This position paper from Glass for Europe was initially meant to provide input to European decision-makers at the time of fine-tuning and activating Europe’s new industrial strategy, ‘A New Industrial Strategy for Europe’, COM (2020) 102 final, dated 10 March 2020.
While Glass for Europe’s initial assessment of this strategy was that of a promising start, despite a lack of concrete action in some key areas with adequate sequencing, the reality is that this strategy is unexpectedly and sadly outdated already.
The COVID-19 outbreak is an urgent health and sanitary crisis that Europe must confront with all its strength. One must recognize that with it comes huge economic impacts dangerously weakening Europe’s economy and many of its industrial sectors. The sudden reduction in demand and production in certain sectors is likely to have long-lasting impacts with high risks of many companies going bankrupt (See next page for impacts in the flat glass sector). This could trigger a downward spiral of the economy with rising unemployment; a situation which could be worsened by similar trends observed across most major economies worldwide.
Against this background, Europe’s economic and industrial response cannot remain based on an industrial strategy elaborated before the crisis, without taking stock of the new economic conditions.
At the same time, it is Glass for Europe’s belief that the European Union should not abandon its goals of becoming a climate-neutral continent by 2050 thanks to an EU industrial base ‘becoming greener and more digital, while remaining competitive on global stage’. An EU recovery programme will be required and it must be climate-compatible: a massive renovation of ageing buildings, support for clean mobility transition and increase in the share of solar energy.
With these objectives in mind, Glass for Europe would like to make suggestions for a revisited EU industrial strategy, which triggers a virtuous cycle of decarbonisation thanks to concrete actions and their adequate sequencing (See next page on a virtuous cycle of decarbonisation). The flat glass sector manufactures the high-performance Insulating Glazing Units (IGUs), automotive glazing and other products, such as solar-energy glass, which are non-substitutable materials indispensable for Europe to meet its ambition of climate-neutrality. It remains fully committed to work in this direction.
Beneath headline targets and objectives, a proper assessment of Europe’s industrial state and strength as well as properly sequenced and concrete actions are needed for a fit-for-purpose industrial strategy to support Europe’s economy and society while meeting climate aspirations.
The scale of COVID-19 economic impacts on Europe’s flat glass sector
The outbreak of COVID-19 will be plunging Europe’s flat glass sector in a profound crisis of a magnitude not yet fully quantifiable. Sudden and tremendous reduction in demand and production are already witnessed since the introduction of confinement rules:
- The flat glass sector, whose production output goes primarily into buildings and transport[1], witnesses demand volumes more than halved since confinement measures are in place and this situation is expected to continue until the COVID-19 outbreak is over.
- Many of Europe’s 48 flat glass melting installations had to cease production for several weeks now, while being placed in costly ‘hot-hold operations’, whereby production is stopped but costs remain high. Industrial furnaces are kept ‘hot’ to ensure safety and security and to preserve the industrial equipment (see ad-hoc Glass for Europe paper).
- Nearly all of Europe’s automotive glass processing plants have come to a stop as car manufacturers have closed their assembly plants. In the building segment, a majority of Europe’s thousands of SMEs active in glass transportation, transformation, processing and IGU assembly have stopped activity, as construction works have either come to a halt or have seriously slowed down.
- Tens of thousands of workers in the flat glass sector are currently experiencing temporary unemployment measures.
While the above picture is reflecting what is happening during the confinement period which will eventually come to an end in a matter of weeks, the flat glass sector is likely to be negatively impacted in the middle-term:
- Based on the assumption that the above situation goes on for two-months, industry experts forecast losses in demand and production of flat glass between minus 15 and 30%[2] over the course of the year 2020, provided a rapid pick-up once the health crisis over. Such numbers over a single year, equally experienced in other regions of the globe, will generate unprecedented losses for flat glass manufacturers.
