Topic of the Month in June: The Ukrainian glass market - calm before storm?

A little about history

Ukraine is a relatively young state in Eastern Europe. And although she has become independant over a decade back (in 1991), the Ukrainian people have a very old history. Archaeological excavations in the territory of the Ukrainian capital Kyiv testify that glass workshops existed here already in Х century.

But the industrial development of glass manufacture in Ukraine began only at the end of XIX century, simultaneously with the development of Donetsk Coal Pool, where large deposits not only of coal and iron ore, but also of dolomite; limestone and high quality sand were found. Then, it had attracted many western investors (particularly from Belgium and Germany), who were spending money in the construction of glassworks. Konstantinovka glassworks f.ex. was constructed at the instigation of a businessmen from Belgium and was tempered in 1897. In this factory there were built two tank furnaces with a capacity of each up to 320 tons, which was enormously huge for these times.

Raw materials

Ukraine is very rich in raw materials for glass manufacture. At the moment, there are exploited eight deposits of dolomite and more than 30 quarries of sand. Two soda plants and two alumina plants operate in the territory of the country.

Well, at least, the situation looks strange, with the raw materials - soda, alumina and dolomite mined and exported from Ukraine in huge quantities. You have to admit, it would be much more favourable to export available production - float-glass and other glass products. This situation was understood by local government, and consequently a special program for support of possible construction of float-factories in Ukraine was developed.

Moreover it can be asserted with certainty that the largest benefit will be received just by that investor, which will come first on the Ukrainian market.

Manufacture of glass

In the Soviet times, when the territory of Ukraine still belonged to the USSR, about 70 glassworks were in operation. Six of them produced float glass for windows. After disorder of the Soviet Union, economy fled from the country and now there are just few over 40 still in operation, of which building glass is made only by three.

Now in Ukraine actually only one plant for manufacture of float-glass still works. It is situated in Lisichansk (Lugansk area). This factory is in state ownership and its output produced on three float glass lines is coming up to 42 000 m2 of glass per day.

Most of the production, however, (about 80 %) is exported. Low cost for electric power, raw materials and work force allow to export the Ukrainian float-glass at very favourable conditions. But only 20 % remaining for the domestic consumers at home now appears to be insufficient.

And consequently, it is quite logical, that the sharp increase of demand for insulated glass, glass furniture and other products made from glass in the years 2001-2003 has resulted in a lack of float-glass in Ukraine. This in turn, caused growth of imports, which in 2001 accounted for 1.32 million m2. In 2002, they reached already 2.4 million m2.

This signifies, that in only one year, the import of float-glass into Ukraine has increased by 80 %! Following up on basis of these data, it can be anticipated that in 2003 Ukraine will import about 4-5 million m2 of float-glass.

Apart from Lisichansk glassworks, flat glass is also made by two other factories, which are already operating by Fourcault process. The first one is situated in Konstantinovka which is in Donetsk area. It produces 22,000 m2 of glass per day. The second one is located in Lviv, with a volume of manufacture of 5,000 m2 of glass per day.
Until recently there was another flat glass factory in Lisichansk, but after an unsuccessful attempt of privatization, the enterprise has gone bankrupt.

So, today, the situation in the field of manufacture of glass in Ukraine can be characterized as follows: the total volume of manufacture of sheet glass in 2002 comes up to 25.4 million m2 for this year, of which 14.8 million m2 were exported; in turn Ukrainian consumers in 2002 have imported 2.4 million m2 of float-glass from abroad.

Processing of glass

Regarding the Ukrainian market of processing of glass in the last two - three years it developed very without least delay. Since 2001, the number of machine tools for processing glass in operation in Ukraine has increased by factor 2.8(!). Most part of the purchased equipment are simple machine tools made by Ukrainian, Russian and Czech manufacturers, and also second hand Italian or German machine tools. Prime reason are low investment abilities of Ukrainian businessmen and run-throughs credit system in Ukraine.

On the other hand, companies which could invite foreign investments were enabled to get more expensive and consequently better equipment for processing of glass, with automatic loading of the machines.

As example can be named the company Saint Gobain. Their investments in the creation of a trade division of the company in Ukraine which were made about five years back have justified the hopes of the investors beyond expectations: now Vitrage Saint Gobain is not only one of most known traders of glass in Ukraine, but is also one of the largest Ukrainian companies for processing glass.

Ukraine or Russia?

Certainly, when comparing the Russian and Ukrainian markets of glass, the first one looks much more attractive to foreign investors, than the latter one. But this is only true at the first sight.

It is necessary to take following fact into account: the Russian market already is exploited as a whole, whereas Ukrainian gives potential for a large field of activities.

The glass industry in Ukraine instantly develops modern technologies for the glaziers which sustainably are increasingly present among the visitors of lots of glass exhibitions and conferences.

Already now, the demand of glass products in Ukraine has increased sharply. And for the coming two - three years there is expected an even more active demand for given production.

As basis for this conclusion has served the analysis of the situation which has been usual for today in Ukraine in the market of glass in combination with the following statistical data: the territory of Ukraine makes 603.7 thousand km³, or 5.7 % from territory of Europe. In terms of area she exceeds countries of Europe such as France (544 thousand km³), Spain (505 thousand km³), Sweden (450 thousand km³), Germany (356.3 thousand km³), Poland (312.7 thousand km³). With regard to the quantity of the population Ukraine takes 5.place in Europe (after Germany, Italy, Great Britain and France) and 21.place in the world. The share of Ukraine in Europe’s population is 7.3 % (and 1 % from the world population). At the beginning of 2001 49,5 million citizens lived in Ukraine.

As afore said it is possible to make the following conclusion: The Ukraine is an ambitious and developing young European state, with more and more growing demand both in glass and glass products, and for the equipment for manufacturing and processing of glass. Any investor, now contributing money in the development of the Ukrainian glass market, can be sure that in some years this will show huge profit.

Source: OGIS GmbH, www.glassglobal.com