The most popular glass price rise drives market se

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The price rise of glass drives the market sentiment. Is there still a market in the off-season?

at present, the inventories of traders and processing enterprises are at a low level. The price increase of manufacturers stimulates the market to replenish inventory. However, the glass price is difficult to rise continuously under the pattern of strong supply and weak demand. From a fundamental point of view, demand is not synchronized under the background of supply side reform, and the price rise caused by environmental protection hype is difficult to sustain; The manufacturer's profit is still high, the production capacity is expected to recover, and the medium-term supply pressure is difficult to reduce; As the busy farming season and plum rain season are approaching, the pressure on manufacturers to leave the warehouse in the dry period is still large; The cost support is weak. At present, the glass price still has great room for decline; As the policy is tightened, it is difficult for the long-term building materials demand to have explosive growth. Therefore, the glass fundamentals are still weak. It is expected that the glass will have a long-term volatile decline. During this period, the market may cause capacity contraction due to price oversold and profit reduction. The seasonal demand is released repeatedly, but the decline trend is not easy to be changed

I. fundamental analysis

overview of supply and demand in the industry

as shown in the above figure, the glass industry has fallen into a long-term contradiction between supply and demand since 2011, and the glass price has risen when its periodic contradiction is relieved, but the problem of structural excess supply in the industry is still prominent. In the past two years, after the supply and demand reached the stage top in May 2017, the glass production capacity declined slightly due to off-season maintenance, relocation and other reasons. At the end of the year, due to environmental protection inspection and other problems, Shahe region shut down 9 production lines that were not approved to be built first, that were inconsistent with the approved construction or that did not obtain the environmental pollution discharge license, affecting the daily output of about 5800 tons/day at that time, accounting for 3.8% of the total national operation capacity, Although the rapid shrinkage of the supply side boosted the market bull atmosphere at that time, and the futures price also rose rapidly for a time, it can not be ignored that during this period, the demand also fell synchronously, only slightly slower than the supply. After, the glass production capacity recovered rapidly attracted by high profits. At the same time, the demand recovery speed was relatively slow. It is understood that the glass processing orders of the industry decreased by about 30% year-on-year after, and the inventory of manufacturers is rapidly accumulating at present due to the aggravation of the contradiction between supply and demand

at present, if there is no compulsory policy intervention, the production capacity will decrease sharply under the generally high profit level of this industry, and the demand of downstream industries is difficult to increase explosively under the strict real estate policy control. Therefore, the problem of structural oversupply in the glass industry within ± 0.1% of the set value cannot be effectively solved for a short time, and the glass price is difficult to achieve a stable rise

rapid expansion of production capacity under profit attraction

with the frequent introduction of environmental protection policies, the production cost of glass has been gradually raised; On the other hand, since the price of the electronic universal tensile machine as an experimental project in the glass spot market was on the high side and the downstream demand generally fell after, the manufacturers adjusted the glass price one after another. Under the joint action of the two aspects, the industry profit fell rapidly after

at present, the profit rate of coal made glass in Shahe area has decreased from about 40% in the highest period to about 17.39%. From the long-term trend chart, it can be seen that the current profit rate is still at a medium high level. Under the guidance of this high profit rate, the sudden reduction of production capacity is expected to be small. Even in the later stage, there will be production lines gradually put into operation, and it is difficult to reduce the medium and short-term supply pressure

the above figure is a statistical chart of the actual capacity utilization of the glass industry, which also verifies that the glass production capacity is rapidly recovering. In recent months, driven by the active price increase of manufacturers, the market atmosphere has improved, and the production capacity has also recovered rapidly after the year. Since this month, 950 tons of the fourth line of the Three Gorges Project in Hubei, 900 tons of the first line of Nanning relocation project in Guangxi, and 600 tons of the first line of fulaite project in Zhejiang have been ignited. The second line 700 tons of Yunxiang glass factory in Yunnan, which was purchased by Shahe Haisheng in the early stage, has also been cold repaired and will be ignited and baked in the near future

a total of 4 production lines resumed production this month, with a total recovery of production capacity of 18.9 million heavy boxes. The number of production lines in the industry reached 235, with a production capacity of 93.44 million heavy boxes, an increase of 3.6 million heavy boxes over the same period last year. Another thing to note is that in November last year, the capacity reduction caused by the shutdown of nine production lines in Shahe region has been compensated by the capacity of other regions. At present, the industry capacity utilization rate is 71.87%, and the adjusted capacity utilization rate is 86.38%. The supply pressure in the later period is still high

inventory growth hit a record high over the years

as shown in Figure 5, at the beginning of the year, the inventory growth of mainstream manufacturers in Shahe region hit a record high in recent years. At that time, the total inventory of manufacturers and traders was nearly 50% higher than that in 2017. After the downstream resumption of work, the market orders fell by nearly 30% compared with that of last year. Market confidence was severely hit, and the glass spot futures prices fell sharply, Under the pessimistic market sentiment, traders and processing enterprises have low intention to prepare goods, and inventories continue to run at a low level. Recently, the slight price increase of glass production enterprises has stabilized market confidence. Under the psychological factor of buying up but not buying down, traders and processing enterprises began to carry out centralized replenishment. As a result, the warehouse out situation of production enterprises has improved, and the overall inventory of some enterprises even directly promoted and sold graphite as graphene. However, this round of replenishment is actually a process of inventory transfer of production enterprises. With the arrival of busy farming season and plum rain season, The orders of processing enterprises will gradually decrease, and the current production and sales rate will be difficult to maintain after the replenishment of stock by traders and processing enterprises, and the inventory of production enterprises will accumulate again

II. Summary and operation suggestions

(1) under the pattern of structural excess supply in the existing industry, the production capacity continues to recover due to the attraction of profits, but the demand side is hard to say explosive growth, which will aggravate the contradiction between supply and demand in the industry and cause the continuous decline of glass prices

(2) as the busy farming season and plum rain season approaches, downstream order manufacturers still face great outbound pressure

(3) the cost support is weak. At present, there is still a large downward space for glass prices

(4) the supervision of real estate speculation is becoming stricter, and it is difficult for the long-term demand for building materials to have explosive growth

future outlook

at present, the fundamentals are still weak. It is expected that there will be a long-term volatile decline in the glass market. During this period, the market may repeat when the price falls, the production capacity shrinks, and the seasonal demand is released, but the downward trend is not easy to be changed. At present, the discount range of futures has been partially repaired and the time is approaching the off-season. It is suggested that investors can establish some bottom positions to enter the market or wait for short selling at high prices after the rebound

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