Overcapacity serious flat glass projects under construction are cleaned up

In 2009, the state-of-the-art flat glass was listed by the State Council as the six industries with excess capacity and adjusted. Two years later, due to blind investment and other factors, the excess capacity of flat glass is further aggravated.

To this end, the Ministry of Industry and Information Technology yesterday issued the "Circular on the suppression of the excessive growth of flat glass production capacity to guide the healthy development of the industry" and asked all localities to comprehensively clean up projects under construction in the region.

The industry believes that in the next five years, the flat glass industry will not only carry out deep mergers and reorganizations to increase production concentration, but also deep processing of glass will become a hot spot in the industry.

The data from the Ministry of Industry and Information Technology shows that in 2010, 34 new flat glass production lines were newly added in the country, with an additional capacity of 130 million weight boxes, and the national flat glass production capacity has reached 890 million weight boxes. In 2010, the output of flat glass was 630 million weight boxes, and the capacity utilization rate has dropped to around 70%. At present, there are more than 30 production lines under construction or proposed to be built, and the capacity to be released will be as high as 100 million weight boxes.

In 2009, the flat glass was listed by the State Council as six industries with excess capacity. However, over the past two years, the momentum of overcapacity has not been well contained.

In response, Zhou Hong, representative of CSG (000012.SZ) securities affairs, stated that in 2008, the entire industry fell into losses, and more than 40 production lines were shut down across the country. However, as the economic situation improved, the industry started from the second half of 2009. Recovery, the production line that originally stopped production began to gradually recover. "Especially since the second half of last year, with the rise in the price of glass, the profits of the industry have also increased substantially. At present, the average gross profit margin of the industry can reach more than 30%."

"Higher profits are the fundamental reason for the expansion of industry capacity." Zhou Hong said that this is also an important factor in regulating "failure."

China Construction (601668, stocks) Glass and Industrial Glass Association believes that the growth rate of flat glass has clearly exceeded the growth rate of real estate. In particular, since last year, the state has adopted a series of control policies for real estate, and the driving effect of real estate on the demand for the glass market has been reduced. The current market has seen a clear trend of "supply oversupply".

From January to March this year, the China Construction Glass and Industrial Glass Association focused on monitoring float glass companies, with a 21.95% year-on-year increase in production, a 93.22% sales rate, and an average selling price of float glass fell from the highest 90.45 yuan/heavy case in November last year. In March, it was 76.98 yuan/weight box.

At present, there are more than 40 projects under construction and proposed projects. The China Construction Glass and Industrial Glass Association believes that if all of these production lines are completed and put into production, there will be a serious excess of production capacity.

Regarding the reason that the production capacity was not contained, the China Architectural Glass and Industrial Glass Association explained that because some companies were tempted by immediate interests, they did not analyze and predict the future market objectively according to the operating rules of the industry economy, resulting in “impulse to build the line”; At the same time, the flat glass project has been implementing the "record filing system" for many years. Some local government authorities have not strictly followed the spirit of the "document" in order to develop the local economy and attract investment, causing "out of control" in the total amount.

The Ministry of Industry and Information Technology requires that the new flat glass construction project must be approved by the competent national authority.

Deep mergers and reorganizations

In addition to curbing excessive growth in production capacity, the Ministry of Industry and Information Technology also requires the industry to conduct large-scale mergers and reorganizations to increase the proportion of deep processing.

According to data from the China Construction Glass and Industrial Glass Association, the concentration of the top 10 large corporate groups in the flat glass industry is currently around 57%.

Zhou Hong told the newspaper that the productivity of the flat glass industry in developed countries is very high. According to data from the research institute of China National Securities Corporation, the total capacity of the top five glass groups in China accounted for only about 30% of the country in 2009, while the top four international glass companies in the world have worldwide (not including China) more than 65% of production capacity.

In view of this, the Ministry of Industry and Information Technology requires that during the “Twelfth Five-Year Plan” period, through mergers and reorganizations, the glass deep-processing rate should be gradually increased to more than 45%, and the proportion of flat glass production capacity of the top 10 companies in the total production capacity should be raised to over 75%.

The purpose of mergers and reorganizations is to hope that powerful companies will invest more funds in the development of new products. GF Securities (000776, stocks) analyst Wang Fei believes that from the perspective of industry trends, glass deep processing will continue to be the hot spot for future development.

Deep-processed glass mainly refers to glass secondary products. It is a glass product that uses a single-formed plate glass as the basic raw material, and uses different processing techniques to produce glass products with specific functions according to the requirements. The main varieties include tempered glass, laminated glass, and hollow. Glass and coated glass and so on.

As of the end of 2009, the domestic deep processing ratio of glass was only 36%, while the annual output of deep processing glass in industrialized countries accounted for more than 60%.

The Ministry of Industry and Information Technology proposed in this document to support the independent innovation of enterprises and develop high-end products with high technical value and high added value, such as screen display substrate glass, photovoltaic glass, insulating glass, laminated glass, and borosilicate glass, which are urgently needed in the production and market.

Zhou Hong believes that if it is well implemented, the policy-driven effect is relatively large. "For example, policies require real estate to increase energy efficiency and comfort, and then the demand for corresponding energy-saving glass products will be stimulated."