Glass Melting Technology: A Technical and Economic ... - OSTI

Fiberglass: Insulation
The health of the economy affects the demand for glass fiber insulation, as reflected by building
and construction, the major markets for insulating materials. The 35 percent increase in new
home size since 1985 has positively affected the demand for insulation, and relatively low
mortgage rates over the last several years have led to a robust building cycle and remodeling
activity. The glass fiber insulation industry sold 3.8 billion pounds of product valued at $2.9
billion in the year 2000. Consumers prefer glass fiber to other insulating materials because of the
material’s attributes and attractive price.
Residential construction represented 71 percent of the demand for glass fiber insulation in 2000.
Of this market, new housing starts accounted for 56 percent, replacement and remodeling 23
percent, and attic re-insulation 19 percent. Replacement and remodeling is an important growth
segment for glass fiber insulation. Overall demand for glass fiber, by the slowing residential
construction market is expected to grow by only 1.4 percent per year by 2005, a sharp
deceleration from the 4 percent pace from 1995 to 2000.
Energy costs, and expectations for future energy costs, also affect the demand for insulation
materials. Concern over US dependence on foreign sources of fuel may influence decisions about
energy conservation—and demand for insulation material. Insulation levels have increased for
buildings from R-11 to R-13, and in attics from R-19 to R-30; generally, better performing
building components are used in new construction. However, one study shows that consumers
are willing to add only $3,000 worth of up-front costs in building a home to save as much as
$1,000 a year in utility costs. (National Association of Home Builders Survey of Consumer
Preferences, 1996)
Production of glass fiber for insulation is capital intensive and requires particular technology, not
only in the glass melting area but also in the glass delivery, fiber forming, and downstream fiber
handling steps of the process. Five companies produce all the glass fiber insulation in the US and
share 95 percent of the market. The difficulty of producing fiberglass does limit new entrants
into the field. However, two new competitors did join this industry segment after the second US
energy crisis in 1977 and have increased industry capacity. Pricing and profitability of glass
fiber insulation have been affected by two major competitive forces: industry capacity utilization
(demand-supply balance) and consolidation in channels to market (increased buyer power).
With consolidation of the insulation channels to market through such big box retailers as Home
Depot and Lowes, the power of buyers has increased in do-it-yourself retail sales. Wholesale
distributors to professional construction buyers have also consolidated, but at a slower rate.
Cameron-Ashley acquired smaller local and regional distributors before being acquired itself by
Guardian Industries. Insulation contractors have also consolidated; for example, Gale Insulation
consolidated smaller contractors and then was acquired by Masco.
The increasing power of buyers suggests that sales channel alignment and distribution costs are
important, given the bulky nature of the products. The impact of substitute materials on sales has
been limited. Cellulose insulation struggled with issues of fire performance, volatility in costs
related to waste paper markets, the availability of glass fiber insulation, and credibility with
customers as an industry of smaller regional producers. Plastic foams compete directly with
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