Cheap gas makes glass, ceramics industry viable

Cheap gas makes glass, ceramics industry viable

By SHAILENDRA TYAGI | NEW DELHI | 30 January, 2016
Glass containers forming. Source: Wikipedia
‘The glass and ceramics segment is dependent on LNG supplies to run its plants. The depressed gas prices will help the segment to run with profitable margins.’

An excess supply of natural gas in the global market resulting into cheaper gas prices is restoring the economic viability for several gas fed industries especially India’s glass and ceramics industries. As fuel makes up about half of their manufacturing cost, the lower input price is helping these industries to become even more competitive. India has recently re-negotiated its long-term LNG supply contract with Qatar which would help India to import gas at half the price compared to its earlier level of $13per mmbtu. “With new LNG price regime in place, several gas fed industries in large sectors including a host of MSMEs in segments such as glass and ceramics, will catapult for economic viability because the earlier price regime ($13/unit) had virtually killed this sunrise sector of the Indian economy,” says Mahesh Gupta, president, PHD Chamber of Commerce and Industry.

Low cost and uninterrupted supply of power and gas are of paramount importance in pushing growth of this industry.

“The glass and ceramics segment is heavily dependent on LNG supplies to run its plants and machineries and the regime of depressed gas prices will enable such enterprises to run with margins to keep them viable and profitable,” adds Gupta.

Lower energy cost is also expected to make these sector more competitive in the global market as well.

While the industries are relishing cheaper energy inputs, what is impacting their growth prospects is the lack of required demand both in the domestic and global markets. “More than the cheaper capital, industries here want government to boost consumption demand in the country,” says Gupta.

This way we can offset some of the ongoing contraction in our exports.

He adds that a large number of Indian MSMEs manufacture goods for the real estate sector which remains depressed due to high interest costs. The revival of India’s real estate sector is a must to help MSMEs leverage the cheaper gas inputs as half of the goods used in the construction industry comes from MSMEs. Analysts expect that India’s glass and ceramics industry is poised for sustained growth powered by demand for construction which is estimated to grow on account of various fiscal incentives given to infrastructure development, increase in income levels and availability of a range of financing options for housing.

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