Through the Looking Glass: The Commodities Around Glass Packaging

Spend Matters welcomes a guest post from Nick Peksa, of Mintec Ltd.

The global market for the glass packaging industry is a mature market, but one which is expected to undergo moderate annual growth in the near future. Compared to its fierce material rival, plastics, innovation in glass packaging is rather limited, making the glass packaging industry highly reliant on its environmentally-friendly image.

Europe remains the main packaging glass manufacturer, with increasing competition from Eastern and Southern Europe due to cheaper labor rates and lax implementation of environmental directives challenging Western European manufacturers. The US, boasting the biggest glass packaging manufacturer in the world, has recently experienced competition coming from cheaper products originating in Mexico.

China's role on the global scene is still expected to boom, with glass packaging production expected to reach 15.5 million tonnes for the 2011-2015 period, which represents 75% of current EU production.

Breakdown of Glass Costs In the glass market, elements which can affect the price of glass are:

  • The raw materials
  • The production process used (the price will vary depending on how dry or humid the material is);
  • Energy and logistics;
  • Environmental factors, such as how polluting a raw material is;
  • The combination of components used to colour the glass (prices can vary widely depending on the oxide used).

(Source: Mintec – World Glass Packaging Report)

Main drivers:
Silica sand makes up about 6% of the total cost of glass manufacture but around 70% of the glass mix. Silica is the most abundant mineral in the earth's crust; so the low cost tends to be dependent on the price of labour for extraction, energy for purification and logistics for transport. Its price has increased recently as a consequence of renewed demand and increased costs (labour, energy and logistics).

Soda ash (Sodium Carbonate) 7% of the cost of glass manufacture, 15% of the glass mix. Prices have slowly been decreasing Asia, notably in China. The cost of soda ash production rose in early 2011, but the growing surplus in global capacity helped to ease the trend.

Limestone 5% of the cost of glass manufacture, 7-17% of the glass mix. World limestone resources are very large. Supply of high-purity limestone and dolomite suitable for specialty uses is limited, however, in many geographic areas. US crushed stone production was about 1.11 billion tons in 2009, a decrease of 23% compared with that of 2008. In 2009, apparent consumption was expected to decrease by 22% to about 1.16 billion tons. Decreasing demand for construction aggregates should however increase the supply available for manufacturing glass.

Recycled glass, or cullet has appeared in the composition of new glass as a cheap and environmentally-friendly alternative in an increasing proportion of the glass mix. As it melts at lower temperature, the processing of cullet saves energy (a 25% decrease is achievable).

Natural gas accounts for 80% of the energy needs of glass manufacture. Crude oil prices, which natural gas has a tendency to shadow (with an approximate 6 month lag), have been trending down overall and have recently hit a level close to the historic lows seen in 2009. However, an unexpected fall in US oil inventory data in the second week of October also buoyed crude oil prices. US crude oil inventories remain in the upper limit of the average range for this time of year. OECD industry oil stocks fell slightly in August against the seasonal trend, by 3.4m bbl to 2,692m bbl or 58 days.

If you are interested in a fuller version of this report please drop us an e-mail at monitors (at) mintec (dot) ltd (dot) uk.

- Nick Peksa, Mintec Ltd.

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