Glass Markets Remain Strong Despite Challenges
Flat Glass Demand Remains StrongAccording to the industrial market research firm The Freedonia Group, world demand for flat glass is forecast to rise more than 4% per year to nearly 4 billion square meters (43 billion square feet) in 2004, with a market value of over $40 billion (see Table 1, p. 66). Demand for raw flat glass is forecast to reach 39.2 million metric tons in 2004. Given this forecast, and assuming an industry-wide utilization rate of about 85%, the global industry will require about 14,000 metric tons per day of new float glass capacity from the installed base at year-end 1999 to meet market demands through the end of 2004.
Although the massive U.S. market will continue to be the largest, the most rapid growth in the North American region will arise in Mexico. Western Europe’s flat glass market has seen solid gains in recent years due mainly to a stronger construction industry and rejuvenated consumer spending dynamics. These two trends will promote solid new gains in flat glass demand in construction and specialty markets, although declining demand for motor vehicle glass will drag down the regional average.
The construction market will offer the strongest gains, with demand forecast to expand 4.7% per year to 2.5 billion square meters (~27 billion square feet) in 2004. In developed regions, demand for architectural glass will reflect in part the implementation of tighter energy standards, while in developing regions, the acute need for adequate housing and the ongoing expansion in the commercial and industrial sectors will be the primary factors behind gains. The automotive glass market will continue to offer a lackluster performance, reflecting generally sluggish motor vehicle production. Specialty markets will benefit from sustained growth in personal consumption expenditures.
Asia will continue to offer strong annual gains, a performance due largely to sustained expansion in the large Chinese market. While the region’s financial crisis hammered demand in the short term, long-term prospects remain favorable, predicated upon the region’s pressing need for adequate new housing, industrial expansion and rising motor vehicle production capabilities. Renewed expansion gains in per capita income levels are bolstering indigenous demand for consumer goods, including glass-intensive items such as appliances, furniture and mirrors. One exception is Japan, which will offer below-average growth due to sluggishness in all major markets. Even these moderate gains represent a recovery from Japan’s flat-to-declining performance over the previous decade.
Plastics Continue to Threaten Glass ContainersPlastic packaging has and will continue to outpace glass and other packaging types due mainly to performance advantages, according to The Freedonia Group. Plastic has deeply penetrated the packaging market, especially in the food and beverage segments. In June 2001, Gerber announced that it would replace nearly all of its glass baby food jars with plastic, based on market research indicating that nearly 70% of consumers prefer baby food in plastic containers. In March 2000, Miller Brewing Co. began making three of its popular beers (Miller Lite, Miller Genuine Draft and Icehouse) available in plastic bottles. “We don’t see plastic replacing aluminum or glass. But we do think there is a place for it. It offers a flexible packaging choice we think was missing in the beer industry,” said Miller spokesman Scott Bussen when the announcement was first made.
Despite Miller’s decision—or perhaps substantiating Bussen’s statement—glass remains the most widely used material in the packaging of beer, with bottle demand forecast to rise 2.3% per annum through 2005 to 220 billion units. Within the glass bottle segment, one-way (nonreturnable) beer bottles will continue to supplant the traditional two-way (returnable) bottles in most markets. While the latter are environmentally friendly and less expensive over the long term (they are typically used 15-30 times and then recycled), one-way bottles require a lower initial investment, are better suited to short runs and custom designs, and are lighter in weight (and hence cheaper to ship). In addition, unexpectedly slow return rates for returnable bottles (e.g., during periods of adverse weather) can lead to temporary bottle shortages. Changing distribution systems favoring supermarkets and related outlets at the expense of small traditional vendors like drink shops also make bottle collection more costly and difficult, supporting the switch to nonreturnables in many countries. The same is true of the trend towards at-home, rather than on-site, consumption.
In the developed world, glass containers are generally perceived to have a high-quality or premium image relative to alternative packaging materials. Such an image is considered especially important for new product introductions and upscale drinks like specialty beers, where producers strive to create a prestigious image.
Additionally, glass containers can be reusable and are fully recyclable. Moreover, unlike plastics, glass packages can easily be sorted for recycling (simply separated by colors) and can be repeatedly recycled into new containers in a closed-loop system. The use of previously ground glass, or cullet, to make new containers also renders the production process cleaner and more efficient.
Drawbacks of glass containers include higher weight—and hence shipping costs—than other packaging materials, as well as the risk of breakage. Many glass beer bottles also require specialized equipment (i.e., can openers) in order to remove the closure, and they vary in their ability to be resealed (again, based largely on the type of closure employed). Moreover, in stark contrast to the developed world, consumers in the developing world view glass as a lower quality and less attractive packaging medium than aluminum cans.
Glass Fibers Reflect Slowing EconomyAccording to The Freedonia Group, demand for glass fibers in the U.S. is projected to rise nearly 2% per year to 6.8 billion pounds in 2005, valued at $6.5 billion. The best opportunities are expected for textile glass fibers in reinforced plastics applications, which will grow 3.2% annually. Opportunities in reinforced plastics will stem from their advantages over competitive materials including light weight, corrosion resistance and a favorable cost/performance profile. Slower growth is expected for glass wool insulation and textile glass fiber in other reinforced uses because of strong reliance on construction markets and a projected deceleration in residential building activity over the forecast period.
Glass wool (fiberglass) insulation demand is forecast to increase 1.3% annually to 4 billion pounds in 2005. A projected deceleration in residential construction will strongly limit growth prospects for fiberglass insulation, as the residential construction market accounts for approximately 70% of overall fiberglass insulation demand. Declining housing starts through 2005 will be offset somewhat by growing aftermarket demand, as well as more intensive use of fiberglass insulation per new housing unit. Industrial and equipment markets, while smaller, will present more favorable opportunities for fiberglass insulation due to modernization activities and associated industrial machinery purchases in manufacturing facilities to maintain productivity increases. Concerns about energy efficiency and indoor air quality will support demand in repair, maintenance and retrofit settings.
Textile glass fiber demand is forecast to advance 2.7% per year to 2.8 billion pounds in 2005. This deceleration from the 1995-2000 period reflects slower projected economic growth and saturation in some applications. In the faster-growing reinforced plastic market, building products and motor vehicles will remain the leading applications. Among other major reinforced plastic markets, above-average growth is forecast for the electrical and electronic market, fueled by rapid advances in computer and telecommunications technology, which have shortened the useful life of many types of business equipment. Among glass fiber demand in other reinforced applications, the best opportunities are expected in mechanical rubber reinforcement applications, based on usage in a broad range of industrial component applications. Asphalt construction products will continue to account for the largest portion of demand for glass fibers in other reinforced uses and will benefit from above-average expected growth for laminated shingles.