short term, the reality of weak trading will continue
during the Spring Festival, downstream demand stagnates, holiday inventory increased by 18.34% annually, 114% year-on-year, and inventory pressure is high.
Glass market trend before and after the Spring Festival is diametrically opposite, the rise before the festival is more expected to be dominated by strong, the middle and lower reaches of the replenishment brought spot to the warehouse price. After the festival, the recovery of downstream demand is not clear for the time being, the cold repair is less than expected, and under the pressure of high inventory, the market has fallen sharply.
Inventory pressure
before the Spring Festival, the middle and lower reaches of replenishment, spot inventory prices, but this is more inventory pressure transfer, not actual demand consumption, traders after pre-holiday replenishment, inventory high level. During the Spring Festival, downstream demand stagnated, holiday inventory increased by 18.34% annually, 114% year-on-year, and inventory pressure was high. The high inventory of
glass needs to be solved through strong supply and demand, but this change is not seen at present. After the spot price rises, the cold repair falls short of expectations, while the downstream has not fully resumed work, demand is still uncertain, and high inventory has become an obstacle to the continued rise of prices after the festival. Before the
cold repair fell short of expectations
, the market expected centralized maintenance at the end of last year or in the first quarter of this year, and finally the actual maintenance fell short of expectations. In December last year, the cold repair volume decreased or even the production line ignited. The main reason for this situation was that after the replenishment of the middle and lower reaches, the spot price rose to the warehouse, the profit improved, and the cold repair power declined.
In addition, in the long run, during the period of capacity recession from 2014 to 2015, the loss of coal is about 200 yuan/ton, and the loss of natural gas is about 500 yuan/ton, which lasts for more than one year. At present, the loss of glass is more than half a year, the loss of production line with natural gas as fuel is about 200 yuan/ton, the loss of production line with coal gas as fuel is about 160 yuan/ton, the basic break-even of production line with petroleum coke as fuel is balanced, and the profit is abundant from 2020 to 2021, so the cash flow can support for a period of time. How the supply of glass goes depends on the start of demand this year.
The downstream has not yet improved
significantly. At present, the downstream processing enterprises have not generally started, the overall trading atmosphere has not yet appeared, and whether the demand can be improved this year is still unclear. From the perspective of long-term analysis, glass is mainly used before the completion of real estate. Our previous research found that the growth rate of new construction after 2016 was three years later than growth rate of completed area in the same month, while the growth rate of completed area in 2022 was not as good as expected due to financial pressure, and some demand for guaranteed delivery was shifted to 2023. There is still a stock of completed projects this year, but the core is still sales. From the comparison of sales growth and completion growth, the correlation between the two is stronger, this year's completion demand ultimately depends on whether the sales data can rebound, the current high-frequency sales data has not seen a significant improvement.
Glass is still playing a game of weak reality and strong expectations. The high inventory in the weak reality needs to be solved, the most fundamental is still on the demand side, and demand determines supply. Short-term downstream has not fully resumed work, whether demand can be improved is still unclear, it is expected that the transaction will still be weak in realistic logic, and the futures price will be weak. In the medium and long term, if real estate sales can substantially improve, glass can be bought at low prices in the medium and long term.
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