German Glass Industry sees Growth Opportunities

In Germany the “delicate little plant” of economic growth is currently only nourished by exports. And the glass sector is no exception to the rule here. German manufacturers of glass plants and machinery have lately been generating 73% of their sales through exports. According to the Glass Plant and Machinery Department of the VDMA (the German Engineering Federation), the German industry comprises approximately 100 manufacturers of plants and machinery for producing, processing and machining as well as for handling of flat, container and special glass. Employing roughly 4,000 staff they generate annual sales worth EUR 600 million. The key customers - and therefore decisive accounts for the demand for glass machinery and plants - are the manufacturers of flat glass (mainly supplying the construction and automotive industries) as well as the producers of container glass supplying the consumer goods industry. In 2003 the principal export markets for German glass machinery and plant manufacturers were East Europe, the Far East and parts of the Middle East. In terms of individual countries China and Russia should be mentioned in particular as important sales markets. Order books increasingly filled In 2003 German manufacturers of plant and machinery for producing and processing flat glass achieved total annual sales worth EUR 144 million. Although the turnover was down again by another 33 % in the first quarter as against the same period of the previous year, the industry as a whole views the future with optimism. The value of orders received as an indication for business developments over the coming few months amounted to over € 50 million in early 2004 and was therefore 40% higher than in the previous year. This means that the export business is going for new record figures: in the first quarter of 2004 93 % of all orders received came from abroad. The reason for this is a development which already became apparent as a trend in the fourth quarter of 2003: a strongly increased demand from Far Eastern countries. Compared to the same period of the previous year, the orders received from Asia multiplied by a factor of 10 in the first quarter of 2004. Furthermore, the demand from North America (plus 7.5%) and from the Near East (plus 6.5%) was up slightly. In contrast to this, domestic demand continued to shrink by another 30% and the order volume from EU countries was down by 45%. This means that in early 2004 nearly half of all orders came from Asia (48%) followed by EU nations (25.5%), North America (12%), Eastern Europe (5.6%) and the Near East (5.4%). Holistic solutions in demand On account of dwindling prices for glass as a raw material, the low demand for high-quality consumer glass and a market concentration of tableware manufacturers the propensity to invest in new machinery was very low in this segment in 2003. While German producers focus on supplying machinery for the production of high-quality crystal glass the demand was highest for mass glass. In 2003 therefore the firms capable of offering holistic solutions managed best to stand their ground. The situation for bottle production machinery producers looks similar. Since late last year, however, producers have started to take in some orders again especially from Central Europe and the Far East. Just as optimistic for 2004 are the producers of machinery and plants for tubular glass manufacturing who expect at least some movement on the market this year. Here again, the major export markets are the Far East and Russia. All in all, the sector of glass machinery and plant producers are satisfied with business trends in 2003. This holds particularly true for those producers who had their sights on exports early on. Glass sector pinning its hopes on 2005 For the German glass industry 2003 was the second year of recession in a row. According to information provided by the German Glass Industry Association (Bundesverband der Glasindustrie e.V.) the turnover of this industry as a whole went down by 2.1 % to € 7.9 billion last year. The main reason being the disproportionately high decline in domestic sales which were down by 3.7% to € 5.0 billion. Abroad, however, the sector managed to increase its turnover by 1 % to total € 2.9 billion. This means the export rate of 34.8 % in 2002 rose to 36 % in 2003. The number of employees was down by 2.4% to 57,625. On the German market the glass industry suffered primarily from the sluggish construction business and the sustained pile-up of investment. Only the mineral fibre segment managed to post significant growth by 5.1% to € 1.0 billion. Domestic sales of flat glass for the construction industry, however, dramatically went down. Flat glass (basic glass) posted a 6.7 % decline (to € 0.66 billion). Accounting for a 35 % share in the total market, the largest single segment, flat glass processing, posted a 2.4 % decline in turnover to € 2.8 billion. Likewise, the manufacturers of technical glass and special glass faced noticeable losses in domestic sales: € 1.3 billion meant a 6.2 % decline. Consumer reticence to buy greatly affected the crystal and consumer glass sector. Totalling € 0.56 billion, turnover fell 3.8% short of last year’s figures. The container glass industry, on the other hand, posted a slight domestic increase of 0.7% to € 1.56 billion. The drastic downturn in sales of disposable beverage bottles in the wake of obligatory deposits on bottles was temporarily offset by the summer boom in demand and the resulting increase in orders for re-usable bottles. Despite the reduced vigour in exports German glass manufacturers managed to exceed the previous year’s level slightly. Sharp falls occurred in the export of special and technical glass as well as of glass-based consumer goods (crystal and tableware glass) - their business opportunities abroad suffered substantially from Euro revaluation. Also declining were the foreign sales of basic flat glass. The other product segments did, however, post export growth. Trough reached in 2004 According to information by the German association order volumes and turnover continued to be on the decline in the first months of 2004. Neither domestic business nor exports generated perceivable momentum. This is why the glass industry does not expect a fundamental improvement of the situation in 2004 although production capacity utilisation at the firms was slightly up in the first few months. The industry is confident it will come out of the trough during the course of the year and it also hopes for reviving impulses from “glasstec 2004”. And for 2005 the glass industry even expects a sustained upswing. The industry sees this development endangered particularly be some political measures such as the C02-emissions trading, the Act on Renewable Energies (EEG) and the road toll for heavy goods vehicles expected to put heavier burdens on companies. This is compounded by special structural influences like the negative impact of the statutory deposit on one-way beverage packaging and the slump in the CRT glass market. German glaziers’ trade optimistic The glaziers’ trade - the third mainstay of the German glass industry - could not escape the long economic downturn and reticence to invest in all areas unscathed either. Against the background of spectacular slumps in turnover and company insolvencies the trade once again proved to be more than robust in the eyes of BIV, the Federal Association of Glazier Trades, and flexibly responded to all adversities. Some 10 % of total sales (approx. € 4 billion) of German skilled trades are accounted for by the glazier trade. While not all firms managed to start the year with order books filled for four months in advance the sector does expect a growing propensity to invest and therefore also views the future with slight optimism. Furthermore, association members are confident that “glasstec 2004” will produce positive incentives for the economy. German skilled glaziers regard themselves as well prepared for the future in technical terms. And they rely on addressing new target groups beyond their traditional market focus. Examples worth mentioning here are solar and security technologies but also a stronger international orientation of German skilled craftsmen. With their sights on EU-enlargement glaziers realise it is important to be present above all in Eastern Europe and to respond to ever changing customer needs by high quality standards. In view of these major objectives and challenges the glaziers’ trade attaches great importance to education and training. Which is why the “learning culture” in the German glaziers’ trade is to continue ranking very highly. Despite the difficult economic situation many glaziers continue training apprentices. According to BIV information this holds true for almost 70% of all German glaziers.