MD Calum Forsyth considers the H+H reaction to the Referendum vote and the immediately pressing challenges of pulverised fuel ash (PFA).
The international nature of company ownership is being highlighted by the recent UK vote to exit the European Union. The vast majority of organisations manufacturing building products in the UK are part of international groups generally based in mainland Europe.
Time will tell what impact any changes to our current trading arrangements across the continent will have, but H+H is keen to emphasise its long-term commitment to manufacturing in the UK. We see the supply of aircrete blocks as essential to the housebuilding sector in the UK and remain confident in this sector’s long-term resilience.
Volatility is never good for the housing sector, but nothing has changed to diminish demand for new housing and, with current order books strong, we remain focused on the immediate need to supply an active market. With this in mind, our immediate challenge is a shortage of pulverised fuel ash (PFA), a vital component of our aircrete blocks.
PFA – a by-product of coal fired power generation – is used as a raw material by most concrete manufacturers in the UK, with aircrete being no exception. The fact that our own aircrete blocks are largely comprised of this material has always provided a positive differentiation in the market place.
However, government policy over several years has been to move to alternative forms of energy generation such as gas, nuclear or renewable technologies. The result is a gradual reduction in the number of coal fired power stations and a consequent reduction in the production of PFA.
This winter an unprecedented set of circumstances has led to a sudden reduction in the availability of fresh PFA. A warm winter, combined with exceptionally low gas prices reduced the operation of our remaining coal fired power stations to unusually low levels at a time of sharply rising demand for aircrete products.
As supplies of fresh PFA have become less readily available, we are developing our manufacturing processes to enable the use of stockpiled PFA – of which there is a considerable quantity.
Stockpiled PFA does not have the same performance characteristics as the fresh material and has required us to initiate changes to our production processes to enable us to utilise it. As with any significant changes to manufacturing, this has required considerable adjustments to ensure the quality of the finished product is acceptable.
The net result of these changes is a reduction in yield. While our plants are still producing around 30% more volume than was the case four years ago, we are facing pressure to meet growing demand.
For H+H this is a short-term difficulty. As we refine our processes to speed production using stockpiled PFA our output is increasing and we have simultaneously negotiated purchasing contracts to ensure we have a secured supply of the product for the foreseeable future.
To address the current demand we are working with our plants in Europe to establish an ongoing supply of imported product. Throughout the winter, a more normal gas supply market and more typical seasonal temperatures should increase the volume of PFA production once more, which should ease the situation for all manufacturers.
In the immediate future we are focusing on directing all of our output to the customers with whom we have long-term supply contracts in place.
We are in constant contact with our contracted customers and instituting a regular reporting procedure to keep the market informed as accurately as possible on the changing supply situation.