Navigating the Loose Links in the Glass Industry Supply Chain

By Scott Sowers

The flow of goods across the entire glazing industry has been affected by several issues, including material shortages, escalating prices and shipping challenges. Inflation worries and labor shortages pop up in the daily headlines as the world lurches back to a post-pandemic normalcy. At the same time, warming economies are fueling rising demand which is stretching an already weakened supply chain in the glass industry. This challenging situation has manufacturers, suppliers, fabricators and glaziers scrambling to keep up.

Increasing Costs

Over the past few months the glass and glazing industry has been hit with a number of price increases, primarily driven by shortages in raw materials. In April and May several glass companies announced price increases on various products, pointing to rising costs of raw materials, packaging, freight and labor as reasons for the increase (see related article on page 20 in the June 2021 USGlass).

Doug Studt of Torstenson Glass in Chicago, says his company received price increases from all of its domestic suppliers in the range of 10%. “Our customers don’t seem at all surprised when they compare this increase to what they are seeing in steel, aluminum, and hardware made from those products … the comment I hear is that they were expecting it. The bigger issue now is availability and extended lead times which are really a challenge. We are telling our customers that spot outages are going to happen and that 100% fill rates for stock orders are not going to happen.”

Speaking of aluminum, Brent Slaton, national sales coordinator with Keymark Corp. in Florida, N.Y., says his company has seen a more than a 30% increase on primary aluminum (P1020A ingot) since November 2020. He says P1020A ingot in the North American market is unalloyed aluminum and gets this designation due to its 99.70% purity with maximum permissible silicon content of 0.10% and maximum permissible iron content of 0.20%.

“Aluminum prices have risen to their highest in more than two years due to increased demand domestically and in Asia resulting in supply-tightening,” says Slaton. “We are not just seeing it affect our industry, but every industry is being affected by a labor shortage and companies are being forced to increase wages as a result. Increased wages, shortages of raw materials, rising transportation and energy costs, and the current economic stimulus plan are all attributing to an out of control rise in prices.”

Jeff Henderson, president of the Aluminum Extruders Council, adds that “Commodity prices have skyrocketed and I don’t think anyone really predicted this. We know from all manufacturers that there’s also a labor shortage and that is really causing wages to accelerate at a rate never seen.”

Across the Pond

In addition to price increases and material shortages, bottlenecks are showing up just downstream from some global suppliers, as trans-ocean shipping has been forced to adapt. “There was a change in the way containers had to be fed to the port yard that caught everyone by surprise,” says Yago Martinez, business development manager, North America, for AGC Interpane, a glass producer based in Germany, that also does a significant amount of work in the U.S. “Containers could no longer arrive by train in large quantities, but had to be delivered one at a time, with a minimum time in between, and a maximum number of containers per day.” The company developed a workaround to get things moving again by renting temporary storage space near the port and using trucks to ferry in the containers.

Martinez reports a 10 to 20% price increase on raw materials, but the bigger
problem was finding something to put the finished product into. “There was a global shortage of containers, caused partially by the pandemic and China’s early shutdown,” he says. “Thousands of containers were sitting empty in China without being able to get out.”

More dominoes fell as trading volumes collapsed and the number of available vessels were reduced. Spaces available on ships that were still sailing shrunk as costs jumped. “Carriers started charging a fee to secure a spot on the ship,” says Martinez. “Between the fee and the higher container costs, and the cost increase in the wood we use for crates, our packaging and shipping costs have almost doubled in the course of the last six months.”

International glass companies that could find containers and space onboard ships have also encountered issues upon arrival. “Once containers arrived stateside, there was port congestion, along with truck and driver shortages,” says Martinez. “Containers have had to remain at the port’s premises longer than usual, accruing significant demurrage costs which we barely had to worry about before.”

With ships and trucks problematic, Interpane tried its luck in the skies and found more turbulence. “Commercial airlines have dramatically reduced the number and frequency of flights between Europe and North America,” says Martinez. “Air freight has been left almost exclusively to cargo airlines, which have limited fleets. Air freight real estate has become extremely expensive and the rates have been very volatile.”

Others Feel the Squeeze

In North America, fabricators waiting on shipments are also in a tight spot. The higher costs and longer lead times have them looking in their own backyard for raw materials, which is adding to the crunch.

