2 min read
Higher production costs hit glass makers

KARACHI: Pakistan's corporate sector reports that a company in the country that has been hit hard by soaring production costs, with a 40-year history of glass manufacturing, announced on Monday that it is suspending production of flat glass products due to rising prices of regasified LNG imported into the country...

"Given the immediate increase in the price of regasified LNG imported into the country, resulting in a significant increase in production costs, coupled with other market pricing factors, management has forced management to temporarily suspend the flat glass business in Kot Abdul Malik," Balochistan Glass said on 5 said in a notice to the Pakistan Stock Exchange on March 27.

During the shutdown, the company has enough inventory to meet current summer customer demand. Management will notify shareholders to resume operations after revising strategic decisions to develop cost-effective operations and other market-related policies, the notice said.

The company has completed the refurbishment of the second furnace with a daily production capacity of 65 tons, which has been ignited on June 5, 2021, to produce flat glass products.

Glass manufacturing companies use gas as a raw material to heat the melting furnace.

Figure 1 The tempering glass producing furnace 1

Figure 1 The tempering glass producing furnace 1

Shares in Balochistan Glass fell 2.19% (Rs 0.14) to Rs 6.24 on a trading volume of 443,000 shares on the Pakistan Stock Exchange.

A brief history of the company shows that it has been refurbishing production facilities to increase capacity or temporarily closing production facilities when production costs are high or profit margins are low.

The company recorded a net loss of Rs 54.39 lakh crore for the nine-month period ended March 31, 2022, compared to a net profit of Rs 72.3 lakh crore a year earlier, due to higher production costs during the same period.

According to the company's latest nine-month financial statement, the company is working to overcome some challenges in terms of gas supply, a sharp increase in gas prices, and overall inflationary pressures on other related costs.

Gas supply remained disrupted across the industry in the first two quarters, and the cuts failed to allow the company to achieve its target production levels throughout the period.

Additionally, in the absence of the necessary natural gas supplies, the company has had to use other expensive alternative energy sources, including furnace oil and liquefied petroleum gas, to keep operating.

In addition, the price of regasified LNG imported into the country continued to rise over the nine-month period, averaging as high as 99% compared to the same period.

Two weeks ago, the Oil and Gas Regulatory Authority notified that SNGPL's monthly RLNG prices through May 2022 had risen by 40% compared to April, while the rate hike for the month more than doubled compared to the same period last year.

In May 2022, the price of imported natural gas rose to $21.83 per million British thermal units, an increase of 39.7% compared to April 2022 ($6.21 per million British thermal units), an increase from May 2021 113% ($11.58 per million British thermal units).

The latest temporary shutdown comes after a sharp rise in global oil prices caused by the Russian-Ukrainian conflict and the COVID-19 pandemic. The government has passed on the rise in international fuel prices to local consumers to fix government spending and restart the International Monetary Fund's $6 billion loan program.

Disclaimer: The above views do not represent the position of Jinan LIJIANG Glass, and the copyright belongs to the original author and source. The content of News is the author's personal opinion, and it does not mean that Jinan LIJIANG Glass agrees with his opinion and is responsible for its authenticity. Jinan LIJIANG Glass only provides references and does not constitute investment and application advice. 

* The email will not be published on the website.