By Xie Hui
On January 29th, glass continued to shift positions for monthly market. The opening price of glass futures main contract FG309 was 1574Yuan/ton, while the highest price of the intraday was 1582Yuan/ton and the closing price was 1580Yuan/ton; it was 13Yuan/ton higher than the previous trading day, with the growth rate of 0.82 percent; the transaction volume was 1,218,900 lots and the holding volume was 355,930 lots.
Meanwhile, being affected by the bullish factors in the real estate industry data and the domestic industrial data, there is a temporary departure between spot trend and futures price. At present, the overall domestic soda ash market is weak but steady, and individual manufacturers have conducted a sporadic adjustment on the factory price, while pre-holiday trading is slack. All the soda ash manufacturers around China have a certain stock, the operating capacity is maintained around 50 percent; the manufacturers are in the destocking phase, and the dominate delivery price of the heavy alkali of the domestic ammonia alkali manufacturers is 1350Yuan/ton to 1,400Yuan/ton.
According to market analysis, along with China's strong economic rebound, external market increasingly gets strong and the investors' risk sentiment is detonated again, while the massive influx of funds pushing up the actual spot; from the short-term point of view, the actual spot of glass price is expected to continue the strong trend.
The policy anticipation opens the rise space
Since this January, there has been a fierce competition in the glass futures market; the main contract price rose from the lows of 1367 Yuan/ton in the beginning of January to 1,527 Yuan/ton, and the growth rate was up to 12 percent, then the price dull and dropped to 1458 Yuan/ton. This week, being boosted by positive data, there was a strong rebound, but it failed to break through the mark integer of 1,500 Yuan/ton.
As for the spot, each index continued to weaken. As of January 29th, the China Glass Comprehensive Index was 1042.26 points, dropped by 0.68 points compared with the report values of the previous trading day; China Glass Price Index was 1012.57 points, dropped by 1.26 points compared with the report values of the previous trading day; China Glass Market Confidence Index was 1161.02 points, increased by 1.65 points compared with the report values of the previous trading day.
Wanda Futures believed that as the Spring Festival approaching, the rigid demand in the spot market gradually passes away and the effective demand is insufficient, thus the long-term positive trend shows itself. There is still a pattern of strong south and weak north in the entire market: the strong rising trend of South China market turned steady and weak; East and Central China stayed even and there was no highlight; the Northeast and the Northwest were still "hibernating". There is no encouraging sign in the market and it is difficult to conduct sharp price adjustment actions in a short term in the spot market.
From the current situation, it can be seen that in January, the supply of crude oil increases, and it will take some time for the global economic to rebound; there is a slow growth in demand, and fuel prices are also running low; therefore, there is a small possibility for the prices increases of raw materials and fuel to promote the price increase of glass, and the glass costs will remain to play a bottom supporting role for the glass prices.
From the terminal consumption structure of glass, it can be seen that 70 percent of China's glass was used in the real estate industry, 20 percent in the automotive industry, and the rest 10 percent was digested by other fields. Although midwinter is a tough season for the glass industry, the "Urbanization Construction" theme began at the end of 2012 is like a fire in the winter, opening the rise space for glass.
"Whether the glass can continue its rise trend or flush high and then recede in later, the funds and project commencement status of real estate enterprises are the important expectation of supporting the actual spot of the glass.” said Hu Xiaodong, Nanhua Futures analyst, indicating that there was a significant improvement in the real estate sales in the second half of 2012, and the capital flow of the real estate enterprises has generally been improved currently. According to the amount of new loans of this year released by the four main banks, it is expected that there will be a blowout in the amount of new loans in January, and the funds of enterprises will be significantly improved in the first quarter.
Therefore, the glass futures prices still have a good support. According to the historical trends, the glass price is now in a rising period of the economy, and the futures price in the later period will mainly show a rising concussion trend.
Excess capacity constraints the growth range
The huge structural overcapacity of glass industry always suppresses the price rebound of the floating processed glass that occupies more than 80 percent of the total glass production. Related data show that in early January, the total capacity of national floating processed glass was 1004 million loaded vans, with an increase of 10 percent year on year; the actual production capacity exceeded 828 million loaded vans (excluding cold repair and stop production), increasing 3.84 million loaded vans compared with previous month. Before the Spring Festival, it is difficult to release a further large-scale demand; facing the oppression of high capacity, the remaining production volume will stay at the intermediate links in the form of stock.
Despite of the amazing growth range of glass futures which is with policy expectation, the growth range of the current spot market price lags far behind the futures price because of the constraint of slack supply and demand environment. From the supply side, it can be seen that the total production of floating processed glass in this January exceeded 828 million loaded vans, with an increase of 9 percent year on year, and there was a relative surplus capacity. In addition, the nonproducing capacity was also larger, and the domestic glass industry will continue to put into 17 production lines under the circumstance of not digesting the production capacity of last year, whereas the continued upside of the glass prices may stimulate the production of the cold repair, pending ignition and other potential yield; high capacity and high inventory will attract the attention of the market and the uplink of glass will be suppressed.
Lv Tengfei, an analyst of Topix futures, predicted that within the next period of time, the end-market demand will continue to weaken, and glass production and sales will weaken continuously; the glass spot market circulation will be mainly in the form of delivering to the distribution channels and some processing plants from spot production enterprises. However, there may be significant changes in the price after the Spring Festival, for which the market have a strong rising expectation.
