During the 2022 International Year of Glass, the repercussions of the global pandemic and the war in Ukraine became acutely relevant. The glass industry’s roadmap was focused on cementing the material’s position in the race for more sustainable luxury. Has that changed? In France, Germany, and Italy, the answer is a resounding no, according to a report from our sister magazine Formes de Luxe published early last summer.
2022 is the International Year of Glass, and yet, ironically, the sector has never struggled so much. It is not alone, of course — every industry is currently experiencing difficulties due to repeated hikes in the price of energy and raw materials. But also to blame is a tangle of tensions across the supply chain related to sea and land transport (rising fuel costs, a dearth of drivers, to name a few) and recruitment challenges in a number of countries.
Not to mention a new peak in China just as the world thought the pandemic was coming to an end—with consequences that could prove worse for luxury European glassmakers than being shut out of the Russian market.
But for the moment, the order books are full, and there are even signs that capacity is strained in places. The post- Covid recovery continues, coupled with the collateral benefits of a consummate rejection of plastic packaging. While problems that existed prior to the pandemic persist—lower margins, orders (and payments) withdrawn or deferred—generally speaking, the additional costs generated by the pandemic have been partially ‘digested’ thanks to a first wave of higher glass prices.
Brands have largely played along. But will they continue to do so in 2022? There’s a good chance that, once again, they won’t have much choice. Increasing volumes will not be enough to compensate for increasing production costs, estimated at +30/+40 %, and the indexation of bottle price against that of energy (in particular) is spreading quickly. No industry can escape it. But the impact should be less painful in the high-end sector as luxury consumers are far less vigilant than supermarket shoppers when it comes to increases. In fact, by late March, some brands had passed on additional supplier costs by applying single or even double digit price increases—a measure not exclusively tied to bottle cost, which represents less than 2% of a perfume’s retail price.
Let’s turn our attention back to glassmakers, united by the FEVE (European Container Glass Federation), to examine the risks implied by possible disruptions in energy supply. While companies are not all equal in this regard, Adeline Farrelly, Secretary General of the federation, sounds the alarm for one and all. “Any disruption in energy supply to our furnaces would be catastrophic as it is technically impossible to stop a glass furnace overnight without causing irreversible damage. We could reduce our production to a certain degree, but our furnaces must receive a minimum supply of energy to stay hot.”
Another coincidence in timing: this statement was made several days before a proposed plan to implement selective power cuts in France reappeared on the table. Although the project is considered a “last resort” measure, in the worst-case scenario, and despite the industry’s priority status in the country, it could affect French glassmakers next winter.
“We have about 300 furnaces operating in Europe: if shortages become a reality, then we absolutely must be present for those discussions and be given several weeks’ notice,” warns Farrelly. “This is not limited to our production sites, but applies to the entire glass ecosystem, which concerns a significant number of SMEs, VSEs and of course, jobs.” Hers is an appeal to public authorities, coupled with an urgent request for support. “During the Covid pandemic, the fragrance and cosmetics sector was the most heavily impacted in our industry,” she says. “Factories were forced to close. We were barely getting our heads above water when this second crisis brought us to our knees. For us to cope, European member states must establish aid programs to support their glass industries.”
What kind of aid? Following the French government’s announcements regarding the Resilience Plan, Étienne Gruyez, head of Stoelzle Masnières, wondered what form this aid might take. “State-guaranteed loans, deferred tax collection, partial activity, increasing the volume of Arenh (Regulated Access to Historical Nuclear Power)? For the moment, we don’t have much visibility, especially given a context in which we can only expect… the unexpected. But what is certain is that in France, we won’t have real answers until after the presidential election.”
What is also certain is that, for Stoelzle, as for all European glassmakers, this aid will be crucial in the race to achieving decarbonization. “In Europe, the industry has mobilized to reach carbon-neutral objectives by 2050,” continues Farrelly. “When it comes to the energy transition, we are ahead of the rest of the world, and the crisis will not deter us from our commitments. It’s not a question of pushing back the deadline but, in the short term, we urgently need publicly funded financial assistance.” And faced with a crisis that affects not only companies’ capacity to invest, but also their survival, some raise the possibility of relieving pressure on the industry by establishing additional free emissions allowances— a thorny issue that continues to divide the European Union, which is still divided on whether or not to eliminate them in favor of a Carbon Border Adjustment Mechanism.
