Glass is a rare commodity. And an expensive one at that. According to data from the European Container Glass Federation (Feve), more packaging glass - including wine bottles - was produced in Europe in 2022 than ever before.
Why is glass so scarce and expensive?
Due to the rise in energy prices as a result of the Ukraine war, customers have accepted drastic price increases for glass. The fact that prices have not been adjusted downwards recently in the face of falling energy costs is causing widespread resentment. There are reports from the bottle trade that the situation is leading to heated discussions with customers.
"On the one hand, bottlers and retailers are hoarding glass in order to be able to deliver or bottle at a time when supply chains are unstable; on the other hand, expectations of further price increases are still not off the table," explains Peter Rotthaus, managing director at the Federal Association of German Wineries (Bundesverband der Deutschen Weinkellereien). "In addition, there has been a lack of production capacities in Southern Europe for several years, which has been slowly building up."
Various industry sources confirm that small and medium-sized bottling bottlers in particular are 'bottle hoarders'. Rotthaus also suspects that many buyers have "artificially increased" their demand in order to ensure bottle supply. However, he does not believe that the bottle hoarding is widespread, pointing out that glass suppliers only sell goods in batches that exceed the requisite quantity.
Christoph Jäckle, CEO of Euroglas Verpackungsgesellschaft, notes a reluctance to place orders for brown glass ,and confirms that a significant number of customers have stashed bottles and are waiting for prices to ease in the second quarter. Another indication of this could be a recently reported shortage of the reusable plastic layer pads used to separate individual bottle layers on a pallet before being returned to the suppliers. This shortage is seen as an indicator of high empty glass stocks.
According to Jäckle, the loss of glass deliveries from Russia, Belarus and Ukraine is currently having an impact primarily on the white glass segment. Demand from Eastern Europe for glass from Western Europe and export markets in general has also increased noticeably. "You don't know exactly who really needs which articles and when or where they are stockpiled, or if, for example, the trade is simply changing its suppliers. The market is extremely opaque at the moment, and demands are sometimes cumulative," he explained.
Has the peak been reached?
It remains unclear whether and when prices on the overall market will fall again. "A wide variety of models prevail, especially with regard to energy costs and their impact on basic prices," remarks Christoph Jäckle outlining the pricing policy of the glass manufacturers. He observes three pricing models in addition to very different degrees of adjustment (+40 to +80%). Some have set long-term price increases valid until the end of the year. Others only confirm prices on a quarterly basis and reserve the right to make adjustments without revealing the justification for doing so. Others increase (and decrease) their prices quarterly on the basis of a clearly communicated calculation involving energy costs.
Will the market as a whole follow suit if individual manufacturers lower their prices? Theoretically, the larger producers would have enough market muscle to maintain their higher prices given the continuing uncertainty of the situation in Eastern Europe.
Peter Rotthaus expects a chain reaction as soon as the first supplier cuts prices:
"The energy suppliers are watching their competitors closely; they want to maintain the high prices. As soon as the first supplier breaks rank, there will be a downward spiral," he says.
In conclusion, Christoph Jäckle explains "as in all limited markets, it is not only the current positive trend in energy costs that decides the price, but supply and demand. We would like it to be otherwise". Nevertheless, he forecasts stable to partial price cuts in the second quarter.
Outside the conflict region where Ukrainian manufacturing plants have had to close, one industry observer notes that "on balance, none of the manufacturing companies will probably have suffered any damage from the crisis".