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Review Of China 2018 Float Glass Market And Outlook For 2019

This year, the price of the glass futures market presents a situation of first high then low. After the extremely strict environmental protection policies last year, many production lines have strengthened environmental protection supervision. This year, shahe region only maintains the existing production capacity, and some production lines are discontinued due to the influence of policies, while the production lines in other regions are still increasing, resulting in the net growth of the overall production capacity this year.


From the perspective of time node, in the past two years, the seasonal performance of the glass market is not obvious under the disturbance of the important factor of environmental protection, and the current winter market does not show too much sadness, but the group price increase. Although the effect is not very ideal, at least the current price supports confidence. If the first quarter of next year no more centralized maintenance under the situation of production line, we feel more pessimistic attitude to market in the first quarter, prices fell again to near 1200 central, but the price is too low to stimulate manufacturer maintenance, late price focus is expected to slow rebound, but the space is not optimistic, next year's summit is expected to price will not exceed this year.


I. review of the flat glass market in 2018


(1) the glass price rises first and then decreases


Taking advantage of the supply side reduction at the end of 2017, the glass futures price has stepped out of the rare mild winter market in the first quarter of 2018. Into the second quarter after a short fall, the overall launch of a wave of upward shock. However, as the gold nine silver ten market was exhausted in advance, so that the real into September, the glass price began to move down the center of gravity. At the end of the fourth quarter, futures fell back to their lowest levels of the year. Below the glass nearly a year to review the trend.


At the end of 2017, nine production lines in shahe, the main production area of glass, were forced to shut down because they did not meet pollution permits. Supply - side shrinkage has caused glass prices to rise sharply. Shahe, as the benchmark of glass price, has a significant driving effect on the national market. Although the environmental protection pressure in other regions is not very great, the spot price in various regions is exceptionally strong under the linkage effect of the glass market regions. In the first quarter, the construction rate of downstream buildings declined due to the Spring Festival, and the mismatch between the upstream and downstream starts was the main factor leading to the weakening of glass. However, the positive effect of the reduction of supply side on the market was obviously more profound, and the glass market prices in various regions even set a new high in recent years.


However, as the downstream factories reworked after the Spring Festival, the performance of market orders fell short of expectations, and the glass market began to fall back gradually. Under the influence of the traditional Spring Festival, the high inventory accumulated by the manufacturers needs to be digested. In the face of high market prices, the decline of orders hits the confidence of the traders, and at the same time, it also lengthened the destocking cycle of the glass manufacturers.


With the increase in raw material prices in June, glass manufacturers in good inventory situation again prices, coupled with the late industry meetings held frequently to boost the market, glass spot price rising around the sound. In August, the supply side of shahe was again suppressed by environmental protection, and the futures price was heard to rise. However, compared with last year's environmental protection policy, manufacturers have improved this year, and the glass price under the policy is relatively mild, and the highest futures price of glass still hasn't broken through 1500.


From July to August, the enthusiasm of the downstream market overdrew the demand of this year's peak season. After entering September, market of glass spot not only did not show the busy season characteristic that anticipates, manufacturer spreads out depreciate mode gradually instead. National Day holiday period, as the spot manufacturers increased, prices fell sharply, glass market peak season phenomenon is difficult to see traces. As the real estate cooling in the fourth quarter, the focus of glass prices is more difficult to increase.


In the real estate market of 2018, the demand for glass has also changed in the latter half of the year. Although the environmental protection policy is still strict, but after 17 years of concentrated production, the glass industry to strengthen their environmental protection management, the latter environmental protection policy again caused a large area of supply contraction situation is no longer repeated. However, under the background of cost compression, the profit of glass manufacturers is shrinking, so that the glass production lines put into production from 2010 to 2014 have started to be repaired one after another, and the phased supply of glass in the later stage is expected to be tightened.