Some in the sector have already had to postpone their investments in energy transition even though the vast majority of luxury glassmakers insist that the crisis will not weaken their determination. Could the war in Ukraine, which makes European dependence on Russian hydrocarbons untenable, act as a catalyst for change? And strengthen the European Green Deal by stoking decisions to end the EU’s addiction to fossil fuels?
Going green & coping with crisis
The issue remains unresolved at a time when several countries are suspending their plans to phase out coal in order to cope with the urgency of the situation. But at Heinz Glas, things are clear. “In line with actions taken by the German government, we have decided to tackle this crisis by implementing certain measures rooted in our environmental commitment. Heinz Glas has been using electricity since 1972: in Poland, one out of two furnaces currently in operation is electric, and in Germany two out of three of our furnaces are electric. And since 2016, they’ve been powered by electricity from renewable sources—which means zero- carbon emissions for glass melting. At the German site in Piesau, our third, electrically supercharged, gas-powered hybrid furnace was due for a major repair in 2022, but we have decided to keep it operating until late 2023 and then replace it with a brand new electric furnace.”
Electric-powered melting is considered to be the most virtuous mode of glass production. While the carbon footprint of electric furnaces depends on the energy mix of each country, when powered by renewable energies, these could lower CO2 emissions by 56 %. Verallia expresses the same desire to continue making progress in energy transition despite the crisis. “Our roadmap hasn’t changed, except perhaps to increase our ambitions: we have approved an envelope of €200m to finance reducing our CO2 emissions by 46% over the next 10 years, by 2030,” says Karim Boussabah, Verallia Marketing Director. “This includes both increasing the use of external cullet in our production (we’re aiming for a ratio of 59% in 2025 and 66% in 2030) and transitioning to electric melting on our Cognac site, where our furnace 2, used for extra-flint glass, will be replaced in 2023– 2024 by two 100% electric ovens. This will be a first in Europe's glass food packaging sector, which uses much larger furnaces than the bottling segment.”
In Italy, Simone Baratta, Beauty Business Unit Director at Bormioli Luigi adds, "We switched to electric-powered melting as early as 1970, and our coldtop furnaces guarantee optimal thermal efficiency, which means we generate nearly three times less CO2. Today, 65% of our glass is produced using 100% electric furnaces, powered by at least 25% renewable energy, plus a portion from renewable sources already present in Italy’s energy mix. Switching to electric is essential for the energy transition, but at Bormioli Luigi, we believe that decarbonizing also, and above all, implies increasing the share of renewable energies in our overall energy consumption. From this perspective, our objective remains to achieve 100% renewable power by 2030.”
Verescence, meanwhile, intends to continue the shift to electricity, in addition to making a strategic more towards recycled materials. “Our largest furnaces in France, Spain, and the United States now produce continuously with 20% PCR, and our Korean oven will make the switch next year,” explains Hélène Marchand, General Manager France. “We have committed to making company- wide efforts to save energy, but how can we achieve this in the short timeframes imposed by the Ukrainian crisis? Especially when the pandemic forced us to dip into our reserves and increase our debt to stay the course. The French glass industry has several clear advantages: it is a sector focused on excellence, a leader in high-end bottles on the international market, with close ties to luxury brands, which also happen to be French. It has a solid foundation— security, expertise, proximity—and we are fortunate to operate in a country that has made the right decisions concerning energy. But today, public authorities and brands alike must commit to accelerating the implementation of our transition programs.”
One thing is clear: given the events unfolding, what happens in Europe will depend on more than the glassmakers’ goodwill. Environmental commitments require not only time for implementation, but also considerable investment. But regardless of whether companies switch to electric power, margins continue to dwindle. “This is not news: there’s a direct correlation between the price of gas and the price of electricity, and both have reached levels that are difficult to sustain,” remarks commodity markets specialist Philippe Chalmin. “The industry as a whole is coping with an energy crisis the likes of which has not been seen since the 1970s. They will not come out unscathed.” His findings point to a complicated future. "While it is difficult to make informed predictions about anything beyond the next 24 hours, it would be delusional to imagine that we could return to megawatt-hour price levels comparable to those in the2010s. The industry must prepare for this crisis to be a long one, and the answer, if there is an answer, will not come from an individual sector or even the national level: we must join forces.”