Supply Chain Issues & The Heat Treatment Industry-Natural Gas Pricing
In our ongoing series entitled “Supply Chain Issues & The Heat Treatment Industry” we are looking at all of the issues facing our industry in these interesting and challenging times. To date we have looked at the rising cost of alloy components, long delivery times for various components and labor shortages combined with rising labor rates.
Having said that you couldn’t possibly look at supply chain issues and their effects on the heat treatment industry without also looking at energy pricing. Focusing on North America we can say that the vast bulk of heat treat furnaces are heated with natural gas (we will quality that statement by saying that this is atmosphere heat treat furnaces, vacuum furnaces are virtually always heated by electricity). With a few notable exceptions such as Quebec, the US Northwest and Tennessee natural gas is the energy of choice because of its low cost compared to electricity and its easy accessibility. Yes natural gas has been the energy of choice for heat treaters and it remains so, however while supply is not an issue costs are certainly rising.
This graph clearly shows that since early 2018 the price per million BTU has more than doubled to just over $5.00 USD with most of that increase occurring in 2021. For historical interest we deliberately chose a graph which covers the last almost 25 years-shocking to see that in 2006 we were paying almost 3 times the current rate (for an in depth analysis we would suggest https://www.eia.gov/naturalgas
The culprit if these is one in these rising prices is simple-increased demand. Increased demand as Pandemic restrictions are lifted combined with a growing need for natural gas for electrical generation means higher prices with no end in sight. The only good silver lining is that at least in North America supply is not an issue in the short to medium term, Europeans will undoubtedly feel differently.
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