Ii. Overall supply increases


(a) increase in the net capacity of glass


From 2015 to 2017, the total production capacity increment of the plate glass industry gradually decreased. On the one hand, the domestic economic growth slowed down; on the other hand, the environmental protection has been increasingly strict in recent years. The approval of new production lines has been strictly controlled. For 2018, though, the net increase in plate glass was higher than in the previous two years. According to the production capacity distribution, two of the five new production lines put into production this year come from liaoning, two from hunan and one from yunnan. At present, the proportion of production capacity in central China is increasing, and the power of discourse cannot be ignored. In recent three years, only 2,600 tons of glass from dejin sixth and seventh lines and jincang glass have been built and put into production in the benchmark dishahe market.


Under the tightening of environmental protection, shahe area has been most affected in the past two years. In November, 2017, many production lines were forced to withdraw from the market due to the problem of failing to meet the emission permit. In August this year, shahe again required the closure of unlicensed enterprises, and the annual production of licensed enterprises was limited to 15%. In shahe, 14 production lines have been shut down, accounting for 26 per cent of local capacity. It is worth noting that shahe is located in an environmentally sensitive area in the beijing-tianjin-hebei region. It is normal for shahe to be suppressed by more environmental protection. However, the production capacity of other regions burns more natural gas and heavy oil, and the supply side is not affected too much. Since the beginning of this year, domestic glass cold repair has reached 10,550 tons/day, and as many as 18 production lines have resumed production, involving a total daily melting of 12,410 tons, which has set a new high for the total annual capacity of resumed production.


(ii) future maintenance capacity is expected to increase


Since November 2018, the number of domestic cold repair production lines has increased significantly. It is reported, current cost pulls go up next manufacturing company profit slides, be in itself to be in demand low season, make glass manufacturer spreads out cold repair in succession. It is reported that most of the recent production lines for cold repair were put into operation around 2010, and the optimal production life of the kiln is 5-8 years. According to the data of China glass futures network, there are 48 production lines that have not been overhauled since 2011 (including), among which 11 are color glasses. These float glass production lines have gradually entered the old age and are facing the need of overhaul at any time. Generally speaking, in addition to unexpected factors, manufacturers will choose low demand or low profit period to choose cold repair. From the recent market trends, the first quarter of 2019 or more concentrated maintenance period.


From January to November, China's total output of plate glass was 79.242 million weight cases, exceeding last year's total output. The total number of float glass in China is 372, among which 237 are in production, and the capacity utilization rate is only 63.7%. In the future, the impact of environmental protection on the supply side will continue to exist. However, when environmental protection measures have been taken in the market, large-scale production reduction will not occur. And if profits are squeezed next year, more production lines will be overhauled.


Third, the production cost increases significantly


(a) soda continued high shock


Data from the national bureau of statistics show that China's total soda production from January to October in 2018 was 21.27 million tons, down 4.08 percent year on year. The average operating rate of soda units since 2018 is only around 84%, down nearly 5 percentage points from the same period last year, due to the shutdown rectification of unqualified enterprises caused by multiple sets of enterprise overhaul and environmental protection inspection, as well as the load reduction of enterprises caused by the high temperature this summer.


The soda market has been volatile this year, with stocks falling after hitting a high of more than 800,000 tons in early march, though they rebounded again in June. After two waves in mid-july, soda soda inventory began to decline again, until now the inventory basically maintained at a low level. According to statistics, at the end of November, the soda ash inventory was 150,000 tons, less than 1/5 of the peak inventory this year. Soda ash inventory and price trend showed a significant negative correlation. Soda prices hit two-year lows in early march and early August, corresponding to high inventories. But this year's soda prices fluctuated less than last year. As the inventory level of the third and fourth quarters all the way down, soda price center of gravity slowly increased. From the beginning of August to the middle of December, the soda price center of gravity increased by 250 yuan, significantly raising the cost of glass production, glass manufacturers' profits fell. In the long run, in the late environmental policy is still too tight, flat glass production capacity reduction under the background, soda or will maintain a strong shock situation.


