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An industry at war

If glass producers saw an increase in demand starting with the second part of 2011, manufacturers of ceramic products struggle to survive the harsh competition of Chinese imports

The glass and ceramics industries have taken completely different routes during the last couple of years. Both of them continue to be affected by the economic recession, but in distinct ways. If in 1989 the sector employed 50,000 people, it currently has around 8,000 employees, while the value of its local production has decreased from EUR 270mn in 2010 to EUR 250mn in 2011, according to Maria Danciulescu, former executive director of glass and ceramics association STICEF.

 

Glass producers, whose sales depend mostly on the constructions and food & beverages market evolutions, had to face a highly volatile demand. Prices for glass in the constructions industry went down to historical minimums during the last couple of years, mainly because of the economic crunch. However, demand has started to pick up in the second part of 2011 and selling prices have partially been readjusted. “Prices tend to reach the levels before the crisis. I think this trend of price and demand increase will continue this year as well,” said Jerome Lionet, general manager of Saint-Gobain Glass Romania, the largest glass producer in the country. 

 

The company, which controls the regional activities of the French group Saint-Gobain, plans to increase its production capacity at Calarasi by 3%. Its orders for window glasses come from both residential and non-residential sectors, while those for interior finishing come especially from the office and commercial market segments.

 

Demand of glass packaging, which depends mostly on local consumption of beverages, such as wine, champagne and beer, and of jar-based products, is slowly picking up. The largest producer in this sector, Stirom Bucharest, owned by the Greek company Yioula Glassworks, increased its turnover by 7% y/y in 2011, up to RON 207mn (EUR 49mn). However, the growth is much lower compared to the 20% recorded the previous year. The company’s H1 financial results for 2012 don’t look encouraging either. Its net turnover has decreased by 5.25% y/y in H1, while net profit saw a sharp correction of almost 59%, down to RON 4.8mn (EUR 1.1mn). According to its manager, the company plans to attract EUR 10mn financing on the stock exchange, to invest in new products, in optimizing energy consumption and in environment protection projects.

 

Household glassware producers are the most affected by the increasing prices of raw materials such as gas and electricity, which count for up to 50% of their total production costs. “If raw material costs exceed 60% of the total production costs, a factory can no longer survive. There are two-three companies currently in danger, where this percent has exceeded 50%,” said Danciulescu from STICEF.

 

This is the main reason why some producers shifted their focus towards art glassware, which uses fewer raw materials and has a good export market. Local production in this sector has steadily increased by 10% each year and companies export almost all their products to the EU (90%), Canada, the US and Russia. In Romania, consumption is mainly focused on cheaper products of Turkish origin.    

 

In spite of the difficult conditions, the Turkish group Trakya Cam decided to enter the Romanian market by acquiring Glass Corp Buzau earlier this year, in a deal estimated at EUR 3.6mn. The company, which ranks among the top six flat glass companies in the world and top four companies in Europe by its production capacity, plans to invest over EUR 55mn in the Romanian producer. Trakya Cam had $751mn net sales in 2011 and employs more than 2,700 people. In 2009, it decided to develop its flat glass activities together with Saint-Gobain in Egypt and Russia.

 

 

 

Ceramics fight against cheap imports

 

The ceramics sector is under huge pressure. In spite of constant demand, of around 660,000 tons per year at the EU level, producers struggle to survive. Their main concern is the unfair competition of similar products imported from China. Problems began in 2005, when the European countries liberalized the access of such products on their markets. The result was an avalanche of Chinese imports, which currently count for more than 65% of the total products sold in the EU, compared to the 22% in 2004. The average export prices from China are some 70% lower than the average 2011 prices of all other countries exporting to the EU.

 

Statistics show that Chinese exports of ceramic table and kitchenware to the EU have increased by 260% since 2004, while the union lost 56% of its jobs in the sector within the same timeframe.

 

In an attempt to limit the negative effects of these imports on the local production, certain countries such as Colombia, Indonesia and Argentina have instituted anti-dumping measures against Chinese imports. The European Commission also initiated, in February 2012, an anti-dumping proceeding concerning imports of ceramic tableware and kitchenware from China.

 

The EU is currently investigating the extent to which such products are dumped and cause material injury to EU producers, in order to define the level of duties to impose to them. The process may result in an increase in customs duties for all imported ceramic products from 7% at present to up to 37%. “I expect these duties will slightly increase the prices of our products and will allow us to have a decent profit ratio,” said Radu Pupaza, executive direct at STICEF and representative of household ceramics producer Cesiro Sighisoara.

 

Until these measures are implemented, local ceramic producers continue to be in a deep crisis. The Romanian market absorbs only 5% of their production and the rest goes to the export, mainly to the EU countries. “The ceramic tiles market shall not recover this year,” estimates Toni Teau, CEO of Lasselsberger Romania, which has the Cesarom brand.

 

However, Lasselsberger, one of the most important players on this market, which also owns Sanex Cluj-Napoca, plans to increase its sales in the short and mid-term runs, as well as its output capacity. The company had RON 83.2mn (EUR 19.4mn) turnover in 2011, while Sanex had RON 94.9mn (EUR 22mn) revenues.

 

In 2011, Romanians bought on average some 35 sqm of wall and floor tiles, which is 10% less than in 2008. Market analysis shows that customers tend to be less interested in small size ceramic tiles and more in favor of bigger, more elegant models. This is in line with the international trends of home design. Renovations generate the most sales and customers tend to focus more on medium-priced products. Producers in this segment count on increasing their tile sales in the rural areas, where the number of houses connected to the sewage and gas networks has increased.

 

“The European Commission initiated an anti-dumping proceeding concerning imports of ceramic tableware and kitchenware from China. The process may result in an increase in customs duties for all imported ceramic products from 7% at present to up to 37%.”