10 August 2012 16:49 [Source: ICIS news]
LONDON (ICIS)--Declining sales characterised the second-quarter earnings of most glass producers hit by the European economic downturn, market players have said.
The sectors most affected by the eurozone debt crisis and falling consumer spending are the construction and automotive industries, the two largest downstream markets for glass producers.
"A contraction in automotive production in Western Europe, the collapse of the solar market, a fall in prices (especially float glass) and a steep rise in raw material and energy costs [all contributed to falling sales]," the French glass manufacturer Saint Gobain Glass said.
Construction output in May decreased by 6.9% in the 27-member EU, and by 8.4% in the eurozone on a year-on-year basis, according to statistics agency Eurostat, while data from the European Automobile Manufacturers’ Association showed new car registrations in the EU fell by 6.8% year on year to 6,644,829 in the first half of 2012.
During the first half of the year, several glass producing furnaces shut down temporarily, were mothballed or closed down permanently. A number of furnaces are also in a so called hot-hold status, which means that they are heated to operating temperatures but they do not produce any glass.
According to glass producers, this has resulted in falling soda ash demand, which is used to make glass, although this has been denied by soda ash sellers which say demand is relatively good and recent furnace shutdowns have not affected sales.
Soda ash prices are set annually around December and January. Because most contracts are annual, there is little scope for negotiation halfway through the year in case energy costs rise, as is the case now.
According to ICIS, 2012 dense soda ash prices in ?xml:namespace>
Because glass sales have fallen and energy costs are increasing, glass makers are looking to pay less for soda ash. However, soda ash producers argue the utility costs have increased in this energy-intensive industry and so they need to raise prices to maintain margins.
As a result, if the current situation persists and glass sales do not improve, there is scope for further furnace shutdowns or closures, a supplier to the glass industry said.
($1 = €0.81)
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