Glass producers, whose evolution is highly dependent on the macro-financial climate, still face the negative effects of the economic recession. At the European Union level, the industry continued its decline, yet at a slower pace: 8% in 2012, compared to 15% y/y in 2009. However, the first rays of sunshine have started to appear. The industrial production in the sector increased by 2% y/y in Europe and by 1.1% in the Euro zone in August 2012, for the third month in a raw, according to Eurostat data.
In the mid run, the sector is likely to stabilize and then to increase, based on the gradual relaunch and higher investments in the EU economy. “I expect a medium growth of 1.5% to 3% for the European glass industry in 2014,” said Andrei Radulescu, senior investment analyst at SSIF Broker. The analyst forecasts growth rhythms for the industry of even 5% to 7% in 2015 and 2016, as long as the Eurozone avoids another crisis wave and enters a new economic cycle.
In Romania, the industry’s main concern refers to high gas-related costs. Starting with January 2014, gas price is expected to be 57% higher compared to the previous year. 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.
“Annual gas price increases amount to 10-14%. This causes us major difficulties, as it is our main raw material and we have an annual gas consumption of 2.5mn cubic meters,” said Adela Ferentz, general manager at Vitrometan Medias, one of the leading European producers of handmade and mouth blown glassware and lead crystal products. The company employs 230 people and is owned by the German firm DERU Glaswarenvertrieb GmbH, which invested around EUR 6mn in upgrading its production facilities.
The industry representatives ask for a change in the law, which would spread the gas price increase over several years. The other problem the industry faces is the lack of qualified workforce, as there are no training schools in the sector. In spite of higher raw materials costs, producers like Vitrometan maintained their 2011 prices. “We didn’t want to risk losing our clients. But, as our production costs continue to grow, we might be forced to increase prices,” said Ferentz.
Apart from this issue, the sales and orders levels have remained relatively stable. The exception is the lighting products, where demand has decreased because Italy, its most important client, was affected by the financial crisis. For the other products, the main markets for export are Germany, Great Britain, France and Italy. If in 2011, countries like Belgium and Austria placed a lot of orders, in 2012 the newcomers were Slovakia, Denmark and Greece. This year, clients from the Middle East have started to show interest in the Romanian glass products.
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 increases were for beer, beverages and mineral water packaging, as the beverages market has become more mature.
The largest producer in this sector, Stirom Bucharest, owned by the Greek company Yioula Glassworks, has ambitious development plans, in spite of poorer financial results. The company’s net turnover decreased by 2.1% y/y in 2012, down to EUR 45.3mn (RON 201.5mn), while its profit was 31.8% smaller y/y, down to EUR 3.06mn (RON 13.6mn). Stirom plans to invest EUR 38mn in improving its energy consumption, out of which EUR 11.8mn will be supported by non-refundable European funds.
“I expect the next years will be difficult for the glass industry because of the announced gas price increases,” said its general manager Spiros Vamvakas. The company increased its prices by 7% to 10% because of higher costs with raw materials, energy and gas. It produces 110,000 tons of glass per year. Last year, it exported 55mn units (EUR 6mn in value) to countries such a Hungary, Turkey, Bulgaria, Italy, Greece, Austria, Republic of Moldova, Georgia and Slovakia. It expects exports of 65mn units this year, worth EUR 7mn.
Stirom has 59% market share for glass packing and 33% for household glassware. In the first segment, it competes with glass producers from Bulgaria, Moldova and the Czech Republic, while for the latter it competes mainly with imports from China and Turkey. Its owner, Yioula Glassworks, has other six glass factories in Greece, Bulgaria and Ukraine.
UNEXPECTED HELP FOR CERAMICS PRODUCERS
The ceramics sector received a huge aid from the European Union this year. In mid-May, the EU imposed five-year anti-dumping duties on China's domestic ceramic products.
The tariffs range from 13.1 percent to 36.1 percent and are targeted at imports of Chinese plates and other table and kitchenware.
“Large retailers made inventories with Chinese products before the EU applied its antidumping measures. This had a direct effect on us, as our orders have decreased at the end of 2012,” said Aurelian Voia, general manager at Cesiro, one of the largest household ceramic producers in Europe. Its major clients are Ikea, Carrefour and Tesco.
“I think the EU measures will be a success and that’s why we decided to increase our production capacity by 20% this year,”
said Voia. The company produced 42.6mn pieces last year, compared to 40.1mn in 2011. More than 85% of its production goes to export, to countries such as France, Italy and Holland.
The tough decision of the European Union came as a necessity for the problems which 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 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 were some 70% lower than the average 2011 prices of all other countries exporting to the EU.
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 accused a series of Chinese companies of dumping, or selling products at unfairly low prices. In February 2012, it started an anti-dumping proceeding concerning imports of ceramic tableware and kitchenware from China. It is currently investigating 30 dumping and subsidies cases, 19 of them involving China.
In November, it suggested imposing import duties of up to 58.8% on Chinese ceramics, to redress the balance with locally produced tableware. Most EU states rejected the proposals, so the value of the duties went down to 13.1- 36.1%. The European Union is China's biggest trading partner, as ceramic tableware and kitchenware imports from China totaled EUR 728mn in 2011.
