Jochen Grönegräs, Managing Director of the German Federal Flat Glass Association (Bundesverband Flachglas – BF): "Energy supplies have become more uncertain and also more expensive to an unprecedented extent. Float glass furnaces are mostly fired with natural gas. Media have been reporting recently that, for instance, the German federal government has been working on a 'shutdown plan' and preparing decisions concerning which industries would be the first to be cut off from the gas grid."
While the issues that the German Federal Flat Glass Association deals with traditionally tend to be on the application side, the BV Glas in Düsseldorf closely follows these production-related topics. For example, BV Glas reports that they are in constant discussion with the Federal Ministry of Economics and the Federal Network Agency, among others, regarding the supply of natural gas (for float glass production). It is not a matter of determining a shutdown sequence within the industry, but a general preparation for possible gas shortages. BV Glas has made it clear to its government contacts that float glass production cannot simply be shut down.
What do European glass associations say about the current situation, Mr Grönegräs?
Jochen Grönegräs: "The European association Glass for Europe, in which the BF is a member, has also taken a stand and emphasised that the authorities must guarantee uninterrupted energy supplies for our industry. Energy costs would also need to be contained by urgently revising the EU Emissions Trading Scheme (ETS) state aid guidelines to offset the indirect costs of the flat glass sector."
What impact can glass processors expect?
Bundesverband Flachglas
Jochen Grönegräs: "In processing companies, you may now be faced with the question of whether you can withdraw from your delivery obligations to your customers due to cost or price increases of your upstream suppliers. We have obtained a current lawyer's opinion on this and quote from it: 'The question of a withdrawal from a contract is governed by § 313 'Störung der Geschäftsgrundlage' (Disruptions to the Basis of the Contract), which was only introduced into the German Civil Code in 2002.
[Bascharage plant in Luxembourg gets new float glass furnace]
This reads as follows: 'If circumstances which have become the basis of the contract have changed seriously after the conclusion of the contract and if the parties would not have entered into the contract or would have concluded it with different content if they had foreseen this change, the adjustment of the contract may be demanded insofar as one party, taking into account all circumstances of the individual case, in particular the contractual or legal distribution of risk, cannot reasonably be expected to adhere to the unaltered contract.' (...)"
How will this affect glass processing companies and their customers?
The BF Managing Director points out: "Extreme and, above all, unforeseeable price increases outside the expected range must therefore occur, which were not foreseeable for either party and make it unreasonable to adhere to the contract. When this is the case cannot be said in general terms, but must be determined in each individual case, by a court if necessary." Something else could apply if the individual contract contains agreements on price increases, e.g. a fixed price period.
[How the float glass process has revolutionised the glass industry]
Against this background, the Zentralverband Deutsches Baugewerbe (Central Association of the German Construction Industry) demands an escalation clause, which could also be applied to existing contracts, as it sees a case for Disruptions to the Basis of the Contract:
Jochen Grönegräs sees the following danger for glass-processing companies: "Submitting binding offers to your customers can become a threat to your business because of the material prices, which may change considerably within the execution periods. And there is the added risk that promised delivery times for existing orders cannot be met."
What Hans-Joachim Arnold of the German Federal Flat Glass Association has to say:
Arnold Glas
When in doubt, the BF recommends first seeking an amicable resolution with the customer. Extensive feedback from BF members in recent days shows that this is possible.
Hans-Joachim Arnold, Chairman of the Board of the German Federal Flat Glass Association, comments: „The uncertainty and the increase in prices within the supply chains in our industry demand joint solutions. Solidarity is needed in many ways in times like these - including between the partners who work together with glass."
[First architectural glass produced using hydrogen]
Jochen Grönegräs adds: "We are currently coordinating with the other members of the Transparent Building Envelope Representative Office on how to position ourselves jointly on these issues as representatives of the partners across the supply chain. Despite all the serious current consequences, there are also medium-term aspects for the industry which may provide some comfort. It is difficult to argue with this without it seeming cynical against the backdrop of the immeasurable suffering in this war - but for our situation, the acute crisis will undoubtedly also have the effect of dramatically emphasising the need for energy efficiency, especially in the building sector, which will (finally) increase the pace for measures in this sector, such as energy refurbishment. The need for an energy transition and efficiency was clear anyway - the rise in prices during the crisis now makes this much more urgent and must be achieved in a shorter time."
How long should supply chains in the flat glass sector be?
The influx of refugees will also have an impact (i.e. skilled labour and housing needs). Due to the consequences of the crisis on supply security and also for transport costs, in the medium term, questions about the length of supply chains and thus the regionality also of production facilities will be asked and may come to different conclusions than before the war.
