Glass Market Overview: Emerging Markets Drive Flat Glass Demand; Other Glass Markets Mixed

December 1, 2005
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Worldwide demand for float glass in the construction industry increased last year, with an overall capacity utilization of 87% continuing the gradually improving trend from the low level reached in 2001, according to St. Helens, UK-based Pilkington plc. Most of the growth was in China, which saw an increase in its gross domestic product of more than 9% in 2004. Spending on construction rose, and China's flat glass output grew strongly. One-third of the world's flat glass is now made and sold in China, and more than 100 float glass lines are in operation around the country. Pilkington reported that construction markets in South America also improved, and Australia held steady. While European demand picked up slightly, excess capacity remains. The North American commercial market continued to be weak in 2004, although there were clear signs of recovery as the year progressed. With the continued strength of the U.S. residential market, industry capacity utilization remained healthy, leading to stable pricing.

Products that offer unique or unusual properties have boosted sales for some manufacturers serving the European and North American markets. For example, Pilkington has seen increased demand for its Pilkington Activ® product lines, which offer self-cleaning properties in combination with solar control coatings, low-e energy-saving glass, laminated safety glass and noise-reduction laminates. Chicago, Ill.-based Engineered Glass Products has reported significant success with its new Thermique® Hot Glass Technology®, which can be integrated into windows in cold climates to radiate warmth into building interiors; used as stylish towel warmers in high-end bathrooms; or used to reheat, store and display warm foods in kitchens and restaurants.

While the automotive markets have been relatively flat in North America and Europe, value-added products are also helping glass manufacturers increase sales in these regions. For example, Pilkington has seen growing sales of panoramic and solar reflective windscreen glass, laminated sidelights for security and comfort, and acoustic noise-reducing and heated integrated-wired products. This trend is expected to continue as vehicle manufacturers emphasize the advantages of increased safety, visibility, comfort and noise reduction. The strongest growth is expected in emerging markets such as South America and Asia, where demand for new vehicles is expected to continue to rise. Japan-based Asahi Glass Co., Ltd., reported that it is also seeing strong demand in Russia.

According to Pilkington, glass demand for the construction and automotive industries is expected to continue growing at around 3.9% per year over the long term, driven by economic growth, as well as by legislation and regulations concerning safety, noise attenuation and the response to the growing need for energy conservation. Additionally, architects and car designers are using increasingly more glass in buildings and vehicles. However, like all manufacturers in the ceramic industry, glass manufacturers in North America, Europe and China are experiencing increasing cost pressures due to rising energy prices, and this challenge is expected to continue in the foreseeable future.

Electronic and Specialty Glass

Asahi Glass reported that demand for cathode ray tube (CRT) glass for PC monitors and TVs declined sharply in 2004, both in terms of quantity and price. However, demand increased for flat panel display (FPD) glass used for thin film transistor (TFT) liquid crystal displays (LCDs) and plasma display panels (PDPs), which remained buoyant as a result of production expansion of screen panels for PC monitors and thin-screen televisions (such as LCD and PDP TVs), as well as for larger sizes of FPD glass substrates. In the electronic materials business, the company reported that sales of integrated circuits and optical pick-up elements for DVD decks remained robust, but those of small- and medium-sized displays installed in cellular phones, as well as optical filters for liquid crystal projectors and digital cameras, were affected by a reduced demand for digital electronic products.

Corning, which is also seeing higher demand for LCD glass, forecasted that global LCD glass market volume will grow in excess of 50% in 2005 compared to 2004 levels. The company reported that LCD TVs comprised 5% of all televisions sold in 2004 and believes that they might account for around 21% of the world's television sales by 2007. "As CRT TVs continue to decline in market penetration, we believe LCD TVs will emerge as the primary alternative technology in the below 40-in. market, as they provide the best balance of form, function and cost," said Peter F. Volanakis, president of Corning Technologies.

A recent study from The Freedonia Group, Inc. projects that aggregate global demand for electronic displays will increase more than 13% per year through 2008 to US$113.5 billion.1 While LCDs will continue to see the highest growth rate, plasma displays and microdisplays will also continue to post strong gains, especially in high-definition television (HDTV) applications. Meanwhile, demand for CRTs will continue to decline.

Container Glass

While plastics and metals continued to chip away at glass container market share in Europe and North America in 2004, manufacturers reported increased demand in developing economies such as Latin America and China. Toledo, Ohio-based Owens-Illinois, Inc., which changed its name to O-I in April 2005, sold its blow-molded plastics business and acquired BSN Glasspack in Europe to further solidify its leading position in the global glass packaging industry. A reported 57% of the company's 2004 sales were in international glass, with 31% in North America glass and 12% in specialty plastics packaging. This compares to 38% international, 31% North American and 31% plastic packaging in 2003. The company reported that unit shipments in North America declined by about 2% overall in 2004. Shipments of beer and malt beverage containers increased by approximately 4.8%, and shipments of containers for wine and spirits were also higher for 2004; however, shipments of containers for tea, juice and other beverages were lower. In the Asia Pacific region, unit volumes were up 2.9% overall due to strong growth in beer, wine and low alcohol refreshers, although this was partially offset by lower shipments of food containers. In South America, glass container shipments increased by more than 5%, led by strong growth in the beer and beverage markets.

Paris, France-based Compagnie de Saint-Gobain reported that it saw high demand for bottles and jars in Southern Europe, particularly Portugal, as well as in emerging economies such as Latin America and China. The company has also seen increased sales in glass flasks worldwide due to its focus on unique designs. Not all companies have been able to leverage enough international growth to offset increased manufacturing costs and flat North American demand. After closing its Connellsville, Pa., glass container manufacturing facility in late 2004, Anchor Glass Container Corp., headquartered in Tampa, Fla., filed for Chapter 11 bankruptcy protection on August 8, 2005, for the third time since 1996. Part of Anchor's bankruptcy reorganization plan could include additional plant closings.

Demand for glass containers is expected to continue to expand in high-end food-and-beverage categories in the developing world. The forecast for other sectors and other regions is less clear. A recent study from The Freedonia Group projects that U.S. demand for cosmetic and toiletry containers will increase 2.6% per year to 24.7 billion units in 2009.2 While plastic is expected to register the fastest growth, glass will continue to hold its niche in cosmetic (e.g., nail enamel) and fragrance uses and is expected to grow at a rate of 0.5% per year.

Editor's note: The foregoing information (except where noted) was compiled from publicly available information in annual reports and news releases.

References

1. World Electronic Displays (published 11/2004, $5200), The Freedonia Group, Inc., 767 Beta Dr., Cleveland, OH 44143-2326; (440) 684-9600; fax (440) 646-0484; e-mail pr@freedoniagroup.com; www.freedoniagroup.com. 2. Cosmetic & Toiletry Containers (published 07/2005, $4200), The Freedonia Group, Inc., Cleveland, OH.

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