What Did The Chinese Glass Industry Experience In The First Half Of 2020

A) Supply side: production capacity has increased slightly, and output has rebounded steadily

      From the perspective of production capacity, as of the end of June 2020, a total of 378 float glass production lines were started, 232 were started, and the operating rate was 61.38%, a production line decreased from the same period last year; the total production capacity was 1.37 billion weight boxes, an increase of 203 million weight boxes from last year. . From the perspective of total daily melting capacity, as of the end of June 2020, the total production capacity of float glass was 228,300 tons/day, an increase of 0.34 million tons/day compared with the same period last year; 150,000 tons/day in production, and the operating rate was 66%; Among them, the production capacity of white glass is 140,000 tons/day, and the production capacity of color glass is 70,600 tons/day. From a production perspective, from January to May 2020, the output of flat glass was 383 million weight cases, an increase of 0.5% year-on-year.

B) Consumer side: domestic demand improves and consumption is gradually released

      1. The terminal rush work continues, and the orders remain high

      With the continuous improvement of the domestic epidemic situation, the national resumption rate has increased significantly, and the market is back on track. At this time, the original real estate market contradictions continue to affect the glass building materials market. Architectural glass accounts for 75%-80% of the demand for flat glass, so the real estate market has a greater impact on the demand side of glass. The initial construction glass is mainly used at the end of real estate construction, so the completion reflects the demand for glass to a certain extent. The rush-time of the construction front end in 2018 has led to the extension of the construction cycle and the continuous delay of completion, which has led to a substantial decline in glass sales and production-sales ratio.

      With the gradual increase in delivery pressure since 2019, the growth rate of completion has stabilized and rebounded, the flat glass production and sales rate has gradually returned to 100% or more, and the cumulative year-on-year growth rate of sales has also returned to the positive growth range, which means that demand orders have picked up and inventory Consume. The pressure of real estate completion and delivery in 2020 is still relatively large, and due to the suspension of the construction site in the first quarter, the construction period is passively shortened. The possible hurry will then appear in the "post-construction phase", and the construction area and completed area will increase significantly year-on-year. The consumption demand for architectural glass as a major consumable in the post-construction phase will increase significantly, reversing the same bad conditions as in 2018.

      2. Automobile production and sales continue to decline, and the industry's decline is difficult to change

      As another important downstream of the glass industry, compared with the real estate industry, the automotive industry is in a state of sluggishness, especially the impact of the epidemic in the first quarter, making the situation of the automotive industry worse. According to data from the Automobile Association, the cumulative national automobile production from January to May 2020 was 7.66 million units, a year-on-year decrease of 23.6%; the cumulative national automobile sales from January to May was 7.96 million units, a year-on-year decrease of 22.62%. The sluggishness of the auto industry is not unique to my country. The global auto market is performing very weakly. Many large auto companies have cut salaries and layoffs, and their production and sales have fallen sharply. The world is experiencing the winter of the auto industry.

      Another important reason for the decline of the automobile market is the crowding-out effect of high housing prices on automobile consumption. In recent years, real estate prices have continued to rise, residents’ leverage has continued to increase, and residents’ car consumption levels have fallen. The superimposed epidemic has a serious impact on the economy. Multi-factor resonance As a result, the auto market continued to slump. With the rapid development of the overseas epidemic crisis, the prospects for Chinese physical industrial enterprises with high foreign trade dependence are indifferent, and the income level of residents is still difficult to be optimistic. The attitude of cash holding makes it difficult for the new auto policy to start as expected. The auto industry is still not tolerated Optimistically, after the domestic epidemic is under control, after a small wave of restorative consumption, it has returned to negative growth. The demand orders for automotive glass are still the main pressure on the market.

 C) Inventory end: accelerated release of demand and accelerated destocking

      During the epidemic, the extreme imbalance in production and sales led to a substantial increase in the company's inventory, which once reached an absolute high in history, and the terminal's inventory was at a low level due to the stagnation of the construction site and the low operating rate of deep processing enterprises. With the end of the epidemic and rapid recovery of various industries, the demand for construction glass in the downstream terminal increased rapidly, and deep-processing companies replenish the warehouse to drive the rapid release, which led to a substantial decline in the stock of original glass companies.

      In mid-April, the national glass enterprise production line inventory reached 72 million weight cases, which is at an absolute historical high, which is 80% higher than the same period in 2019, and the inventory in the same period in 2019 was a 33% high year-on-year. By mid-June, the inventory had dropped rapidly to 38 million weight cases, with a drop rate of 48%, returning to the same level in history.

D) Summary: Demand resilience is maintained, the market is volatile

       Short-term pressure: With the effective control of the domestic epidemic, various policies have been put in place to ensure the resumption of production and production of enterprises, and the start of the real estate construction project at the largest consumer terminal has gradually increased demand orders and deep processing sales have improved, but seasonal consumption In the low season, the terminal inventory has reached a high level, the incremental purchase of the original film has slowed, and the market still has callback pressure.

      Support in the medium term: the surge in catching up on the front end of the real estate construction due to various reasons in the early period has accumulated a large number of projects to be completed, and the domestic epidemic situation in the first quarter has been superimposed to affect the start of the construction process. After the construction site is resumed, the enterprise will gradually accelerate the progress of the construction back end. This may bring a significant wave of "hurried completion", which will drive the substantial increase in back-end building materials products, especially construction glass orders, and the continued demand, and the market rebound drive will gradually increase. However, in the case of profit recovery, it may also stimulate the resumption of the original cold repair capacity. Under the dual impact of supply-side incremental expectations and demand toughness, the market maintains a high-volatility pattern.