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

With the high capital cost of new glass plants and space constraints in existing facilities, glass
manufacturers have focused their efforts on increasing the production capacity of existing
furnaces. When market conditions demand additional production capacity, incremental
production from existing facilities is the most capital-efficient solution to meet market demand.
Glass manufacturers have aggressively pursued productivity gains increasing output from their
existing furnaces. Because few new glass plants have been built in the US in the last several
years and a number of plants have been closed, maximizing production of existing furnaces is
essential.
Because of the large capital investment in melting furnaces, many efforts are made during
production to extend their useful lives. The need for capital investment for furnace replacement
or rebuild is deferred as long as possible, at least until quality, safety, or production demands are
compromised. Boosting with electricity or oxygen firing to increase production may increase
melting cost per ton of glass, but manufacturers accept these conditions because additional
capacity is gained at a much lower capital cost than could be required to build new furnaces.
Operators often accept some deterioration in production capacity and reduced energy efficiency
while extending the furnace life, but the risk of catastrophic failures and unplanned production
outages can affect the ability to meet their commitments to customers.
Glass businesses need large capital investment and ongoing infusions of capital for periodic
rebuilds and new plant construction. In the past, some glass companies set up an accounting
“reserve for furnace rebuilds” to accrue funds for expected furnace rebuilds. But this accounting
practice has been largely abandoned since an IRS rule was revised in the 1980s to penalize
accruing of funds from current operations for future rebuilds. (See Table II.10 for cost of melter
rebuilds by segment.)
Table II.10. Melter Rebuild Cost by Glass Industry Segment
Glass segment Typical melter size
(ton/day)
Cost of a new line
($ million)
Melter rebuild cost
($ million)
Melter repair cost as
a % of typical
refurbishing project
Container 300 75 8–12 25+%
Glass fiber 150 100 1–10 15–50%
Flat 600 160 25 25–30+%
Capital costs
The cost of capital, or hurdle rate, used to evaluate financial investments in the glass business
was surveyed in the course of this study with the response rate that ranged from 10 to 20 percent.
A number of companies used a risk-adjusted rate for investments in unproven technology.
Financial managers expect glass businesses to earn a return on capital that exceeds the
corporation’s cost of capital. Capital-related charges, taken as depreciation of manufacture, do
not account fully for the capital cost associated with process businesses like glassmaking,
according to the financial metrics used by many public companies today.
The huge physical footprint of glass furnaces accounts for the capital-intensive nature of the
glass business. This space requirement has been a major barrier to rapid growth. Smaller
furnaces, although less energy efficient and more expensive to build per unit of glass produced,
can be an acceptable alternative to large furnaces. The smaller furnace is more flexible in
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