(2) other raw materials remain high


In addition to soda, the cost of glass fuel and quartz sand are rising steadily. With the increasingly stringent national environmental protection policies, the mining of placer has been greatly affected. Many manufacturers have closed the placer, so the supply of quartz sand is in a certain gap. Meanwhile, the procurement cost and transportation cost have also increased significantly, and the shortage situation will continue in the short term.


Since the beginning of winter, the price of natural gas has increased again under the background of increasing heating demand and changing from coal to natural gas in many places. Natural gas prices have risen more than 50 percent since late August, a repeat of last year's fourth-quarter rally. Due to seasonal effects, natural gas prices are expected to remain strong until the end of next year's heating season. At the same time, another important fuel coal prices also continued high shock situation.


Under the support of relatively good profits, the pressure of rising costs can not be fully converted to the original. When the market preference, the rising cost of glass has a significant role in promoting the price of glass, when the market recession, the increase of raw material cost may be more encroachment on the profit space of the glass industry itself. In the environmental policy phase of tightening expectations, the overall market cost is difficult to have significant room for decline.


Iv. Poor long-term demand


(I) good overall inventory structure


Taking a general view of the inventory of flat glass manufacturers in recent years, the trend of inventory shows obvious seasonal characteristics. The annual inventory peak is generally from the Spring Festival to the end of the first quarter. Due to the holiday of downstream factories and rigid production of glass manufacturers, the glass market inventory keeps rising. In the third quarter, due to the expectation of peak season, the speed of traders' procurement was accelerated, and the inventory of glass manufacturers reached a peak of digestion, while the inventory fluctuation in the second and fourth quarters was small. According to the inventory data of the year of 18, the overall performance is preferred to 2015-2017. It can be seen that enterprises have made great progress in inventory management. This year's industry conference is also to increase prices for the theme, to the effect of the performance is good. From the glass manufacturers weekly inventory digestion, the second and third quarters of this year, the overall sales speed is good.


From the point of view of shahe key enterprises inventory, shahe glass inventory at the beginning of this year hit a peak of nearly 5.69 million weight boxes after the year began to decline mode. At the end of November, inventories had fallen to as low as 2.8m weight cases, half of this year's peak. It is this wave of confidence that has made the December conference price hike a success. However, it is worth noting that during the month before and after the Spring Festival, the demand decreased sharply, and the glass inventory increased undoubtedly. If the spot goods increased sharply at this time, the demand in the later period would certainly be advanced.


Glass inventory can most directly reflect the sales situation, the overall negative correlation. The manufacturer may judge the current sales level according to the current inventory status and the recovery of truck iron frame, so as to make price adjustment. Therefore, the inventory trend may be slightly ahead of the price change. At present, the inventory of glass manufacturers is 31.19 million boxes, 440,000 boxes more than the same period last year. With the recent rise in spot prices across the region, in the downstream buy up or not buy down the drive, traders or a round of replenishment needs. However, the cold weather, the north downstream construction market rate of decline, glass market inventory is difficult to effectively digest. The low inventory in the glass market reflects the good actual demand driven by the release of the previous real estate stock demand. However, as the real estate cooling intensified, the late performance of glass demand is worth studying.


(ii) shrinking long-term demand for real estate


According to data released by the national bureau of statistics, from January to November 2018, the sales area of commercial housing was 1.486.04 million square meters, up 1.4 percent year-on-year. Investment in real estate development nationwide totaled 11.083 trillion yuan, up 9.7 percent year-on-year in nominal terms. From January to November of 2018, the fundamentals of the real estate industry are still positive, and the sales growth rate remains positive despite a decline. From the perspective of cities, the cumulative sales area of first-tier cities presents an upward trend year on year, which is mainly caused by the population flow of first-tier cities, while the cumulative sales area of second-tier and third-tier cities with overheated investment in the early stage presents a steady decline year on year. Overall, the transaction volume of commercial housing in 30 large and medium-sized cities has declined gradually in the past three years. Along with the country to the shantytown resettlement way from the emphasis on monetization to return to the physical resettlement, the late three or four tier cities destocking rate gradually decreased. Data show that the housing price in the first, second and third-tier cities in 70 large and medium-sized cities this year showed a stable year-on-year trend in the month. Under the policy of "insisting that houses are used for living", the housing price growth was well curbed.


