Topic of the month July: The Russian Glass Market, Part II – Container/Glass Fibre

The Russian Glass Market, Part II – Container/Glass Fibre

Overview of developments in the Russian glass market, which has seen significant growth and investment over the past few years.

Containers

Along with other Eastern European countries, Russia is witnessing strong growth in overall production levels of glass containers. In particular, Russia is seen as one of the world's major growth markets for beer - as the young population turns away from the traditional vodka, the market is expected to grow by around 6% per year.

According to major investors in the region, demand in the past had been met by expensive imports and inferior returnable bottles, which meant a major injection of cash was required if the country was to avoid a severe shortage of quality glass bottles. As a result, the last few years has seen a significant amount of investment in glass bottle production in the area.

In 1997, Sise Cam purchased the glass manufacturer Mina-Ksani from the government of Georgia - to meet growing demand in the Russian beer market - with help from the IFC and ERBD. The US Overseas Private Investment Corporation also provided a $29.5m loan in 2001 for expansion of the Rasko plant, with the intention of increasing production to nearly 1.2 billion bottles annually.

Later, in 2002, Sise Cam further strengthened its position in the region, by establishing the Ruscam glass bottle plant in Gorokhovets. Earlier this year, The IFC provided a third loan of $17.5m to finance a third furnace and four bottle forming lines, following a total of $23m financing for Ruscam's first and second furnaces. This latest investment will enable the plant to increase capacity to 975 tonnes of glass per day.

Glass Fibre

In April this year, Saint-Gobain of France announced plans to invest $120 million in the reconstruction of Steklovolokno, a glass fibre plant in the Vladimir region. Saint-Gobain acquired a controlling stake in Steklovolokno from the Moscow-based investment company Russkie Investory with the aim of setting up new production. The cost of the deal has not been disclosed.

The Spanish company Uralita is also rushing forward in Russia. In September 2003, the company began producing glass wool at its second Russian plant. Uralita has a firm foothold on the Russian market. According to its own figures, the company holds a 58 percent share of the Russian glass wool market Uralita plans to strengthen its leading position on the vast Russian market by starting production in the Siberian capital, Novosibirsk. Work on the construction of a factory was planned for this year.

Conclusion

Russia is being heralded by Industry leaders as a potential ‘boom' market to watch, for foreign investors. In fact, the UK's Trade and Industry Secretary, Patricia Hewitt, commented at the Russian Economic Forum in London that, "Russia shows every sign of being the next China. I want Britain to have seats on the plane before it takes off."

Businesses are being urged ‘not to miss the boat' and to seize the attractive business opportunities on offer in Russia, before it's too late. Ultimately, those who gain a head start in the Russian glass sector - such as Asahi, Pilkington, Sise Cam and Saint-Gobain - can expect to benefit from a more prosperous, stable and outward looking Russia.

Part I published las month highlighted the Flat Glass Industry

Source: OGIS GmbH, http://www.glassglobal.com/ in cooperation with dmg World Media, http://www.glassmediaonline.com/