- The average forecasts by automotive industry consultancies are that car manufacturers will not be able to restart car assembly at full capacity before May 2020 at best, when Europeans are unlikely to invest in new vehicles. As of 13 April 2020, EU-wide production losses due to factory shutdowns amount to at least 1,9 million motor vehicles, with spill-over effects on the flat glass sector[3].
- In the building sector, the risk is high that without adequate support measures, many SMEs in the glass and glazing logistics, transformation and processing industry will not have the financial strength to survive the crisis. If Europe loses these essential links in the glazing and, more generally, construction value-chains, recovery in construction would be seriously hampered.
- It can be anticipated that after a possible rebound in activity immediately following the lifting of confinement measures, major investments are postponed or cancelled. Companies’ cash-flow in some sectors is likely to be drained and increased uncertainty and risks of unemployment will deter consumer investments in major equipment, automotive, construction and real estate.
- Such trends, if experienced, would de facto lead to unsustainable over-capacity of production of flat glass in Europe with almost inevitable closures of industrial sites.
A virtuous cycle of decarbonisation for a revisited industrial strategy
The proposal for a ‘virtuous cycle of decarbonisation’ formulated below is based on both the need for an economic rebound after the COVID19 crisis and the proposals contained in Glass for Europe’s publication “2050 Flat glass in Climate-neutral Europe”, which was released in January 2020.
To Glass for Europe’ views, the way forward is a recovery package that effectively supports Europe’s climate agenda and boosts activity in European sectors most affected by the crisis.
1 – Immediate measures to safeguard most impacted industries and their value-chains
- To accompany companies’ efforts in ensuring health and safety in all their activities to combat the spread of the virus and to safeguard Europe’s industrial equipment.
- To ensure a minimum level of economic activity in all sectors of the economy when precautionary measures are in place to facilitate a future recovery.
- To ease companies’ adaptations to this exceptional situation in terms of administration, access to temporary unemployment, letters of credits, etc.
More information on COVID19 & the flat glass industry is available in this Glass for Europe paper.
2 – Short term measures to activate an economic rebound
Europe will most likely enter an economic crisis impacting its real economy with a sudden and tremendous reduction in demand in certain sectors, including construction and automotive among others. Not all sectors will be impacted in the same proportions hence the need for a targeted response:
- To evaluate the impacts of this crisis on the different sectors and Europe’s industrial base with a high degree of granularity to design a targeted recovery plan.
- To massively inject liquidities into the economy, to safeguard most endangered industrial value-chains, including the millions of SMEs, heavily affected in the flat glass industry.
- To design a recovery plan that prioritizes the launch and financing of a massive renovation wave to support recovery in the construction sector and the transformation towards a climate-neutral building stock.
- To mainstream carbon avoiding products, such as triple and high-efficiency double glazing, including by way of revisited mandatory performance requirements so that any rebound in demand positively influences consumption patterns towards greater sustainability.
- To carefully consider and eventually postpone by a few years new legislative proposals when post-crisis impact assessments show that the proposed measure brings marginal benefits yet major adverse impacts on those industries already seriously injured by the crisis.
3 – Medium term measures
It is thanks to a robust support to demand and European production of carbon-avoiding products, that the next phases of the ‘virtuous decarbonisation cycle’ will become economically and socially sustainable. The below phases of such cycle are presented in Glass for Europe’s publication:
- To develop the climate friendly infrastructures, such as waste management facilities, supply and distribution of low-carbon energy sources, carbon and capture facilities.
- To develop mechanisms to nurture the competitiveness of Europe’s industries supplying carbon avoiding products and solutions.
- To attract industrial investments in capacity and low-carbon manufacturing solutions.
- To reward innovations in clean technologies and products, with targeted R&D support and regulatory instruments rewarding carbon-avoiding products and solutions.
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[1] Representing 80% and 15% of the flat glass production output respectively.
[2] Large range provided to reflect uncertainty and variances in predictions and to abide by the EU competition rules.
[3] ACEA statement 13 April 2020: https://www.acea.be/news/article/interactive-map-production-impact-of-covid-19-on-the-european-auto-industry