Looking forward to 2018, we believe that the prosperity of the glass spot market can continue into the first half of next year, and the company’s profitability may hit a new high. The main factor affecting the price of glass products will still be the feedback of supply and demand. The focus next year should be on the supply side more than the demand side. In terms of prices, we expect that both glass spot and futures prices will continue to rise in the first half of 2018. In the first half of the year, glass futures prices are expected to hit 1700, but the trend may be high and low throughout the year.

On the supply side, in November, nine production lines in Hebei received a shutdown order from the local environmental protection bureau. In December, three production lines faced “coal to gas” rectification and also faced a shutdown. The total production capacity of the 12 production lines is 47.1 million heavy boxes per year, which is equivalent to 5% of the national production capacity before the shutdown and equivalent to 27% of the total production capacity in the Shahe region. At present, 9 production lines have been determined to release water for cold repair. At the same time, these 9 production lines are new production capacity in the period of 4 trillion yuan in 2009-12, and they are already close to the cold repair period. Inferring from the traditional cold repair time of 6 months, even if the policy is loose next year, the time for the 9 production lines to resume production will be after May. The remaining three production lines have now been revoked by the Environmental Protection Agency. We expect that before the end of 2017, and before the official implementation of the sewage permit system, these three production lines will also be released for water cooling.

This suspension of production first boosted the market price and confidence in the downstream peak season in 2017, and we believe that the impact will further ferment to the winter storage stocks in 17-18. According to the glass production data of the National Bureau of Statistics in November, the monthly output has dropped by 3.5% year-on-year. With the implementation of the shutdown, the negative output growth will continue into 2018. And glass manufacturers often adjust the ex-factory price according to their own inventory, and the amount of inventory during the winter storage period is less than in previous years, which will further enhance the manufacturers’ willingness to price in the spring of 2018.

In terms of new production capacity and resumption of production capacity, there will be 4,000 tons of daily melting capacity production in Central China next year, and there are plans to increase production lines in other regions. At the same time, due to its high operating rate, the price of soda ash is gradually entering a downward cycle, and the profit level of glass production enterprises is expected to be improved. This will delay the manufacturer’s willingness to cold repair, and may attract some production capacity to resume production. By the second half of the peak season, capacity supply may be significantly higher than next spring.

In terms of demand, the current demand for glass is still a lag period of the real estate boom cycle. With the continuation of real estate regulation, the demand will be affected somewhat, and the weakening of demand has a certain continuity. From this year’s real estate development investment and completed area data, the downward pressure on real estate has gradually emerged. Even if this year’s demand for some real estate projects is suspended due to environmental protection, the demand will be delayed, and this part of the demand will be quickly digested in the spring of next year. The demand environment during the peak season is expected to be weaker than next spring.

In terms of environmental protection, we hold a neutral attitude. Although the Hebei shutdown is very concentrated and the government’s attitude is very tough, the locality has its particular geographical location. Can other regions and provinces carry out environmental violation inspections and rectifications so resolutely? , With greater uncertainty. Especially in areas outside the 2+26 key cities, the penalties for environmental protection are difficult to predict.

In summary, we are generally optimistic about the price of glass next year, but at the current time, we believe that the price increase in the first half of next year is relatively certain, and the situation in the second half of the year is more uncertain. Therefore, we expect that the average value of glass spot and futures prices will continue to increase in 2018, but there may be a trend of high and low.