Glass price deflation reflects global glut

After increasing by 2.1% on an annual average basis of measure between 2000 and 2001, overall flat glass prices declined by 0.7% over the course of 2002, according to estimates from the U.S. Labor Department. But prices increased by an unexpectedly sharp 0.8% between November and December 2002, to bring December 2002 average flat glass costs a slight 0.3% ahead of the year-end 2001 level.

This December 2002 blip should prove to be an anomaly. Overall flat glass prices should be flat to only slightly higher over the course of 2003. Demand won't build much this year, and there's more than enough worldwide production capacity to supply the market with almost any kind of commodity and specialty glass at an affordable price.

Of course, a lot of flat glass product goes to markets other than construction, much of it to the auto industry. But based on the limited amount of price information available for the specific kinds of flat glass used explicitly for construction and architectural purposes, it appears that glass inflation for the building and construction industry was off at about the average (-0.7%) rate as for flat glass products in the aggregate during 2002.

The price index for standard flat glass products used for construction purposes was 1.8% lower in December 2002 than in December 2001. This followed an increase of more than 30% in average prices over the previous two years. Tempered glass for construction use was 1.9% more expensive at the end of 2002 than during December 2001, however. And sheet/plate prices were 4.0% higher in December 2002 than a year earlier, although on an annual average basis of measure, prices were actually 2.3% lower in 2002 than in 2001.