Gas price pressure on glass

Gas is a particular concern, and not all float glass plants can run on alternative fuels. The longer term implications of high prices might be less domestic production, closures and job losses, and an adverse effect on the balance of payments.

‘The forecast of an extended cold snap got people very excited, because we are very short of gas storage space in the UK.' said David Workman, Director General of the British Glass trade association, in an interview for Glass Age.

‘If we go into a period of sustained cold weather, even those manufacturers with firm gas contracts could have supply curtailed'. continued Mr Workman.

Pilkington is running 90 per cent oil at its UK float lines, and many but not all manufacturers are equipped to run on alternative fuels. The manufacturer can run into emissions problems if running oil for long periods of time.

Energy minister

At the time of writing, Mr Workman was due to meet Malcolm Wicks, the Energy Minister, on 23rd January to discuss how to alleviate continuity of supply problems and the strain of high prices on glass businesses.

He argues that the Government should intervene through Ofgen to ensure gas supply, which he believes has been done by countries such as Italy, Spain and the USA.

‘The interconnector (Zeebrugge pipeline and shipping) and storage facilities are not being used to full capacity.' Specific glass industry concessions might include:

It’s feasible that production could be transferred outside the UK if the cost base looks high for a long period of time.

A 100 per cent discount on the Climate Change Levy energy consumption tax for glass manufacturers, an increase from the current 80% relief. Tax cuts on energy efficiency measures.

Carbon credits for glass manufacturers under the emissions trading scheme. ‘There should be incentives for producers of these products to remain in the UK because they are energy saving materials'. added Mr Workman.

Strain on industry

‘Steep increases in gas and electricity are not happening on the continent. I don't think the DTI understands the implications of this.' continued Mr Workman. The glass containers sector is particularly under fire from imports.

In contrast, flat glass has managed to get some of the cost increases back through pricing mechanism. But prices are still at an unsustainable level, according toMark Bristow, Managing Director of Guardian in the UK. Mr Bristow stressed that some press reports that an American-owned glass business threatening to pull out of the UK is a glass container business, and not Guardian.

David Workman thinks that it is feasible that float producers could move overseas in the longer term: ‘Global operations have visibility of cost bases around the world. It's feasible that production could be transferred outside the UK if the cost base looks high for a long period of time.'

His outlook isn't altogether bleak though: ‘We've got to get through this winter and next winter and then in theory there's a new pipeline from Norway and hopefully more gas storage facilities.'