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Ardagh on track with Nigel expansion as it seeks to rectify glass supply shortfalls

Ardagh on track with Nigel expansion as it seeks to rectify glass supply shortfalls

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To meet short-term glass supply shortfalls in South Africa, Ardagh Glass Packaging – Africa (AGP), a subsidiary of Ardagh Group, is on track with its Nigel 3 extension plan, which was expected to be commissioned in late 2023.

Earlier this year Ardagh completed its R18 billion acquisition of Consol with a R3bn Nigel extension plan in hand to broaden its Africa footprint.

AGP said in a statement this week, it planned a further extension of its Nigel production facility in Gauteng to support customers’ current and projected demand growth over the next few years. This investment in a third furnace (N3) follows the recently commissioned Nigel 2 (N2).

AGP said the lead time to build a new glass furnace was 18 to 24 months and it took time to replenish essential glass stocks once the facility was up and running. There were similar challenges globally in glass and other packaging materials.

“With the commissioning in August 2022 of Ardagh Glass Packaging – South Africa’s N2 (Nigel 2) expansion project at the company’s Nigel facility, the extra capacity is helping to address the current glass shortage and repatriating imports to local supply. The confirmation of an additional furnace expansion (Nigel 3) will rebalance the supply to demand incongruencies in the South Africa market and effectively eliminate expansive glass imports,” it said.

However, it said leveraging Ardagh Group’s technical capabilities and global sourcing capabilities, the latest N3 expansion project was expected to be commissioned in late 2023, well ahead of standard lead times, much like N2.

This capital investment was expected to further bolster government’s economic recovery plans in Ekurhuleni, Gauteng, offering 300 additional job opportunities and increased ancillary supply-chain benefits in the community.

AGP said yesterday that South African glass industry, which was made up primarily by AGP and Isanti Glass, was experiencing elevated demand across certain beverage and food categories, with growth exceeding historic pre-Covid levels.

“In addition to buoyant glass demand, the current supply constraints are a direct result of the many lockdown and associated alcohol bans in South Africa in 2020 and 2021, which severely impacted glass manufacturers, who were forced to curtail production, impacting essential stock builds ahead of peak trading periods,” AGP said.

This shortage was experienced earlier this year by some companies. In February Distell, South Africa’s largest cider exporter of Savanna, was forced to switch to aluminium cans due to severe glass shortage, with its CEO predicting the shortage to last into 2023.

During the various stages of lockdown, alcohol sales were banned on several occasions, while on-premise/hospitality events were severely limited. As a result, players in the South African packaging market had to shut down some facilities and cancel planned capital investment projects since the demand was only expected to recover very slowly over several years.

“The reality is that demand recovered much faster than expected as inventories were rebuilt, and at the same time, imported glass into the market was expensive and difficult to procure due to the global glass shortage and ongoing global logistics and supply chain disruptions. This meant the South African market has been under pressure to recover supply across categories,” it said.

Recent consumer surveys had confirmed that almost 90% of people showed a strong preference for glass packaging for its prime health, sustainability and lifestyle credentials, AGP said.

The demand for glass was increasing as consumer concerns around sustainability were on the rise, with more and more people considering the impact of the products “we buy and expecting businesses to do more to help us make sustainable choices”, AGP said.

The group said the alcohol industry was its biggest market, however, it also served a range of customers in the food, pharmaceutical, and non-alcoholic beverage categories.

BUSINESS REPORT

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