Flat glass prices hit a new high in ten years
Recently, the official website of the Ministry of Industry and Information Technology disclosed that the Department of Raw Materials of the Ministry of Industry and Information Technology held a flat glass price seminar the day before. The meeting concluded that the recent increase in demand and rising raw material and fuel prices have pushed up the price of flat glass. In response to price stabilization, the meeting proposed that companies should do everything possible to increase production, strengthen the connection between upstream and downstream industry chains, pay attention to the price changes of raw materials such as quartz sand, soda ash, and natural gas, and coordinate the upstream industry chain to ensure supply and price stability.
Participating organizations in this conference include the Industry Development Department of the National Development and Reform Commission, the competent authorities of industry and information technology in key provinces and regions, as well as relevant industry associations and key enterprises.
Behind the above-mentioned calls for increasing production and stabilizing prices is the price of flat glass that has risen for one year in a row. According to data released by the Price Monitoring Center of the National Development and Reform Commission at the end of July, from May 2020 to June 2021, the average monthly transaction price of 5mm float flat glass rose from 32.51 yuan per square meter to 42.24 yuan, an increase of nearly 30%.
Glass futures prices also hit a record high. Zhengzhou Commodity Exchange data show that since this year, the main contract price of domestic glass futures has slowly climbed, and then rose rapidly in May. On May 12, it broke through the 2,700 yuan/ton mark, and then the price adjusted back to 2,500 yuan/ton. In July, prices rose again, hitting an intraday high of 3079 yuan/ton on July 23, a record high.
“At the end of last year, the price of flat glass had risen to a ten-year high, and this year it has increased by about 50% on the basis of the ten-year high.” A raw material industry analyst at a securities firm said that the price continued to rise. It has brought huge profits to flat glass manufacturers, but it has also brought an impact to the fiercely competitive downstream processing industry, which is dominated by small and scattered enterprises. This is one of the reasons why the Ministry of Industry and Information Technology is currently proposing stable prices.
According to data from the Ministry of Industry and Information Technology, in the first half of 2021, the operating income of the domestic flat glass industry above designated size increased by 46.2% year-on-year, and the total profit increased by 155% year-on-year.
This round of flat glass price increases is mainly driven by tight supply and demand fundamentals. Real estate is the most important demand side of flat glass. The aforementioned analysts pointed out that the economic incentive policies under the epidemic have promoted the increase in demand for real estate chains. According to data from the National Bureau of Statistics, from January to June, real estate development enterprises completed a floor space of 36.81 million square meters, a year-on-year increase of 25.7%.
On the supply side, “de-capacity” is the main policy route faced by the domestic glass industry in recent years. In 2009 and during the “Twelfth Five-Year Plan” period, under loose macroeconomic policies, domestic infrastructure demand was high, which drove a large amount of glass production capacity to launch, which in turn resulted in overcapacity in the industry. In 2016, the State Council issued a guiding opinion, proposing that it is strictly forbidden to file new flat glass construction projects to expand production capacity before the end of 2020; the following year, the Ministry of Industry and Information Technology issued measures for the implementation of capacity replacement in the glass industry. The replacement ratio puts forward a higher requirement of 1.25:1.
“Under the guidance of policies, enterprises’ impulse to invest in glass production capacity has been suppressed.” The aforementioned analysts believe that while the supply of flat glass is under control, demand continues to rise, which is the main reason for the continuous increase in glass prices since last year.
In addition, the aforementioned meeting of the Ministry of Industry and Information Technology believes that rising prices of raw materials and fuels have also pushed up the price of flat glass. The product is a mixture of quartz sand and soda ash, and the main fuel is natural gas and coal. Since the beginning of this year, the prices of the above-mentioned raw materials and fuels have shown an upward trend. In this regard, the Ministry of Industry and Information Technology proposed to pay attention to the price changes of raw materials such as quartz sand, soda ash, and natural gas, coordinate the upstream industrial chain, ensure supply and price stability, and create a good market environment.