Customers to feel the pain as manufacturers tackle surging power costs

Concreters, brick makers, steel fabricators and other energy-dependent local manufacturers are cutting staff bonuses, freezing pay rises and bumping up prices as soaring energy bills eat into earnings.

Businesses across the country say they will have to pass the surging power costs on to consumers, as they take measures to keep themselves afloat following Treasurer Jim Chalmers downbeat assessment this week that household energy bills will rise on average 20 per cent this financial year. The costs are forecast to surge 56 per cent over the next two years.

BLV Engineering’s Belinda Gambrill says rising energy costs will be passed on to customers.Credit:Edwina Pickles

Belinda Gambrill, who runs Western Sydney metal fabricator BLV Engineering, said her firm is considering price increases, so it can pay wages and bills on time.

“We’ve got these increases, so we need to maybe try and save money somewhere else or put our prices up. That involves charging them [customers] more for our hourly rates or putting our prices up on materials.”

Local manufacturers, like BLV, have the added worry that if they raise their prices customers will seek cheaper alternatives in China. Gambrill added the business was battening down its hatches to cope with energy bills potentially doubling in the near future.

“If that doubles, that is a fair increase to our yearly expenditure. However, I don’t see it being something that would tip us over the edge,” she said.

Energy, oil, gas and coal prices have shot to new highs since the start of the conflict in Ukraine, squeezing businesses across the board.

Mining giant Fortescue said on Thursday the cost of extracting iron ore – a key ingredient for steelmaking – from its mines in the Pilbara has jumped 16 per cent over the year because of rising diesel prices and tight labour conditions.

“Our biggest cost driver is fossil fuel, diesel in particular,” chairman Andrew ‘Twiggy’ Forrest said.

Realistically, what we need to now pay to energy providers is something that we would have passed on as an extra bonus to our staff members and so forth.

Lindsay Partridge chief executive of Brickworks, a $3.3 billion company that makes building products, said his company has signed gas contracts – a key energy source for its brick making kilns – that are pegged to inflation, but its electricity bills will double from the start of next year.

Brickworks Managing Director, Lindsay Partridge is worried about gas prices.Credit:Louie Douvis

“Unfortunately for Australia it took more than a decade of politically based decisions to create this mess, and it will take a decade of methodical engineering-based decisions to get us stabilised, and another decade to get us in a good spot!,” Partridge said.

While customers are on track to feel the sting, staff also face belt tightening.

Melbourne-based Midway Concrete’s general manager Adam Nuhiu said soaring energy prices will mean fewer bonuses and pay rises for employees.

“Realistically, what we need to now pay to energy providers is something that we would have passed on as an extra bonus to our staff members and so forth,” Nuhiu said. “It’s starting to bite.”

General manager of Midway Concrete, Adam Nuhiu.Credit:Eddie Jim

Midway Concrete is spending 27 per cent more overall on energy related bills this year, Nuhiu said, as concrete manufacturing is a very electricity intensive processes.

The price crunch will impact the firm’s bottom line, as well as future budgets and forecasts, he added.

“We can’t make major changes to our business because the whole thing runs on electricity, everything from the batch plant systems to compressors.”

Meanwhile, the company is considering ways to limit power use such as installing solar panels, timers that switch off lights, and shutting off computers after closing.

“Our electricity bills are paid from profits. When we get a consolidated report for the September quarter, that’s when we’ll start to see the true impact of it,” Nuhiu said.

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