A look into shortage of clear float glass in Indian market

May 29, 2021 Latest Updates6

GB Conducts Study On Gap Between Demand And Supply Of Flat Glass, And Its Effects

India’s glass industry is going through a very difficult time as the country fights a severe outbreak of the second wave of COVID-19.

Amid a number of uncertainties, the industry also faces a historical shortage of flat glass in the market, especially clear float glass. Glass Bulletin conducted a survey on this current situation of glass shortage glass manufacturer, dealers, glass processors, wholesalers and retailers to understand what they think about it and also sought their feedback and suggestions to overcome the same. We spoke to several stakeholders over phone and email to get a grasp of the situation, and in this report, we present their views as received. Names are being withheld to safeguard their interests.

Why the shortage?
Glass manufacturer never thought at the time of the long lockdown due to first wave of the coronavirus in 2020 that glass industry will in the next year face a massive shortage of glass. As we all are aware when any glass furnace starts production, it runs continuously and it cannot be stopped.
During the lockdown last year, glass companies were breaking glass and recycling it to keep their furnaces running and also avoid surplus stock in their warehouses. But after the lockdown was eased, demand of glasses in the various segments increased tremendously.
This gap of glass in the market meant manufacturers were unable to meet the demand. But it also meant prices went up. Based on what we heard from participants in our survey, we can break the reasons for the shortage down into the following:

  1. There has been no new float line set up in the last two years (after 2019). And setting up one from scratch takes at least two years before production can begin. Hence, while demand will rise, supply won’t, which essentially means the gap will persist.
  2. Import of glass has fallen significantly after COVID-19 and freight has become three to four times higher than usual. So, even importing glass makes less sense now as costs will rise.
  3. Demand of glass has risen all over the world. Multiple sectors are now using glass, more than before
  1. The Indian government has imposed anti-dumping on the import of glass. This means prices are bound to go higher in case of imports.
  2. Uses of glass has increased in various segment like home appliances, solar and glass furniture. The demand has gone up significantly because of this.
  3. China, which is the largest exporter of glass, has now started importing it as the lockdown and strict pollution norms in the country have led to the closure of numerous small and local producers.
  4. A lot of imports of float glass are getting choked. A number of float manufacturers outside India are also unable to get BIS certification because of the travel restrictions due to the ongoing pandemic.

Who took the hit?
As we spoke to colleagues and stakeholders in the industry, we asked them who all have been hit by this gap between demand and supply in the market. Based on what they said, we can roughly place those affected by this shortage under three heads.

  1. New glass processors who were willing to come and start processing units are definitely the most effected. Glass is the basic raw material to run a glass processing unit. Traditionally big processing houses aside, small and medium processors have been hit the shortage.
    The situation is even more problematic for new entrants as they find themselves staring at no supply of raw materials to keep their units running.
  2. Small importers mostly had to close their businesses as imports have fallen significantly and freight charges sky-rocketed. A situation has arisen where only big scale importers are able to keep their businesses running.
  3. Real estate has also been affected due to less availability of glass and very high prices.
    Glass had presented itself as a very viable material with multiple uses and flexibility. Real estate developers mostly plan their projects in advance, which is why shortage and consequent price rise of glass would leave them in great difficulty.

“No new float line set up in last two years. Setting up one from scratch takes at least two years before production can begin. Hence, while demand will rise, supply won’t.”

Who benefited?

  1. Glass Manufacturers
    Before the lockdown, glass manufacturers of India were unable to increase production due to low demand and large amounts of imported glass in the market. Glass company sales persons would visit processor and traders regularly for orders. These processors and traders were taking the benefit of the low price of glass. The situation now has reversed and the ball is in the court of glass manufactures. Supply of glass is less than the demand. People we spoke to as part of the study were of the view that as the demand for glass increased after the nationwide lockdown was eased, leading to a shortage, glass companies hiked prices. They felt the price hike sustained as processors agreed to pay.
    Glass processors and traders are not that particular about size and thickness of glass. They are ready to buy whatever size is available. Participants of our study mostly were of the opinion that the glass market of India was completely in control of glass manufacturers.
  2. A section of dealers and processors
    A certain section of glass processors and traders are also reaping the benefits of the current shortage of glass in the market. It came out in the study that financially strong glass processors and traders, and those enjoying good rapport with manufacturers, were getting their supply as they are able to bear the hiked costs.
    These traders who are getting glass directly from manufactures are getting higher margins in second sale because of the high demand and low supply in the market. They are jacking up the prices but the demand is so high that people are still willing to pay, respondents of the study claimed.

