Major glass fiber price hikes loom

A five-year slump in glass fiber pricing may soon be coming to an end. The industry built up global capacity just in advance of the Great Recession that began in 2008. As a result, prices dropped and have failed to match gains made in thermoset resins or competing materials such as steel and aluminum.

"We've seen over the last five years since the financial crisis, a tremendous reversal in the rate at which the players in this industry have been adding capacity," said Owens Corning CEO Michael H. Thaman in a recent conference call with financial analysts. He said supply will probably lag demand growth for at least two more years.

As result, capacity utilization will rise to the point where there may be supply-demand tension if growth continues as expected.

"We'd expect that we're going to be able to start driving pricing in the marketplace and improve our margins through pricing," Thaman said. Prices may need to rise at double-digit levels to justify new capital investments.

One sign of the changing marketplace were first-quarter price increase announcements by two Chinese producers—Jushi and Taishan. Owens Corning also announced a glass fiber price increase for the composites market in China.

"We are hopeful that a positive price trend in China can create momentum for price improvements in Europe and the U.S. in the second half of this year."

Separately, Owens Corning officials reviewed the global composites market, including margin problems, in a meeting with reporters conducted via the Web this morning.

Demand for glass fiber composites is projected to grow at 5-7% annually, with continued penetration in automotive and consumer electronics applications in particular, according to Byron Hulls, market intelligence director. He said demand for composites in wind energy has slowed, and now accounts for about 7% of demand.

The average car contains about 8 kg of glass-fiber composite, and that is expected to grow to 16 kg by 2020.

Applications for glass-fiber composites are growing at about 1.6 times overall industrial growth. That compares to a 3.8-times growth rate for carbon fiber composites, 1.1 times for aluminum, and 0.9 for steel.

Owens Corning operates two business groups: Composites, which includes reinforcements and downstream businesses; and Building Materials, which includes insulation and roofing businesses. Composites made up 35% of sales in 2012. Its primary competitors in the composites business are China Fiberglass Co., Chongqing Polycom International Corp. (CPIC), PPG Industries, Taishan Glass Fiber Co., and Johns Manville.

Owens Corning reported a net loss of $19 million in 2012 on sales of $5.2 billion.