MAGDA MUNTEANU

  |  12.11.2013

EU takes drastic measures to protect local producers

While gas price increases cause concern to glass and ceramics producers, the European Union gives them a helping hand by imposing high duties on Chinese imports

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Glass producers, whose evolution is highly dependent on the macro-financial climate, still face the negative effects of the economic recession. At the European Union level, the industry continued its decline, yet at a slower pace: 8% in 2012, compared to 15% y/y in 2009. However, the first rays of sunshine have started to appear. The industrial production in the sector increased by 2% y/y in Europe and by 1.1% in the Euro zone in August 2012, for the third month in a raw, according to Eurostat data.
 
 
In the mid run, the sector is likely to stabilize and then to increase, based on the gradual relaunch and higher investments in the EU economy. “I expect a medium growth of 1.5% to 3% for the European glass industry in 2014,” said Andrei Radulescu, senior investment analyst at SSIF Broker. The analyst forecasts growth rhythms for the industry of even 5% to 7% in 2015 and 2016, as long as the Eurozone avoids another crisis wave and enters a new economic cycle.
 
 
In Romania, the industry’s main concern refers to high gas-related costs. Starting with January 2014, gas price is expected to be 57% higher compared to the previous year. Household glassware producers are the most affected by the increasing prices of raw materials such as gas and electricity, which count for up to 50% of their total production costs. If raw material costs exceed 60% of the total production costs, a factory can no longer survive.
 
 
“Annual gas price increases amount to 10-14%. This causes us major difficulties, as it is our main raw material and we have an annual gas consumption of 2.5mn cubic meters,” said Adela Ferentz, general manager at Vitrometan Medias, one of the leading European producers of handmade and mouth blown glassware and lead crystal products. The company employs 230 people and is owned by the German firm DERU Glaswarenvertrieb GmbH, which invested around EUR 6mn in upgrading its production facilities.
 
 
The industry representatives ask for a change in the law, which would spread the gas price increase over several years. The other problem the industry faces is the lack of qualified workforce, as there are no training schools in the sector. In spite of higher raw materials costs, producers like Vitrometan maintained their 2011 prices. “We didn’t want to risk losing our clients. But, as our production costs continue to grow, we might be forced to increase prices,” said Ferentz.
 
 
Apart from this issue, the sales and orders levels have remained relatively stable. The exception is the lighting products, where demand has decreased because Italy, its most important client, was affected by the financial crisis. For the other products, the main markets for export are Germany, Great Britain, France and Italy. If in 2011, countries like Belgium and Austria placed a lot of orders, in 2012 the newcomers were Slovakia, Denmark and Greece. This year, clients from the Middle East have started to show interest in the Romanian glass products.

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