From January to November in 2018, investment in real estate development nationwide reached 11.083 billion yuan, up 9.7% year-on-year, and the growth rate was the same as that from January to October. From January to November, real estate development enterprises purchased 253.26 million square meters of land, up 14.3% year on year, down 1% from January to October, while housing construction started in the same period, up 16.8%, up 0.5%. The growth rate of new construction started to go up again, while that of land acquisition ended to go down. The trend of divergence reflects that major real estate developers have reduced their land acquisition efforts. However, it is still an irresistible trend to accelerate the pace of development and increase the land purchase. From January to November, the national housing construction area increased by 4.74% year on year, down by 0.4% year on year. The year-on-year growth rate of the completed area was -12.3%, with the year-on-year growth rate falling by 0.2%. The continuous differentiation between the start and completion of new construction highlights the tight capital and prolonged construction period of the industry.


With the decrease of sales de-escalation and the increase of financial pressure in the industry, it is expected that the cumulative year-on-year growth rate of new construction area of the real estate industry in the past 19 years will be high and low, while the land purchase data will also remain low. Real estate regulation and control policies are still under high pressure, and the land market is cooling. Land acquisition by real estate enterprises has slowed down obviously in the fourth quarter, and real estate investment will face certain pressure next year. Under the background of increasingly strict regulation, rising capital cost and gradual deleveraging policy effect, first-tier developers have increasingly prominent advantages in financing ability, land acquisition opportunity and development and sales ability, and the industry concentration has been accelerated.


Generally speaking, glass demand will be generated only after the completion of real estate, so the completion area data is closely related to the glass demand. The total area completed since this year has been in a negative growth situation year on year. Compared with the increment of glass supply end, the loose situation of glass supply and demand cannot be ignored. In the real estate slowly cooling trend, it is difficult to effectively boost glass demand.


5, outlook


Generally speaking, the price of the glass futures market this year presents the situation of first high then low. After the extremely strict environmental protection policy last year, many production lines have strengthened the environmental protection supervision. Although the current and future environmental protection policy is only strict for the glass supply end, the influence in the later period will be weakened a lot. In view of this year, shahe region only maintains the existing production capacity, and some production lines are discontinued due to policy impact, while production lines in other regions are still increasing, resulting in a net growth of the overall production capacity this year.


Raw materials are also subject to environmental policy requirements, from soda ash to fuel are affected to varying degrees, resulting in high glass production costs, but nonetheless, this year the flat glass industry is still a considerable profit. In the later stage, the real estate market is still the nerve that affects the market. Under the suppression of regulatory policies, slow cooling of the real estate market is inevitable. As the main demand side downstream of glass, low real estate demand will definitely affect the consumption of glass. But after 19 years, the large number of production lines now facing cold repair demand, if the demand or profit decline, supply will shrink.


From the perspective of time node, in the past two years, the seasonal performance of the glass market is not obvious under the disturbance of the important factor of environmental protection, and the current winter market does not show too much sadness, but the group price increase. Although the effect is not very ideal, at least the current price supports confidence. If the first quarter of next year no more centralized maintenance under the situation of production line, we feel more pessimistic attitude to market in the first quarter, prices could fall to 1200 prices near central, but the price is too low to stimulate manufacturer maintenance, late price focus is expected to slow rebound, but the space is not optimistic, next year's summit is expected to price will not exceed this year.