A clear uptrend in the glass market

By IM Staff
Published: Wednesday, 01 May 2019

Led by a revival in North American sales, the outlook for the global flat glass market remains positive – as it also does for the container sector. Manufacturers will need to fork out more for raw materials, though, Ross Davies finds.

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Casting one’s mind back only as far as two years ago, the consensus among global flat glass manufacturers, while not overtly gloomy, was one of concern.

The North American market, in particular, took a battering – although it can argued that it had been in decline even before the recession bit in 2008. According to market research firm Mordor Intelligence, float glass capacity in the region fell by over 40% between 2005 and 2016. The total number of operating glass plants in the United States dropped by 14 to 21 over the same period.

This decline in flat glass production lines was initially attributed to the aftershocks of the global downturn, with traditional consumers of flat glass, mainly the construction and automotive industries, were struggling with their own bottom line woes.

Then, just as it appeared the market was getting back on its feet, three of the US’ major primary glass manufacturers were buffeted by a series of unexpected shutdowns – not to mention a natural disaster – disrupting supply once more.

As identified in research from Key Media & Research (KMR), back in February 2017, Pilkington North America, a large manufacturer of glass for use in buildings and vehicles, saw its float glass plant in LaSalle County, Illinois, sustain serious damage at the hands of a tornado.

It remains unclear as to how long the factory was offline – Pilkington was unable to confirm when approached by Fastmarkets – but the plant is reported to have recommenced operations in early 2018.

Elsewhere, Guardian’s Iowa plant was closed in June the same year due to an explosion, while Vitro Architectural Glass was forced to suspend operations at its Pennsylvania factory due to a fire two months later.  

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Despite Trump’s coal revolution, photovoltaic growth continues unabated in the US.
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Demand growth 

But it appears flat glass sales in the US finally rebounded last year, with major float lines "going back into operation", according to KMR. Going on the financials of the market’s biggest manufacturers for 2018, this appears to be the case. 

Vitro reported an 8.1% increase in sales year on year in 2018, underpinned by a 10% uptick in its architectural glass business. Meanwhile France-based Saint-Gobain also increased its like-for-like sales in North America – which represents 13% of the company’s overall revenues – by 6.2%. 

While Japan-based AGC Glass reported its flat glass revenue to be flat for the North American market in 2018, according to its most recent financial report, the group is confident both its sales and profits will mount in 2019. This will be achieved, it says, by a mix of a reduction in production costs and productivity improvements (a common theme in most financial reports for the year).

Pilkington, a subsidiary of the Japan-based NSG Group, is also bullish about its chances in the region for the year ahead. According to its latest third-quarter financial report, the group was aiming for a 3.2% increase in revenue for the year ending March 31. 

US glass suppliers appear to be riding on something of a wave of optimism – 82% of those surveyed in the aforementioned KMR report predicted they would boost their sales once more in 2019 – with nearly half of that number forecasting a spike of over 10%. 

The automotive and construction industries aside, MarketWatch recently cited "infrastructure development and reconstruction or renovation of old building projects" as a major driver in the region’s flat glass market. 

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A backlash against plastic has meant that people are more likely to buy their
beverages in glass containers – which has led to a surge in demand for bottles.
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Solar powered growth

Increasing demand for photovoltaic modules is another major contributing factor. US President Donald Trump might be keen to revive the national coal industry, but this did not stop Americans installing more than two gigawatts of photovoltaic solar capacity in the second quarter of 2018, according to a recent report from Wood Mackenzie Power and Renewables and the Solar Energy Industries Association. The US is expected to more than double its solar capacity over the next five years – something flat glass producers and manufacturers are anticipating with relish. 

It is not just flat glass that is enjoying a renaissance, either. The glass container industry also appears to be in rude health. In January, industry body the Glass Packaging Institute attributed a recent spike in demand for North American glass to the domestic wine market. In 2018, the market for wine – especially organic, sustainable and biodynamic varieties – reached more than $4.3 billion, and is forecast to grow by more than 14% by 2022. 

Manufacturers such as Ardagh Group and California-based Gallo Glass are seeking to get in on the action. The former recently reported an increase in wine bottle orders, while the latter is in the process of updating its facilities to service the Golden State’s famous wine industry – which accounts for over 80% of US total vineyard production. 

According to Jim Nordmeyer, vice president for global sustainability at Owens-Illinois, the world’s leading glass container manufacturer, "we are clearly seeing a renewed interest in glass". 

"It’s visible on the shelves at the supermarkets and comes up, over and over again, in our conversations with customers," he explains. "Glass is well positioned to capitalize on this interest because it is healthy, sustainable, and helps build brands. You can feel its quality in your hand. Consumers and customers alike love glass."

First and foremost, Nordmeyer puts this fresh consumer demand down to growing trend of premiumization – the move to make a brand or product appeal to consumers by accentuating its superior quality and exclusivity. It was recently deemed by Forbes to be one of the dominant trends in contemporary retail. 

"Consumers want high-value products, because it means higher than average price points," he says. "And glass is the best option for brand building in these high-value products, as it offers quality and differentiation, through a range of shapes, colours and textures. A great example is the beer category in Europe, which is highly differentiated – each brand has a unique bottle shape, generating strong brand equity."

