Whenever power is concentrated in a few hands it’s tempting to manipulate supply and put up prices.
In power generation and utilities, we’ve seen it on a grand scale. In banking and the finance sector it appears to be commonplace. As the manipulation of LIBOR rates showed there is no limit to ambition: if you can make money by changing the balance of advantage someone will.
Fortunately, power is generally fragmented and dispersed so it’s only in a few industries that large groups manage to concentrate power through acquisition and merger, and get their hands on the controls. When they do create a chokepoint on the supply chain they can raise prices and their profitability at will.
Recently Europe’s PVC converters’ have been protesting noisily against upstream suppliers doing just this. The suppliers, they say, are using their highly concentrated producer power to impose unwarranted price increases.
EPPA, the European PVC Window Profile and Related Building Products Association, said its members were highly concerned about an “unprecedented wave of over 30 ‘forces majeures’ events in the past four months.” ‘Forces majeures’ include plant shutdowns for a variety of reasons, some planned and some accidental. One of these was a large fire. “Price rises of 10% have been imposed and further increases have been announced.” As there is no link to oil price trends and 30 is a suspiciously and conveniently high number, the “converters (systems companies and profile extruders) question the legitimacy of these declarations.”
“Because of the shortage of feedstock,” wrote Ineos to its (PVC profile) customers, “the company was unable to meet its obligations,” reports Plastics Information Europe. So prices go up.
Recently the chemical giant Ineos sold two operations in Runcorn as part of a deal to form a PVC joint venture with Solvay. Solvay is also selling some assets to comply with requirements set by the European Commission competition authority to level the playing field slightly.
Now they’ve made their token disposals and start flexing their muscles, will we see more unwarranted price increases being forced on systems companies, fabricators and installers?