What is the Solution to this?

  1. New production capacity – Indian glass market needs new manufacturing facilities to overcome this acute shortage.
    A new glass production unit announced today can take a minimum of 18 months to start production. A Chennai-based manufacturer is undergoing repairs and will begin production in one-two months, thereby easing the crisis a little.
  2. Glass manufacturing company can ramp up production – Many respondents to our survey suggested glass manufactures can ramp up their current production of clear float glass to meet the market demand and overcome the shortage.
  3. Temporary lift on anti-dumping duty – Many were of the view that if the government lifted the anti-dumping on import of glass temporarily, the situation will normalize and save thousands of jobs. Imports of float glass into India have come down considerably and are currently negligible because anti-dumping duty has been levied on most of our neighboring countries, the most recent being Malaysia, from where sizeable imports were taking place. While maintaining that they were not against anti-dumping duty, the respondents said just like medicines and vital medical supplies are being imported at present to tide over the crisis, anti-dumping can be lifted just for about a year so that the industry can recover.
  4. Multinational companies producing glass in India can import from overseas factories – A section of respondents also suggested that multinational glass companies in India can reduce exports at this juncture and import more from their plants in other countries to help resolve the crisis.

“Home appliance and furniture are among major segments now using glass in big quantity. They may switch back to conventional materials if the shortage and high price of glass upset their budgets.”

Factors to be considered
Application of glass is increasing in other industries too. Glass has many advantages over conventional materials and it looks more aesthetical. Home appliance and furniture are two major new segments using glass in big quantities. While this is good for the industry, it has to be considered that there’s a possibility they will switch back to conventional materials if the shortage and high prices upset their budgets.
Glass manufactures produce clear float glass and many other different types (mirror, reflective, tinted, lacquer, frosted etc.). They want to make maximum value added glass in comparison to clear float glass to get more profit. It means more focus on sale of value added glass.
GB sought a feedback on this from the participants of the study. One processor said while he deals in clear float glass and very little coated glass, glass companies offer to sell him float glass on the condition that he also purchases a certain quantity of reflective glass. Now the processor says they are forced to purchase reflective glass only so that they can get clear float glass even.
This, he said, leads to accumulation of stock and blocking of capital as reflective glass has a very wide range, and nobody knows when they will get an order for the kind they have stored. The processor said while they have no right to tell manufacturers what glass to produce, they would like to be able to buy only the glass they require to minimize their losses and sustain.
Imported glass is now selling at a much higher price in comparison to indigenous glass. Selling price of imported glass was always lower than indigenous glass, but the scenario has changed completely. Imported glass is selling at much higher rates due to the shortage of supply.

What are the takeaways?

  1. Reviews from different segments of the glass industry indicate that the current situation of shortage will persist this year.
  2. If this glass shortage continues for a long time, related industry will start looking for alternatives to glass, harming the sector.
  3. Impact of the shortage will be faced by upcoming glass processing companies.
  4. Credit has become very less. Earlier some transactions were being done on credit basis, but that has gone down significantly, particularly in the last year or two.
  5. Increase in glass demand in Indian glass industry is a very positive sign for the future.
  6. There should be no pressure on processors or traders to purchase products that they don’t want just to be able to get clear float glass. Forcing them to buy a product range as a condition to get their required supply of clear float glass blocks their capital and endangers their sustainability.

Respondents of the survey were overall optimistic of the future of the glass industry of India. They spoke about measures that can be taken to tide over the problems facing the industry. They were unanimous on the fact that every single stakeholder has to come together to bring the industry out of this difficult time.

Disclaimer: Although we reached out to all stakeholders of the glass industry for this survey, we got no response from glass manufacturers. The views expressed in this report are not of Glass Bulletin but
of the participants of the study.

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