Weekly Review of the Glass Industry: Line shutdown rate continues to rise, inventory levels decline

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Weekly Review of the Glass Industry: Shutdown rates continue to rise, while inventory levels decline. April 17, 2012, 10:12:33, Xiangcai Securities. According to data from China Glass Information Network, prices dropped slightly in most regions during the first half of April; the price drop in the Shahe area, which serves as a benchmark for prices across the country, contributed to this downward trend. According to our monitoring areas (the percentages in parentheses indicate the average price changes for white glass in each area), there are 2 areas where prices rose: Wuhan (+0.1%) and Guangzhou (+0.1%); whereas there are 6 areas where prices fell: Shanghai (-1.52%), Chengdu (-0.2%), Xi’an (-0.15%), Beijing (-0.12%), Shenyang (-0.05%), and Qinhuangdao (-0.65%). Sales in the northwest market have been poor, leading to a slight price drop; prices in the central China region have seen a minor increase, but the overall situation has not improved yet. With the decline in glass prices in Shahe, Hebei, there is also room for price reductions in the northeast region. The situation of inverted prices for glass intended for winter storage is now inevitable, posing significant pressure on glass manufacturers when it comes to shipments in the future. Under the impact of low-priced glass from Shahe, companies in Qinhuangdao have little ability to resist and are forced to sell glass at market rates. The export market for colored glass is also shrinking, while demand has increased slightly compared to previous periods. Orders from processing plants are decent. Excess production capacity has always been a major factor contributing to rising prices in North China. Recently, one production line in Shahe, Hebei was shut down for maintenance, but this had a limited impact on the market. Prices in the southwest region remain roughly at previous levels; market demand is uncertain, and some companies have seen an increase in inventory, which has led them to offer discounts. In East China, after a brief period of price increases by manufacturers, demand failed to strengthen, and prices lacked solid support. As a result, manufacturers have lowered their prices again in order to maintain their sales volume. Currently, the CIF price in Shanghai is around 60-61 yuan per metric box. The moderate demand in the southern China market also hinders any upward trend in manufacturer prices. Fluctuations in prices of goods from other regions also put pressure on prices in this region. Although manufacturer prices have not yet changed, the pressure remains evident. 　　Inventory levels: Increased shutdown rates lead to a decline in inventory. In the first ten days of April, the inventory levels at 267 float glass production lines across the country decreased compared to the same period earlier in the month. The total inventory amounted to 29.67 million weight boxes, a decrease of 440,000 weight boxes, representing a 1.46% drop on a month-on-month basis. However, inventory levels increased by 77% on an annual basis. As the weather gets warmer, downstream industries start operating again, and inventory levels are expected to continue declining. 　　Prices of heavy oil and soda ash on the cost side: Soda ash prices saw a slight rebound in early April. As of April 10, the average prices in the East China, Central China, and South China regions were 7 yuan/ton higher, at 1650 yuan/ton; 36 yuan/ton higher, also at 1650 yuan/ton; and 36 yuan/ton higher, still at 1650 yuan/ton. Stable in North China; 7 yuan/ton decrease in Southwest China. 　　Production capacity status (new startups, maintenance shutdowns, suspended operations) This week, one additional production line was put into maintenance mode, bringing the total to 37 lines; the production capacity of these lines in maintenance mode is 16,070 T/D. There were no changes regarding lines that were suspended – 29 lines remain suspended, with a production capacity of 11,960 T/D. No new startups occurred. Given the unfavorable market conditions, companies will continue to shut down their plants, raising the shutdown rate to 19.67%.