The glass' trouble
From February 24, 2022, everything that goes wrong is the fault of the war in Ukraine, indeed, of the invasion of Ukraine by Putin's Russia.
In some ways this is the case, but the war has highlighted some crises that had already begun, such as the increase in the prices of energy and raw materials.
The pandemic in 2020 stopped both production and consumption, while a kind of recovery began in the second half of 2021. However, the increase in demand was not adequately supported by production, which in many sectors took some time to reopen its lines, and above all had to cope with much higher demands than normal.
This resulted in an increase in prices which involved all supply chains and all stakeholders, from producers to transporters and finally to those who had to transform the raw material into finished or semi-finished products.
Signs were already there in 2020
The scarcity of glass has been increasing since 2021, causing problems in numerous sectors. Due to the pandemic, various factories and manufacturers have had to stop or slow down the production of glass, making it extremely difficult to meet the current demands. Getting back after being closed or with production at a minimum for so long can be extremely difficult, especially considering that still in 2021 the work capacity had not returned to the usual levels, in terms of human resources. The largest glass producer resides in China, and zero-Covid policies risk stopping every plant, every factory, every workplace for at least a month.
The work of unloading containers in ports has also suffered significant slowdowns. In September 2021 there were queues of 88 container ships waiting to be unloaded at the port of Los Angeles, when in the same period there was a maximum of 1 container ship waiting.
What the glass is?
The world of glass production is certainly complex, like all productions; the raw material is basically silicon dioxide, germanium, arsenic sulfide and something else. This Wikipedia link will give you the basic information, while on the Assovetro website (the Italian glass producers association) you can read the main steps for the production.
Briefly, the material is melted and then slowly solidified without crystallization, produced in large blocks that the processors will then turn into windshields, windows, wine bottles, containers for tomato sauces and medicinal vials. It was this last part that contributed to the distress of suppliers: from 2021 onwards there was a huge demand for vaccine vials, at least 20 times higher than normal production. In short, as I said, glass is a complicated world.
In an article of November 2021, almost a year ago, Il Sole 24 Ore (Italian newspaper about economics), explained that glass had undergone increases of 35% due to the increase in the prices of production and extraction of raw materials, increases caused by a surge in the prices of gas. The article takes into consideration flat glass, used mainly in construction, but the raw material is identical for both a windshield and a jar of jam.
Into the topic, the glass market is worth 120 billion dollars and 20 million tons are produced per year (data from 2021). The largest producer is the Chinese Beijing Glass Group, with a turnover of $ 80B; the second in the rankings, the PPG of Pittsburgh, has a fifth. Some of these companies have glass factories in Ukraine, particularly in the Kharkiv and Kherson area. Ukraine also has discrete deposits of sand and soda which are used for the local production of glass, not suitable for windows but usable for hollow glass, therefore containers. The main glass supplier for Ukraine, until 2021, were Russia and Belarus, and therefore this decreases the supply capacities of Ukrainian bottles even more.
Not only wine in the glass
Of the 5 million tons of glass bottles produced in Italy, 300,000 are imported, almost half from Ukraine and part from Russia. Among the largest glass producers in Europe we find PGP Glassworks, based in Ukraine 80 km west of Kyiv and a production capacity of 800,000 glass containers per year. The supply chain does not favor smaller producers, so the larger brands will probably not have big problems, but they will have all the others.
Although the glass market figures seem really high (they are!), in 2020 it was worth 228 B$, so already in 2021 there was a decline mainly due to production difficulties due to the pandemic and the interruption of the distribution chain.
Most of the production is divided between flat glass (windshields, sheets, windows, kitchen tops, ... total about B $ 100) and hollow glass for containers (bottles, jars, containers in general, about B $ 52), and for the rest in products for technology and telecommunications: glass for optical fiber has had a leap forward especially in China, at least until the end of 2020, and substantial growth is also expected in Europe.
In 2020, the share of hollow glass used for alcoholic beverages was 35%, and we reach 70% by adding beer. The rest is used for food, non-alcoholic beverages and pharmaceuticals. Asia Pacific and Europe account for about 80% of the entire market, while the US is below 20%. Of the entire beverage container market, glass accounts for 15.5%, plastic is still dominant with over 20%. The USA are major importers of glass, from China until 2016, then with the tariff war against Beijing wanted by Trump, they started buying semi-finished glass from Europe and Latin America, but to satisfy 60% of the needs, a the amount of glass imports, it will now be more difficult.
Is this a supply-chain problem?
Among the main problems of the increase in the cost of glass containers is transport and a logistics chain that is struggling to return to full capacity after the 2020 stop. I also note that these costs affect everything that ends up in a bottle or in a jar, so not only the wine but also oil, preserves and jams, for example.
Glass, like any other product, is transported by ship, and the cost of a single container went from $ 5,000 to $ 20,000, as reported in this article from early February this year, before the war began. The increase in gas, oil and electricity in Europe has also led to price increases for supplies to the United States, our best customer for wine exports, and these increases could lead to a decrease in the number of bottles of Italian wine on the shelves. and on the tables of US restaurants.
In this recent article on Wine Business, Felicity Carter provides a fairly clear summary of the problem, which highlights a (yet another) perfect storm between factory closures during the pandemic, increased transport costs, increased gas prices from 2021. to summer 2022.
If 1 bottle weighs 0.600 kg…
Italy produces about 4 million tons of glass bottles, imports are equal to 850,000 tons and exports 300,000. The average consumption of bottles per capita is 77 kg, or 89% of all hollow glass produced. 45% of these containers are used in the wine sector, and the price in a year has increased by 30%, due to all the factors I have written about: scarcity, inefficient logistics chain, energy costs. Glass production is extremely energy-intensive, the ovens run on gas and therefore production prices increase accordingly.
In part, these shortcomings can be met by the large share of recycled glass we have in Italy, over 76%, taking us to first place in Europe. The quantities of recycled glass are able to cover 45% of the entire requirement for glass for containers.
Among the largest Italian glass manufacturing companies, Zignago Vetro of Empoli is the one that uses the most recycled glass for its production.
On the other hand, there are no exact data regarding the possible gas savings: even recycled glass (Secondary Raw Material) must be melted to produce new containers, although in smaller quantities than the processing of the original raw material. Some estimates give an annual saving of 380 million cubic meters of gas in 2020, as much as Milan's homes consume in a year. The Sandro Bottega winery, producer of Prosecco, has launched the idea of returning to returnable vacuum, with special containers equipped with a plug to fill the bottles that customers bring from home. I don't think this can really solve the problem, there are logistical problems to be overcome, the wine must be brought in steel vats to fill the containers with the plug to fill the bottles, in short, not exactly an easy idea to realize soon.
A push to use less glass also comes from ecological considerations; a glass bottle for wine can weigh up to 750g, making them lighter means increasing the number of bottles produced with the same quantity of glass. The savings are obvious, given that with the same weight more bottles are carried or, vice versa, the same number of bottles would weigh less, reducing the carbon footprint of the bottle (including its transport) on wine production, which some estimates give around 40%. Furthermore, producing lighter bottles would make it possible to use ovens at lower temperatures, with consequent savings in gas (and therefore in consumption of Italian gas, and therefore still in the need for imports) and CO2 emissions.
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