The manufacturing, capital goods and consumer durables sectors have all grown over the last year; economic indicators point to that growth being sustained over the current year. The growth in the country's population and higher standard of living are driving forward the subcontinent's construction and automobile sectors in particular, while creating an increase in the demand of consumer goods. In all these areas, glass plays a significant role, for example as a modern construction material in architecture, as packaging material or as automotive glass. The total glass industry is worth INR 180 billion in 2010.

Varied nature of glass makes its useful across different segments Glass can be broadly classified into flat glass, container glass, specialty glass and fibre glass on the Market basis of manufacturing process and its use In terms of volume of glass consumed, building products is by far the largest sector, LE Float glass is fast replacing flat glass all over and accounts of total consumption.

Growth in Container glass industry volumes

India's Rs 775 billion packaging industry has been growing at a CAGR of 15%, which is likely to increase to 20%. The container glass industry constitutes 6-7% of the total packaging industry and has been growing at 7-8% CAGR. The container glass industry offers huge growth potential, given the expected acceleration in growth rate of user industries and low threat from substitutes.

Float glass has emerged as the preferred flat glass product. It accounts for 90% of total consumption with 12% CAGR in demand. Per capita consumption is only 0.8 kg as against 8 kg in China and 10 kg in USA. The usage of glass in housing as well as commercial buildings is on the rise due to rising focus on aesthetics and time saving. In Eleventh Five Year Plan, the Planning Commission estimates the number of urban dwelling units to increase from 58.8 million in 2006-07 to 66.1 million in 2011-12, an annual increase of around 1.5 million units during the period. Looking at the above factors the demand looks encouraging.

The Float glass industry has been growing steadily over the years, except for the slight change in trend during 2008-09, where the sales declined by 2.15% to 2000 tpd. The decline was mainly during January to March 2009, with 8.38% decline to 1885 tpd. During the period January to march 2010 the sales grew by 36% to 3135 tpd compared to 2008-09.

The float glass industry is currently dominated by Saint Gobain, Modi Guardian and Asahi who have a capacity of 3,150 tpd. Capacity utilization is rising fast (up 30% in past 12 months) due to strong demand from automobiles and construction sectors. Float glass demand is expected to increase at 12-15% CAGR in the coming 3-5 years.

Substitutes

Although container glass industry has been facing rising competition from segments like PET Bottles, Tetra packs and Cans due to factors like weight and fragility. However the threat is unlikely to impact the demand potential for container glass industry due to superior properties of glass compared to tetra packs and cans.

Glass is a chemically inert material which provides better storage quality to food, beverages and medicines. It preserves moisture, taste and increases the life duration of products. Glass is more suitable for storage in tropical countries like India. Glass can be easily recycled and reused compared to PET (non biodegradable) and tetra packs (uses metal and paper). Plastic packaging is being frowned upon due to environmental concerns, which augurs well for the container glass industry.

Container glass is a low cost packaging option. In the beer and soft drinks segments, bottles are re-used multiple times. The cost per use of a soft drink glass bottle works out to Rs 0.3 as against Rs 1.5-1.8 for a PET bottle. Besides, the glass bottle can be recycled after being used 15-20 times. Recycling by using old bottles as cullet helps to achieve up to 40% saving in power consumption. Glass bottles still continue to rule in the soft drinks and beer market.

Hindustan National Glass: Plans to Double Capacity

Hindustan National Glass (HNG) commands a share of 55% in the organised container glass market. It supplies 70% of its production to the fast-growing liquor and beer segment. The remaining is supplied to pharmaceutical and FMCG industries. The company made three acquisitions in the past eight years. It has six manufacturing plants in India, with work in progress in its seventh plant in Andhra Pradesh.

Fluctuating raw material cost, particularly, soda ash, and power & fuel cost pose a challenge for the glass sector. As a result, Hindustan National Glass reported 40% fall in profits to Rs 58.68 crore, despite 16% rise in net sales to Rs 734.03 crore in the six months ended September 2010. The company is partially passing on the hike in costs, and has administered a price rise of 6-7% in its products since August 2010. By steadily switching to natural gas in some of its plants, the company is partially overcoming its dependence on crude oil fuel.

HNG, along with promoters have entered the fast-growing float glass segment though their associate company HNG Float Glass, where HNG holds a 48% stake. Float glass finds application, primarily in the construction and automotive sector.

HNG plans to invest 25 billion rupees ($551 million) to double its production capacity in three years. The company will set up a new manufacturing plant in Naidupeta in the southern state of Andhra Pradesh. Hindustan National will also add a furnace to its facility at Nasik in western India. The new plant and equipment purchases will help raise production capacity to about 6,000 metric tons a day. The new plant is likely to start production by March 2012. The company is considering acquisitions in the Middle East, North Africa and Eastern Europe.

Outlook

The growth factors of glass are growth in income, increasing retail estate, growing use in automotive industry, growing use in packaging industry, glass used widely in the solar products, glass used for energy conservation and its qualitative aspect. Glass industry in India is poised to grow rapidly owing to its extensive use in the numerous sectors. The market is driven by increasing disposable income and willingness to spend on better living standards due to rising aesthetic sense among consumers as well as glass being the preferred medium of packaging. The key challenges identified include import from China and recyclable nature of glass.