Glass industry supply and demand more than expected probability!

Recently, the market is highly concerned about the glass industry, tangled in that, on the one hand, glass prices have been oscillating at high levels since the second half of last year, glass companies will have a good performance, on the other hand, they worry that the current cycle is high and the second half will go down. . What are the core factors that determine the profitability of glass companies? What are the main variables that determine the price of glass? Where will the glass prices go in the second half?

The main conclusions are as follows:

1. The core factor of the cyclical changes in profitability of glass companies is the glass price. Taking Qibin Group and Xinyi Glass as examples, its profit rate and glass prices are highly correlated with each other.

2. Historical experience shows that demand determines the glass price trend: the growth rate of new real estate starts is highly consistent with the glass price trend; the impact of supply on glass prices is divided into two phases: Before 2008, new ignition capacity led the supply change, margin Supply and glass prices are highly negatively correlated. When marginal supply increases substantially, downward pressure on prices is greater, and vice versa. After 2008, production capacity cuts (including cold repair and production restart) dominate supply changes, and marginal supply is highly correlated with glass prices. This is because the decision to suspend production capacity is based on the profitability of the company and business owners' expectations. When the demand is strong and glass prices rise, corporate profits improve and business owners expect to be optimistic, marginal supply will increase (reproduction capacity will increase), and marginal supply will become marginal demand. The dependent variable. Taken together, demand is the core variable for glass prices.

3, 2016-2017 glass price cycle has become different from the past, the next six months can be optimistic points: First, the demand was stunned elongated, due to real estate sales differentiation, developers did not significantly make up the inventory, making the current inventory absolute value and relative The values are all at a low level. The new construction of real estate will not be pessimistic in the next six months (perhaps there may be a possible rebound). Second, the marginal supply will increase slowly. Most of the new capacity in the industry will be ignited after 2005, according to a 10-year lifespan. At present, the increase in industrial technology production has been suspended. At the same time, the company’s asset-liability ratio is high, environmental pressure is high, and pessimism is expected based on past experience. The recovery production capacity is not expected to rebound. Looking back for half a year, marginal supply pressure is not significant.

4. Due to the highest proportion of fuel costs in the glass industry (about 44%), the use of different fuel systems (natural gas, heavy oil, petroleum coke, coal tar, coal gas) has a large difference in production costs and lower fuel costs. The bigger the medium-term view, the stronger the environmental protection, the different companies' fuel costs will gradually converge, and will benefit companies with strong cost management capabilities.

According to the above analysis, combined with the industry's short-term judgments, the supply and demand relationship in the glass industry is higher than expected.