What’s in store for the glass industry? That was a question Serge Martin, vice president of marketing, building and industrial products with AGC Glass Co. North America, addressed during his keynote presentation on Monday. Martin spoke during the Glass Association of North America’s (GANA) Building Envelope Contractors (BEC) Conference, which is taking place in Las Vegas.
He started with a look back at the Wall Street Journal article from last September that discussed a glass shortage. Martin revisited some of those statements, and answering whether they are true and what to expect in the next few months.
“It’s on everyone’s minds,” he said. “Will we have enough glass?”
Manufacturing capacity was one of the points he discussed. He explained that different manufacturers followed different courses of action during the recession—shutting down lines, for example. But, in terms of things such as capacity management, flat glass remains very concentrated with five U.S. players.
So, where is glass being used? With the residential recovery, more than half of the glass produced in the U.S. is used in this segment. Nonresidential, though, carries a higher dollar value per square foot and also remains very attractive, he said.
Looking at products produced, Martin said clear glass is now down to 55 percent and represents an increasingly small part of the glass usage. Coated glass and interior glass are in growth mode.
He also looked at how the cost of glass has evolved. He explained that over the last ten years, we saw a sharp decrease due to recession. That is now on the increase in the market recovery. He also explained that looking at historical data, the price of glass has hardly changed over the past 20 years.
“If you want to compare it to others, look at cement and gypsum, which have both seen steady increases due to inflation,” he said. “Float glass has been able to absorb inflation.”
There is also complexity within the supply chain. Martin explained there are a lot of players involved between the end user and the primary manufacturer. Primary glass, including high-performance coated glass, can represent as little as 5 percent of the final value of the glazed area.
He said glass itself is only about 5 percent the total cost of the installation. So a glass shortage, he said, will have a huge impact on the user.
“We need to realize that if there is an increase, it’s probably inflated throughout the supply chain,” he said
Martin also addressed the questions, how limited is the supply of glass and what are solutions? He told his audience, “From the moment float glass was developed through 2007 [there was] only continual increases in capacity.” So by the early 2000s the industry was at overcapacity. So now, it’s coming down to closer align with what the market needs.
But despite market recovery, Martin said he doesn’t see a significant increase in capacity. So, what happens now?
“Glass availability will be an issues across the country in 2016 and beyond,” said Martin. “In 2015-2016 market demand will start to exceed available production capacity.”
Martin referenced a recent American Institute of Architects report, which foresees high single digit growth in the nonresidential segment, while the National Association of Home Builders still believes in a double digit increase in new housing starts.
“Even with more conservative assumptions, the domestic production capacity could be short by about five lines or about 15 percent capacity by 2018,” said Martin.
How can we make the supply meet the market demand? Martin offered a few suggestions, from less to most desirable. These could include:
– Add back float glass capacity;
– Import finished product;
– Increase float imports;
– Limit exports;
– Maximize production output; and
– Minimize waste.
– The last two, Martin said, are more in our control.
“There is a lot of waste that can be saved going from sand to a window,” he said.
As an example, adopting Building Information Modeling (BIM), can help minimize waste.
“There are savings that can be generated across the entire supply chain,” said Martin. “BIM is a direction I think as an industry we can benefit from.”
He added, “Yes, things will get tough. Supply may be constrained. As manufacturers we do our best to provide solutions … if we communicate and plan well we can make things as simple as they can be.”