Corning Raises Glass Prices
Corning (GLW) announced this morning that it will be instituting a moderate price increase for display glass substrates in the 3rd quarter. According to the release, “the adjustment to price is a result of elevated costs in logistics, energy, raw materials, and other operational expenses during this extended period of glass shortage, as well as general inflationary pressures impacting the display industry.” The company also mentioned that it expects glass supply to remain short to tight in upcoming quarters. Typical ingredients for borosilicate glass are Silica (SiO2), Boric Oxide (B2O3), Soda Ash (NaCO3), and Alumina (Al2O3) and are combined at higher temperatures than typical soda-lime glass, raising the cost. While pricing on the various components is difficult due to quality and gradation, the cost of electricity produced from natural gas has risen from $2.23 last March to $3.41 in March of this year, a 52.9% increase, and while that does not reflect actual cost to Corning’s display glass production business, it is certainly a factor that would push Corning to incorporate those types of cost increases in its pricing negotiations with customers.
While we cannot remember a time when Corning was able to raise glass prices, it might have happened, however typically, glass prices decline each quarter, although over the last few quarters Corning has been able to hold those declines to small amounts or no change. Given that supply problems at competitive suppliers and continued demand for displays has kept the glass market tight, it is no surprise that Corning has established price increases for 3Q, when demand will likely be the highest. As no data was given on the magnitude of the increases, we surmise that Corning Is able to cover the cost increases that it has absorbed over the last few months and likely a bit more. However, while the display division’s objective is to increase profits, expanding the company’s customer penetration is key to the longer-term goal of generating returns on the capacity investments Corning has made for its customers, and holding them for ransom with egregious price increases is likely not Corning’s goal in this case.
While we cannot remember a time when Corning was able to raise glass prices, it might have happened, however typically, glass prices decline each quarter, although over the last few quarters Corning has been able to hold those declines to small amounts or no change. Given that supply problems at competitive suppliers and continued demand for displays has kept the glass market tight, it is no surprise that Corning has established price increases for 3Q, when demand will likely be the highest. As no data was given on the magnitude of the increases, we surmise that Corning Is able to cover the cost increases that it has absorbed over the last few months and likely a bit more. However, while the display division’s objective is to increase profits, expanding the company’s customer penetration is key to the longer-term goal of generating returns on the capacity investments Corning has made for its customers, and holding them for ransom with egregious price increases is likely not Corning’s goal in this case.
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