Building Materials Glass Industry Research Weekly

[China Glass Network] The average price of white glass for construction in China this weekend was 1536 yuan, up from last week in 7 yuan and up from last year in -91 yuan. This week, the overall trend of the glass in stock market has risen steadily. The production and sales of production companies have increased slightly from the previous month. Market prices in some regions have adjusted, and market sentiment has improved from the previous month. Overall, the orders of downstream processing enterprises are relatively stable, and some regions have increased month-on-month. With the advent of the traditional sales season, traders have also increased their inventories in moderation. Although some areas are affected by rainfall, manufacturers are blocked from going out of the warehouse, but overall, the inventory of manufacturers still shows a slight downward trend, easing the financial pressure on manufacturers. In terms of production capacity, this week Zhangzhou Qibin second line 600 tons of cold repair completed, ignition resumption of production, is expected to around the end of the month to lead the plate, to produce high-quality glass-based. It is expected that some production lines in southern China will resume production in the middle of the year.

Glass production increased by 6.8 year-on-year in January-June 2019, and we believe that the announcement by the Bureau of Statistics may be slightly distorted due to the statistical caliber, and according to the capacity data published by China Glass Futures Network, we believe that the actual production growth rate should be 3-4%. In terms of the number of production lines, due to the significant tightening of environmental protection in Shahe at the end of 2017, a large number of production lines entered cold repair, resulting in only 222-227 production lines in January-June 2018, while the number of production lines in January-June 2019 was 230-234, an increase in production capacity year-on-year.

Real estate "high-term housing sales and low inventory" status quo to provide support for glass demand. In recent years, the high growth rate of real estate sales and new construction and completion growth rate has shown a more obvious deviation; and in recent years, the high growth of real estate sales in the proportion of housing significantly increased, has accumulated more pressure to complete delivery, although late but will eventually appear to make up, the second half of 2019 gradually mean reversion is more likely. As the main use of glass before the completion of the scene, if the construction link as a whole warm up, the demand for glass will have a certain support, in the last 3 months of macro data has seen the construction end of the growth rate began to pick up, the second half of the glass demand to pick up the logical support gradually verified. From the construction data, January-June year-on-year growth of 8.8, the growth rate and January-May unchanged. High construction growth rate will be gradually transmitted to the glass installation, glass demand toughness.

In the production capacity increase and cold repair production is more, the potential cold repair event impact is expected to offset the increase in new/resumed production capacity. Judging from the new ignition capacity, there are 3 in January-June 2019, with a total daily melting capacity of 1950 tons. Cold repair production lines increased more, with 8 additional lines from January to June with a total daily melting capacity of 5550 tons. However, there are 4 production lines entering cold repair in January, 1 in May and 6 in June. The total daily melting capacity of these 11 production lines is 8550 tons. Although the production limit of Xingtai glass in mid-June has not been fully effectively implemented, the impact of similar events may be further fermented when environmental pressure is greater. The impact of environmental events can not be predicted, but from the governance of Xingtai, we believe that the strength of environmental protection has not been substantially weakened, and if similar event shocks continue to occur in other regions, it is expected to strengthen the contraction of the supply side, when the business climate is expected to improve significantly.

Look forward to the resonance of cold repair peak and completion repair. The float glass industry has indeed entered the peak period of cold repair, but there are many factors to consider whether the production line enters cold repair, including kiln age, cold repair costs, immediate profitability, the industry's off-peak season, expectations of future prosperity, and so on. At present, the kiln age of the enterprise has indeed entered the peak period of cold repair. Due to the different choices of refractory materials, the kiln age of glass kiln is usually 6-10 years. If poor refractory materials are selected, the cold repair period is generally 6-8 years, while better refractory materials are used, which is only a theoretical cold repair period. The repair of the kiln can usually last 1-2 years or even longer, this leads to a certain degree of uncertainty in the cold repair cycle, but the greater the certainty of the cold repair cycle. Judging from the cost of cold repair, due to the sharp rise in the price of refractory materials, the cost of cold repair has risen sharply by about 3000-50 million yuan. Enterprises are not willing to enter cold repair, but try to prolong the service life of kilns through continuous hot repair. Judging from the off-peak season of the industry, it is currently a mediocre period, and the following September-November is the peak period of demand. If enterprises choose cold repair, they will try their best to delay it after this year's peak season. Therefore, we believe that in terms of the supply cycle, in the absence of significant external disturbances on the supply side (e. g., the impact of the 17-year Shahe Environmental Shutdown of 9 lines), this year's peak season will not be too strong due to more new and cold repair production lines on the supply side. And next year's off-season, will depend on the willingness of enterprises to cold repair, from the kiln cold repair cycle, we believe that the large-scale cold repair cycle is expected to be seen in the Spring Festival next year, when the demand side of the toughness is still strong, there may be a phase of the industry high boom.