Price increases could hit hospitality, healthcare and industrial customers
The TSA (Textile Services Association) says that the rapidly rising energy prices will have a significant impact on laundries and describes the increases as ‘alarming’. They come at a time when commercial laundries are struggling to meet demand, in the face of staff shortages and rising costs in raw materials, linen and wages. They could result in even more pressure on prices for commercial laundry customers in the hospitality, healthcare and industrial markets.
“Energy typically amounts to around 10% of a laundry’s cost base – but the increases we are facing are off the scale,” says David Stevens, CEO of the TSA. “They make the previous record highs of 2004 pale into insignificance.”
For example, in March 2021 the cost per therm of gas was around 42p. Today the cost has breached 160p. Similarly, electricity in March was around £54 per MWh. Today’s settlement price is around £140 per MWh. “It doesn’t end there,” says Stevens. “The first week of September saw sixteen settlement (half hourly) periods with pricing in excess of £1000 per MWh. Nine of these were above £3000 per MWh. The highest was an incredible £4000 MWh.”
To make matters worse, currently the energy network is in a low demand phase – winter will see more demand and the pressure will mount on an already limited supply. There are a variety of reasons for the dramatic increases. Key is a lack of supply throughout Europe, combined with a boom in demand from Asia, especially for LNG (Liquid Natural Gas). In addition, recent poor weather and lack of wind has meant that renewable energy sources have been hit.
Fox Energy is one of the specialist suppliers working with commercial laundries. Paul Dilley, a director at Fox, says, “The energy markets are reaching extraordinary highs with no sign of returning to normal any time soon. Any business renewing a contract in the next six months may be at a significant disadvantage compared to those that have fixed contracts that were set when the market was substantially lower, even just a few months ago.
“We have been working with the laundry sector for many years and we have never seen anything like this before. Sadly, it’s a trend we may see continuing through this winter season.”
The TSA is recommending that all laundries should make urgent allowances for these increases and contact their supplier or broker for advice. “This is especially important for those on flexible energy contracts or that have existing fully fixed energy contracts due to expire within the next 6 months,” says Stevens.
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