GLASS MARKET: Asahi closes plants to restructure North American operations
By Glass Canada magazine
Asahi closes plants to restructure North American operat
By Glass Canada magazine
Asahi Glass Company is halting
operations on three of its float glass production lines and two of its
architectural coating lines while the company sells its glass
Flat glass plant in St. Augustine, Quebec, shuts down.
Asahi Glass Company is halting operations on three of its float glass production lines and two of its architectural coating lines while the company sells its glass fabrication business.
AGC Flat Glass North America (AFNA), formerly AFG Industries, a subsidiary of Asahi Glass has shut down its flat glass production facilities in St. Augustine, Quebec; Victorville, California; and Greenland, Tennessee. There are approximately 240 people employed at its plant in Quebec.
A press release issued by its president and COO, Kazuhiko Ishimura, from its head office in Tokyo, Japan, in April states that the company is responding to the rapid changes in the business environment and it will restructure to concentrate its management resources on glass for solar cells, as well as raw glass for automotive use and value-added building products.
In the flat glass business in North America, Asahi Glass has been working on improving its profitability since 2006 by overhauling management and shutting down its Cinnaminson plant in New Jersey. However, the continued decline in the US housing market, where residential glass occupies a greater share, has created a serious oversupply situation. “The earnings structure of AGC excessively depends on clear float glass/general purpose glass that is difficult to differentiate from products of competitors. This, combined with higher costs driven by a price surge in raw materials, has been squeezing Asahi Glass’ profitability in the region,” the press release states.
“All furnaces have been shut down,” says Chris Correnti, vice-president and general counsel for AGC, during a telephone interview with Glass Canada magazine in April. “The decision to close the facilities depended on the particular market they were located in. We just couldn’t keep the plants open… the demand is low, the capacity is high and it was getting worse,” he says, pointing to the market in the west.
“On the east coast it was a similar situation. Producers needed to take action to increase capacity utilization. Canada is now seeing the same thing. The demand is not as bad, but it’s not good. There is a lot of glass coming into Canada from the US because of the favourable exchange rate and we have been seeing more competition in Canada than ever,” he says, adding that about 15 percent of the company’s total sales are in the Canadian market.
“The plant in Quebec produced clear flat glass which has been hit hard by commodity pricing like it has in the US. The imports coming into the Canadian market with these companies competing against each other has been driving prices down. A lot of companies were increasing the size of their float tanks, creating a situation of having too many plants open and overproducing, and the market just couldn’t keep up to the capacity increase,” he says, adding that the housing slump in the US accelerated the problem. “It made a bad situation worse. We were seeing a lot of price squeezing even though the demand was going up, but the capacity was going up even more,” says Correnti. “At some point, something has to give.”
Meanwhile, with growing concern about the global environment and energy issues, the solar cell market is projected to rapidly grow by 40 percent annually on a global basis. In North America, demand for solar cell glass is expected to expand, while demand for raw glass for automotive use and value-added building products is projected to remain stable.
Under these circumstances, Asahi Glass has decided to restructure the flat glass business in North America to focus on three categories: glass for solar cells, raw glass for automotive use and value-added building products. It has also decided to stop its float glass operations, hoping to improve the supply-and demand balance of glass and raise the utilization rate of other production facilities. With these measures, Asahi Glass will decrease its glass production capacity in North America by about 40 percent.
As for architectural sputter coating lines, which have an excessive output capacity compared with the size of the market, Asahi Glass has decided to stop operations at the Victorville plant in California and at the Hampton plant in Iowa to concentrate production of its full commercial and residential product range at the Abingdon, Virginia, plant.
It has decided to sell the glass fabrication business to focus on core glass production and coating technologies. With this new structure, the company says it will be better able to focus resources and management attention to driving product innovation and improving cost and quality. Asahi Glass will continue to leverage its group resources and production technologies to introduce leading edge high performance products into the North American flat glass market.