederation comment on current gas situation

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British Ceramic Confederation comment on current gas situation

Last updated: 12/10/2021, 16:00

Energy is normally a third of production costs for many of our members, so they are always concerned about higher energy prices, which could affect their international competitiveness. However, now it can be up to around 65%.

Members have options about how to buy energy, which is more complex than for households. Many ceramic companies have already purchased much of their energy for the upcoming winter and so will not have to fully pay the higher prices immediately.

However, a small number of members are already facing higher gas, electricity and carbon prices now – higher than paid by their international competitors – which is leading some to consider scaling back production. As the high prices continue more members will begin to be affected.

Increased uncertainties about demand for some ceramic goods, caused by the lingering impacts of COVID-19, also mean some members are more exposed than they would otherwise have planned to be. This puts many supply chains at risk from house building to food and drink and other sectors.

We are deeply concerned the prices reflect the market’s views about the physical availability of gas over the winter. In the event of national supply shortfall our members are near the front of the queue to be forced off the gas network, while households are last.  This can happen at very short notice and a forced, quick shutdown runs a high risk of severe damage to kilns, which can threaten business viability.

If their energy supplier fails, manufacturers will need to get a new contract. This will almost certainly cost much more than with their previous supplier. If this happens we’ll need government to provide immediate support to those members.

Jon Flitney, Energy & Innovation Manager, said: “We urge the government to take actions to limit the impact of high market prices, whether to help members now or through the rest of winter. Our members would be very reassured if gas emergency measures were changed, which would give protection to their kilns and equipment in the event of a network emergency.”

Jon continued, “The ceramics sector does not benefit from government support to the same level as other energy intensive industries. We welcome the further call with the Secretary of State yesterday (Mon). We are glad to hear that Government is considering solutions. We eagerly await proposals from Government as to how they will help ceramics companies who are grappling with soaring costs.”

Energy security is a basic requirement in any country. We need government to take urgent action, learning from other countries, to ensure manufacturing can continue in the days, weeks and months ahead. Our short-term asks are:

  • Introducing winter cost containment measures on gas, electricity and carbon prices – to ensure that those most exposed to these costs can continue to operate this winter and produce the essential goods that feed UK supply chains, as well as going forward to compete internationally through the immediate cessation of uncompetitive policy ‘on-costs’ such as ‘Carbon Price Support’.
  • Immediate action by Ofgem to reduce EII network costs: Ofgem must replicate the network tariff discounts offered to competitor industries in the EU.
  • Reduce the priority consumer qualification threshold from £50 million per site to £1 million per site, to ensure ceramic kilns have the time to be safely shut down without the risk of sustaining serious damage.
  • Shield industrial (and indeed all) energy consumers from the rising pass-on costs associated with supplier failure.