“The costs coming out of China right now are comparable with the costs in North America,” says Brad Miller, chief financial officer with AGNORA, a glass fabricator based in Ontario. “There are fabricators that would normally go overseas to buy their glass who are now sourcing it from North America instead. That’s effectively driving up demand domestically which is
driving up prices.”

AGNORA is thankful it does most of its business in North America and remains somewhat insulated from what’s happening on the oceans. Miller says they’ve seen some of their competitors placed on product allocations due to high demand in the automotive and residential markets. Their main logistical challenges are centered on getting their finished products out the door.

“We build all of our shipping crates out of wood, and lumber costs have gone through the roof,” says Miller.

While the company hasn’t yet seen any significant price jumps in some of the materials it uses, such as spacers and interlayers, the impact from the spike in lumber prices is compounded when moving the glass to the next link in the chain.

“We use third-party trucking companies and we have excellent relationships with them but they’re swamped right now,” says Miller. “A lot or our customers have tight turnaround times so our partners have always been really good at turning those around but they are needing more notice. I suppose it’s tougher for them to get drivers, and short notice loads are a lot more difficult. We’re having to give four or five days’ notice where in the past we could give two to three days’ notice.”

Suppliers Favor Buying Local

Companies that provide fabricators with materials other than glass are also being affected by yanks on the supply chain. Kuraray is based in Japan and supplies interlayer materials to the glass industry. In May, it also announced price increases, in their case on Trosifol PVB interlayer and SentryGlas ionoplast interlayer materials. The company pointed to escalating costs in raw materials, packaging materials, transportation and logistics as reasons for its increase. Amy Nemchik, global supply chain manager for Kuraray, based in West Chester, Pa., says there have been some raw material shortages due to the pandemic, “mostly limited to those raw materials in which we are reliant on ocean shipping for supply.” She says they have also seen some shortages due to the Texas Power Crisis, which is not pandemic related.

Nemchik says while the company has always placed a high value on buying local, the pandemic raised awareness about long, insecure logistical operations.

“If they have not already started, the pandemic will certainly drive more companies toward implementing ways to make their supply chain more resilient and agile with reduced emphasis on just in time and less reliance on foreign supply. It could even drive more organizations to look at a circular economy approach where the focus is on reusing, recycling and/or the repurposing of critical resources and outputs.”

What’s Next?

As the pandemic starts to slide into the rearview mirror, questions arise about what the new normal will be. Marty Trainor, senior vice president of Ventana, helps run his glazing firm from offices in Chicago, St. Louis and West Palm Beach, Fla. He’s seen the cost of ocean freight go up by a multiplication factor of four since the pandemic hit and believes things are going to stay rocky for a while. “I see no signs of the supply chain bottlenecks improving in the short term,” he says. “There will be increased cost of ocean freight containers over the next five to ten years. Prices probably will decrease some from where they are now, but likely will not return to the low levels we saw before the pandemic.”

The economic recovery is likely to make the crunch on the supply chain worse in the short- to mid-term. Miller says, “I think as restrictions start to ease, demand is continuing to get stronger. I think supply is trying to catch up to demand in all industries. We’re seeing that with commodities, we’re seeing that with glass. If anything there’s probably going to be more pricing pressure on glass and more pressure on access.”

On the manufacturing side, Martinez is expecting to see prices on silicone, lumber and shipping eventually stabilize at a point somewhere in between where they are now and where they were pre-pandemic. He’s also predicting a temporary shortage of float glass, an eventual overstock, and then falling prices. What will happen to the relationships between overseas suppliers and their stateside customers remains an unanswered question.

“There will be a short-term reluctance to procure materials and services from foreign or distant suppliers and sources, and a tendency to keep procurement channels close, short and as guaranteed as possible,” says Martinez. “I don’t see many industry players venturing to buy from new or unknown suppliers. But I also think it will not last long. Any resemblance to a monopoly is, in the long run, bad for business and experienced managers in the field are aware of it. I feel that, at least in the glass industry, some level of competition has been very welcomed by our clients and has kept us glass suppliers on our toes, always wanting to improve and keep our standards high.”

Scott Sowers is a contributing writer for USGlass magazine.

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