Dynamic Analysis of Building Glass Industry in the First Half of 2016

Glass is a traditional industry that is very cyclical. Over the past few years, due to the overcapacity of the glass industry and the difficulty of business operations, the glass industry had to compete at a low price in order to return funds and destock.

In late March 2016, the temperature was warmer and the spring was thicker. The glass research activities in Central China jointly initiated by the Zhengzhou Commodity Exchange and Meru Yabu officially set off. The research team consisted of researchers from the company and the investment company, the head of the glass manufacturing company, and the industry media. They visited three places in Wuhan, Jingzhou, and Yingcheng, and investigated related companies in the upper, middle and lower reaches of the glass industry chain. , and had a discussion with the company.

In response to the status quo and development requirements of the glass industry, through the promotion of supply-side structural reforms, we must truly base on market demand, develop according to demand, adjust development priorities, adjust development policies, shift development to increase effective supply, shift to high-end, turn to foreign countries, and shift to market consumer demand. This will change the development path and increase the number of channels to be used to increase the level of industry development and economic efficiency.

Low utilization rate restricts rising glass

In 2015, 10 newly-built glass production lines, 43 cold-repaired production lines, and 18 cold-repaired production lines had actual production capacity at a significant drop. In the first quarter of this year, one glass production line was newly added, one cold production line and five cold production lines. Up to now, the utilization rate of glass production capacity has been 68.36%, down 4.68% year-on-year, which is a new record low. The production capacity was 85.02 million heavy containers, which was a decrease of 28.54 million heavy containers last year. Too low capacity utilization will restrict the continued rise of glass prices. Imagine that once the glass prices continue to rise, the previously cold-worked glass production line will be cold-repaired, which will again break the relatively balanced environment of short-term glass supply and demand.

Rising Glass Prices in Central and South China

The call for the price coordination conference for the glass market in South China, held on May 10, 2016, will require concerted efforts and confidence in the post-market. Since most of the manufacturers' quotation before the meeting rose by RMB 10-20, the latter price requires each company to decide according to its own situation.

According to statistics, the export of building materials in Hebei is generally stable, and the export of technical glass has achieved rapid growth. From January to March, Hebei's building materials industry completed a total export value of 1.79 billion yuan, an increase of 7.2% year-on-year. The export value of sanitary ceramics was 530 million yuan, up by 3.1% year-on-year; the export value of flat glass was 40 million yuan, down 57.2% year-on-year; the export value of technical glass was 220 million yuan, up 129.7% year-on-year. Hebei's first quarter technical glass exports increased by nearly 130%

It will take time for full recovery of cement glass prices continues to rise

According to the data in the first quarter of 2016, the entire building materials sector is in a low point of prosperity, and only some sub-sectors, such as glass fiber plates and super-hard materials, still have better profitability. Although the recent pull of downstream demand has prompted prices of glass, cement and other products to pick up, private asset investment growth has fallen year-on-year, accounting for a year-on-year decline in total investment, indicating that investment enthusiasm in the market is still at a relatively low point.

Traders are cautious about watching glass prices

First, since May, the spot prices of glass in all regions have been steadily increasing, and there has been no sign of a turn-down. The average price of Chinese glass has increased from 1,190 yuan/ton to 1,212 yuan/ton, while other black-line spot prices also follow prices. And second, this year, China's float glass cold repair 11 production lines, reduce production capacity 39 million weight boxes; build 2 production lines, add capacity 10,200,000 weight boxes; re-production of 6 production lines, increase production capacity 2130 With a weight of 10,000 boxes, it can be seen that the actual capacity of Chinese glass has been reduced by 7.5 million weight boxes. Third, the downstream demand is good, and glass inventory continues to decline.

In the near future, the glass magnifier has pulled up strongly, and even closed at the daily limit on May 30th. In the coming months, the price will be dominated by wide oscillations, and the center of gravity will gradually increase. As spot prices continue to rise, the focus of glass operations will gradually increase.

Glass supply increases attention to demand matching

From the production company's inventory, glass inventory decreased by 500,000 weight boxes from the previous month to 33.47 million weight boxes, which was a decrease of 1.8 million weight boxes compared to the peak value of inventory. In particular, the inventory of manufacturing enterprises in the north decreased rapidly, and the inventory continued. The decline will play a supporting role in the stability and increase of the price of the glass market in the later period. The continuous rise in glass prices in May can prove that there is a good inverse relationship between inventory-price in the glass industry. However, in absolute terms, this year's glass inventory is still higher than in 2013 and 2014. In addition to the declining demand for glass inventory in the early period, it also benefited from the low supply. However, the profit recovery of glass companies in May has stimulated the ignition of new glass production lines. In June, glass demand will enter the off-season. The downside risk will increase.

Real estate fire triggered regulation and tightened glass callback risk

Recently, the glass ** that has been affected by the black system suddenly broke out in an independent market and closed for 5 consecutive days. The price of the glass ** has risen by 100 points. However, from the fundamental point of view, although the spot market as a whole performed well, but in the southern rainy season effect and the northern market capacity increase expectations, the spot price is difficult to continue, coupled with real estate policies to tighten the wind, the glass market correction risk increased.

The Glass Industry Implements Four Target Tasks of State-owned Documents

At the recently held meeting on the economic performance of the building materials industry in 2016, the China Construction Glass and Industrial Glass Association introduced the economic performance of China's construction glass industry in the first quarter of this year, and in the analysis report put forward the implementation of the national office [2016]34 No. 1 document specific measures and mission objectives.

Recently, glass out of the Shahe market has been significantly slowed down, inventory has started to rise, and it has been unable to maintain a balance between production and sales. This has led to the unsustainable pattern of rising glass bottles with high rising water. In the past two weeks, the Shahe region has been able to maintain only between 60% and 80%. Some Shahe manufacturers have already started to use the disguise to reach the goal of depotting. Shahe price reduction is only a matter of time.

On May 18, 2016, the General Office of the State Council issued the "Guiding Opinions on Promoting Stable Growth in the Building Materials Industry, Regulating the Structure, and Increasing the Benefits" (Guobanfa [2016] No. 34), stating that it is planned to reduce the amount of cement by 2020. The production capacity of clinker and flat glass, and the utilization rate of production capacity are back to a reasonable range; the production concentration of the top 10 companies in the production of cement clinker and flat glass is about 60%.

It is understood that the third line of Shandong Jurun Glass Co., Ltd. ignited on May 26 and had normal production and sales on June 19. Its company's fourth-line plan was ignited on July 28. Both of these glass production lines have a daily capacity of 700 tons, and the progress of the third line is one day ahead of schedule. It can be seen that the construction period is rushing forward. Although the glass industry's resumed production trend is expected, the speed of production recovery seems to exceed market expectations. Especially since May, glass production lines in Hebei and Shandong have been intensively ignited, and some of these production lines have been cold repaired at the beginning of the year.

Glass ** was once again strongly rising. The 1609 contract started at a low of 973 yuan/ton and rebounded to the recent high of 1,060 yuan/ton, an increase of nearly 9%. However, in the medium term, the rebound of the 1609 contract is not sustainable, and then the probability of oscillation in the 930-1060 yuan/ton interval is even greater.

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