Volume 46, Issue 5 - June 2011

feature


The Mirror Market Adjusts
Slight Up-tick in Mirror Demand Not Offsetting High Production, Transportation Costs
by Megan Headley

 

In March, Arch Aluminum & Glass Co. in Tamarac, Fla., announced that it had stopped manufacturing mirror, continuing the slow decline of domestic mirror manufacturing (see May 2011 USGlass, page 16).

Ben Thomas, director of strategic marketing for Arch, told USGlass that while the company may no longer be manufacturing mirror, it will continue in the mirror market. “Arch is one of the largest suppliers of fabricated mirror in the country and we continue to see this as an opportunity to be able to provide a complete package to our growing fabricator base,” he says. “We will be buying our mirror from fully integrated suppliers and doing any fabrication required.”

Jeff Leone, CEO of Arch Aluminum & Glass, adds, “We do still fabricate mirror for customers, but we found that the basic mirror manufacturer was probably best for those who have a better integrated cost structure—the companies that make the glass have a better integrated cost structure and can do it more cost-effectively than a downstream player. It’s still a big part of our business and I can’t say we’ve lost any business, but we now have the ability to be more competitive and reliable to customers from a cost standpoint.”

Jim Ventre, national sales manager for Vitro America, notes that the cost issues Leone references are being felt throughout the industry.

“The rising cost of raw materials continues to affect our industry. The most severe problem has been the rising cost of silver,” Ventre explains. “For a long time it was in the $17 per troy ounce range, but in August [2010] it began to steadily rise. In April, it spiked to $49, almost a 200-percent increase. This adds a tremendous amount of cost to the production of mirror; much more than can reasonably be absorbed. Fortunately, though, all manufacturers have to pay basically the same price for silver, so no manufacturer has an advantage over another,” Ventre says.

On May 18, Guardian Industries in Auburn Hill, Mich.—which notes that it is the only float glass company that also manufactures mirrors—issued a letter to its customers informing them of a silver surcharge for all mirror products, to be adjusted quarterly. The letter stated, “Silver is a major component of mirror manufacturing and its cost has more than tripled over historical levels and pricing remains very volatile.” Vitro America instituted a similar surcharge the following week.

Domestic Advantages
Despite high costs of production, Guardian’s director of corporate marketing and brand management, Earnest Thompson, notes the high costs of transportation make it more advantageous for companies to produce mirror locally. “Guardian operates 15 mirror lines on five continents with about a third of those in the U.S.,” Thompson says. “Although there are imports, of course, mirrors are usually produced locally (as evident in our global mirror assets). Mirrors are not an item that is cost-effective to ship.”

Ventre notes that the short lead times of producing mirror domestically can outweigh the importing challenges. “It’s no secret that importing mirror has huge challenges: lead time can balloon up to 16 or more weeks, [there are] size limitations due to container constraints, as well as [little] recourse when product is defective. Few companies have the ability to deal with the unpredictability of importing product, or can meet the volume requirements needed,” he says. “In contrast, Vitro AP (and other domestic mirror manufacturers) can deliver mirrors in a matter of days, which is required to support a ‘just in time’ inventory control model. When business is slow, customers want to keep inventory to a minimum, which is not feasible when importing and dealing with such large minimum orders and long lead times.”

Mirror Demand?
Although the fabricators admit it’s low at best, one can optimistically state that mirror demand is moving up.
“We’ve seen a modest pickup in mirror demand over the past year but there is still significant over-capacity in the system,” Thompson says. “The U.S. consumes only about one third of the capacity of its installed base.” He adds, “There is an up-tick in remodeling and our Guardian UltraMirror product line does quite well in that segment… In addition, we have certain mirror assets that are used in concentrated solar power applications.”

Ventre emphasizes the “modest” part of the up-tick in recent sales.

“We have experienced some spikes in mirror sales in recent months, but not nearly what is needed,” Ventre adds. “According to the National Association of Home Builders new home starts were down 10.6 percent in April and the confidence level is still low within the home building community. The Leading Indicator of Remodeling Activity doesn’t give us much to feel good about these days, as they are projecting spending to increase only 0.02 percent in 2011. It’s difficult to feel truly encouraged until we see demand consistently trending upward.”


House Bill Would Require Domestic Supply of Cerium Oxide
On April 6, Rep. Mike Coffman introduced H.R.1388, “to reestablish a competitive domestic rare earths minerals production industry; a domestic rare earth processing, refining, purification, and metals production industry.”

Although the bill seems more concerned with the use of rare earths in “modern defense technologies,” the rare earth element cerium or compound cerium oxide has a role in the glass and mirror industry.

“Cerium oxide is used in cleaning the glass before it goes through the silvering process,” explains Jim Ventre, national sales manager for Vitro America. Rare earth supplier Molycorp Minerals in Mountain Pass, Calif., notes that cerium oxide is used in the glass industry for polishing compounds, optical glass, UV-resistant glass, X-ray imaging, thermal control mirrors, and colorizers/decolorizers.

The problem, as elaborated upon in the House bill, is that “Though at least 40 percent of the world’s rare earth reserves are located within the United States and its ally nations, our country now depends upon imports for nearly 100 percent of its rare earth needs.” The bill further notes, “[M]ore than 97 percent of all rare earths for world consumption is produced in China.
The ability—and willingness—of China to export these rare earths is eroding due to its growing domestic demand …”

The Chinese Ministry of Industry and Information Technology draft rare earths plan through 2015 proposed an immediate ban on the export of so-called “heavy” rare earths, and a restriction on the exports of light rare earth metals. In July 2010, China decreased its export quota allocations on rare earth oxides and metals by more than 70 percent, causing price increases and supply shortages of some materials. In October 2010, the Chinese government reportedly restricted export of all rare earth oxide and metal to the United States and Europe.

While several companies around the world are beginning the process of reopening their mines, alternatives to the metals are being sought now.

“At this time, we have not found an alternative for cerium oxide,” Ventre says.
Guardian Industries in Auburn Hill, Mich., manufactures its own mirror line, and Earnest Thompson, director of corporate marketing and brand management, notes, “We have several mirror lines that use non-metal oxide abrasives.”

Still, the cerium oxide composed polisher remains the most common solution, and mirror fabricators are seeking additional alternatives. The Glass Association of North America’s Mirror Division has organized a task group to discuss this issue (see May 2011 USGlass, page 40).

As of press time, the bill was awaiting review by the House Subcommittee on Energy and Environment.




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