European glass packaging production in Europe increased by both 1% in volume (to 10,337 tonnes) and units during the first half of 2018 year on year, according to recent figures released by European Container Glass Federation (FEVE). The slight growth was in line with full-year 2017 data. 

"Last year’s production figures show clearly there is an increasing interest in opting for glass packaging," says Michael Delle Selve, a FEVE spokesperson. 

"Generally, all food and beverage market segments experienced a demand growth for glass, and the outlook is very positive also for the flaconnage sector for perfumery, cosmetics and pharmacy."

The green dollar

Glass’ innate environmental benefits are also seen as a huge incentive among consumers – especially in light of society’s move toward greener customs and government-led incentives around sustainability. Indeed, "plastics pollution" is said to have been one the most Googled topics in the United Kingdom last year.

And, as revealed in a recent survey by the Friends of Glass community, 78% Europeans rate glass as one of their top choices when it comes to food and beverage packaging. 

"The outlook is surely positive for the months to come because consumers and brands are switching to glass for environmental reasons," Delle Selve says.

"They want to take an immediate, concrete and easy engagement to safeguard the environment and choosing glass is a simple way to do so.  They are increasingly aware of the impact their daily lifestyle can have on the environment. Sustainability is no longer a buzzword for them. Consumers see a direct link between their purchasing behaviour and major environmental issues, and they want to know more about the products they buy, and the way brands behave."

In March, Owens-Illinois announced a new investment in Europe to reduce its environmental footprint and meet customers’ rising demand for sustainable packaging. This includes plans to funnel more than $60 million into the expansion of its plant in Gironcourt, France, whose focus is predominantly on the premium beer segment. 

According to the group, the plant, when work is finished in 2020, will help bolster the local circular economy by utilizing glass and other raw materials from the area.

"Recycling is core to our business," Nordmeyer says. "We are focused on increasing the use of recycled glass in our products, furthering our commitment to circular economy principles. We have also set a goal to increase the level of post-consumer recycled content in our products up to 50% by 2025. We have already seen some great success in several countries across Europe where recycled content rates are nearly 80%."

For FEVE, the glass sector’s place within the circular economy is a no-brainer. 

"More recycled glass into the loop translates into less virgin material, less energy, less emissions, less impact on the environment and less costs," Delle Selve says. "Once produced, glass is a permanent resource for endless production loop. But we can’t act on our own on this and will need to work with partners. 

"But we still need to make sure that more and better glass is collected throughout Europe. Today, seven out of ten bottles are put back into the bottle-to-bottle loop."

Raw materials squeezed

Returning to the North American float glass sector, there may be optimism among manufacturers, but it is slightly tempered by a tight supply of raw materials.

As revealed by Fastmarkets in February, a bottleneck has emerged in the supply of natural soda ash – a major ingredient in the production of glass – which has forced US producers, in turn, to ramp up their sales prices for the industrial mineral over the last six months.

As of January 31, the monthly price assessment for soda ash, natural, dense, large contracts, fob Wyoming – the state supplies 90% of the US’ soda ash – was $200-230 per tonne. 

Major soda ash producers Genesis Alkali, Tata Chemicals and Solvay have all increased their prices since September 2018, in the range of $10-15 per tonne. Industrial Minerals Association - North America was approached to discuss this pricing trend further, but declined to comment.

Prices for European soda ash – which is largely synthetic, and comprised of salt and limestone, as opposed to its US counterpart, which is produced naturally from trona – are also expected to rise this year. 

Largely due to the huge energy outlays involved in producing the end product, soda ash producers feel they have little option but to ramp up their contract prices. Nonetheless, demand from glass manufacturers on the continent remains firm, particularly in light of the growing consumer trend toward recyclable products.

On a broader scale, according to projections by market research group Technavio, the global soda ash market could post a compound annual growth rate of 2% up until 2022. The glass industry remains the largest end user of soda ash, accounting for over 50% of its share, as of 2017. Asia-Pacific’s burgeoning glass-heavy construction sector is forecast to fuel this growth. 

Supply challenges aside, the outlook for the global flat glass market is largely positive. By the estimates of Market Study Report, it is set to surpass $130 billion by 2024, with the usual producers, Guardian, Asahi, GSC, Astro Cam and NSG Group all expected to remain dominant market participants. 

Europe, just like the US, is set to enjoy growth on the back of the continent’s expanding automotive industry, with a compound annual growth rate (CAGR) of 5.5% forecast for the next five years. Germany, Italy and Russia – sizeable passenger car markets – are expected to lead the way.

There are high hopes for the flat laminated glass segment, which is poised to see its sales surpass $40 billion by 2024. Again, this will be spearheaded by the automotive industry (namely, windshields), as well as skylights in construction. Flat tempered glass – mainly found in household and building application – could grow at over 7%. 

Experts are also betting on the coated glass market, which is set to hit $24 billion in the same timeframe. This growth is predominantly based upon the current inclination among consumers for more aesthetically-pleasing infrastructure projects, such as airports. Consequently, the market is expected to take off in countries undergoing significant infrastructure drives, including China and India.