Reaching out to the Middle East
Dr Ross Moloney, CEO of LEEA (Lifting Equipment Engineers Association) offers members and end users LEEA’s support throughout the Middle East crisis.
Mindful of the economic impact our members are facing, LEEA is constantly monitoring the situation in the Middle East and will be ramping up its activity to reassure our members, particularly those in the Middle East, that we are thinking of them and will offer support in any way we can.
Against the scale of human suffering and economic damage occasioned by the current conflict in the Gulf, the tribulations faced by lifting equipment engineers may not rank high but they are real, nonetheless. We think of our many members, and their families as they maintain the cycle of inspection, assessment and maintenance in such difficult circumstances.
The Strait of Hormuz currently moves between being open and closed. Even if and when there is a durable ceasefire, it will be a while before normal service resumes. It is suggested that reconstruction of damaged refineries, terminals, port installations and other infrastructure will take several years and of course much of the repair will depend on the availability of lifting equipment.
The effects of the conflict are of course being felt worldwide, as the interruption to shipping drives up the price of fuels and other raw materials. There are reports that in China, the costs of importing materials has risen by 30% and even though they are not impacted in terms of oil imports.
If disruption continues then the critical point is expected to arrive around July this year, but even if peace breaks out, price increases are only beginning to work through the many complex and extended supply chains on which we depend.
Lifting equipment is a tight, small margin sector. Much of the lifting equipment that keeps economies moving uses materials that are energy-intensive in manufacture – electro-arc smelting and subsequent heat-treating of steels, annealing of copper wire for motors. Some are made directly from petrochemical products – the polyesters that go into straps, ropes, slings, webbing and personal safety equipment for example are a particular concern.
Polyethylene, the principal polymer concerned, is created from feedstocks such as Naptha and ultimately from petroleum or natural gas, in a high temperature process. It has to be remelted to create filaments before these are spun into yarn, and woven into a textile – steps which may occur in different countries or even continents, with the increased cost of shipping to be factored in.
Polyethylene comes in many different grades for uses ranging from clothing to food packaging, and manufacturers of the specialised engineering polymers that our equipment uses may be in competition for feedstocks and raw materials with other sectors. Additionally, large users of these materials may outbid smaller, more ‘niche’ users – it is far from unknown for diversion of consignments while they are on the high seas. All of this implies price increases and the possibility of availability issues. Similar stories can be told about many of the products and materials used in our sector.
This has insidious implications for our clients, the end-users of lifting equipment. Faced with generalised cost increases, lower margins and possibly depressed levels of business, firms will seek to control costs where they can. There may be considerable temptation to accept or specify goods of a lower specification, a less well-assured quality or even a more dubious provenance.
End users may also be tempted to economise in another direction: improving cash-flow by allowing ‘slippage’ in assessment and inspection cycles.
Inevitably, this is going to put pressure on our members as individuals and companies. This may manifest as a squeeze on margins and a reluctance, or even refusal, to accept price increases on goods and materials. Or it may be that end users start applying pressure on existing partners or seek new contractors, who are willing to be complicit in a lowering of standards or other ‘economies’ that are just the right side of legal.
LEEA’s message to end users is to please be mindful of the pressures our members are under, because they are having to buy materials at a significantly higher price. We would advise avoiding the potential consequences of opting for lowest cost by working alongside our members as partners to gain long term advantage, rather than penalise them for short term gain. Producing compliant, trusted, long term solutions is valuable – and with that value comes a fair price.
Most LEEA members are SMEs and family owned businesses that have nurtured lifelong trading relationships. Above all they uphold the gold standard that underpins the LEEA logo. Price reflects their quality, their processes, their people and their paperwork. This is not only about value but it’s about reliability, best practice and, crucially, safety.
We need to remember that if something appears too cheap to be true, it usually is, and abandoning well developed trading relationships with high quality manufacturing partners is a false economy.
So, during a time of short supply and high prices, we urge caution when it comes to leaving behind well-developed trading relationships. Your high quality manufacturing partners are under pressure – stick with them and they will stand by you. Quality must always be valued over short-term expediency.
LEEA’s message to any members finding themselves in a difficult position, please talk to us. We can help in terms of such things as training and in offering technical advice. Possibly the most influential thing we can do as an Association is to facilitate discussion of the issues, anonymised as necessary, sharing member experience of the problems and solutions or remedies.
LEEA is an association dedicated to supporting our members and a trade body to support end users in the market place. We hope that a cessation of the conflict comes soon and that our innovative and agile LEEA members will play their part in contributing to the Lifting Industry’s vital role in keeping the global economy moving.
