Ceramics Firms Feeling Credit Crunch For Fuel?

The economic downturn--while reversing somewhat--is still hitting industries across the globe. Demand for technical ceramics has waned as industries are looking to cut costs and put off facilities upgrades. And even in the non-technical ceramics industry, the global recession is wreaking havoc.

There was a telling story in the Birmingham Post (UK) about rising fuel prices exerting a unique downward force on the local ceramics economy thereby putting pressure on jobs.

Ceramics firms have a huge demand for gas to fire their products, which coupled with the fact that the industry was last year hit hard by the recession, has left nervous energy companies seeking to cover their backs by demanding upfront payments.

Stoke-on-Trent-based Wade Ceramics, which has just invested £7.5 million in a new plant, said his gas supplier had insisted last year on three months’ worth of payments up front – but the firm had managed to find a way around it by organising a letter of credit.

Because of the fuel-intensive process behind industrial ceramics manufacturing, the ceramics industry is under massive pressure to cover steep costs. In many cases, fuel providers demand large up-front payments, which are prohibitive for ceramics companies' cashflows. In other cases, fuel providers will supply to ceramics companies without an upfront payment, but then they will demand a higher rate.

There is an obvious vicious circle in these sorts of situation: Without more revenue, ceramics manufacturers cannot pay for fuel, and without fuel, ceramics manufacturers cannot increase revenue. Hopefully, as the economy turns around, this cash and credit crunch will begin to subside. Until then, we'll have to rely on efficient processes and solid business sense.