Glass prices with variable surcharges

Glass prices with variable surcharges
31 March 2022 733 view(s)

What do energy prices have to do with glass prices?

The production of glass and mirrors requires a lot of energy. And we all know that energy prices depend on the price of oil. We now also see this clearly reflected in the gas and energy bill and at the pump when we have to fill up by car. Energy prices are currently extremely high and it is unclear whether this will continue, prices will fall or perhaps rise even higher.

The cost price of glass and mirrors consists of a fixed part of the basic material (especially sand, soda and lime), fixed costs of the factory (such as the installation, production process, storage, logistics, etc.) and a variable part of energy costs. But to keep it understandable for everyone, we talk about an all-in m2 price. This includes all costs. Energy costs have been fairly stable in recent years, as a result of which attention has faded into the background. Now that we are again dealing with very high energy costs, which can vary enormously from week to week, the "Energy surcharge" is again a relevant part of the current sales prices.

Previously, the "energy surcharge" was linked to the price of a barrel of crude oil (Brent Oil Index). Since this year, a new type of surcharge has been introduced by the melting furnaces (which make the base glass): the "gas surcharge". This "gas surcharge" is additional to the existing surcharge on the oil price. As a result, the "energy surcharge" has consisted of two variable components since the beginning of this year: "the price of a barrel of oil" + "the gas price".


How is this "energy surcharge" included in the glass price?

A certain amount of energy is required to produce one kilogram of glass. The surcharge is therefore reduced per kg of glass. At GlasBoertje, the oil part of the Energy Surcharge has been at the same rate for years. This is part of the sales prices on our website. To keep it simple for everyone, we have never mentioned this separately or shown it on the website. Due to the added new "gas surcharge", we are faced with a higher purchase price that can change per month... Earlier this year, those surcharges were better than expected and we don't have much to raise the prices. But as of April 1, 2022, the gas surcharge has suddenly become a significant amount. In other words, our purchase price has suddenly increased considerably due to a gas surcharge that was never there before. Naturally, this has consequences for the selling price that we have to calculate. Unfortunately we have had to raise prices as of April 1st.


When will the gas surcharge be reviewed and prices adjusted?

The gas surcharge is regularly reviewed and adjusted by the glass factories (at least once a month). We will also review and adjust our prices based on this. This can therefore unexpectedly lead to price increases, but if the gas surcharge goes down, this will lead to a decrease in the selling price. We understand that this is very annoying, but we will have to continue to monitor and adjust this. We will update this BLOG item as soon as we have had to raise prices again.


Who does this gas surcharge apply to?

As far as we know, this gas surcharge is calculated in any case by AGC glass. They choose to calculate rising energy costs in this way instead of adjusting the m2 prices of glass every time. From a technical point of view, this has a much greater impact on the systems.

AGC glass is the largest glass manufacturer in the world that makes the base glass. They pass this on in the plateau prices they sell to glass processors and traders. They, in turn, pass this on to their customers and ultimately the share of "gas surcharge" in the cost price has an effect on an adjustment of the final selling price.

We can say with some certainty that the rising energy prices will cause a considerable increase in the m2 prices of glass and mirrors across the industry. Whether it is labeled as an "energy surcharge", "gas surcharge", "commodity price increase" or whatever, eventually everyone will be affected by this. Perhaps a few will escape the dance for a while because they get glass from Turkey or Latvia, eventually they will also receive these increases and pass them on in their prices.