Amid a steady rise in the price of sheet glass this year, domestic manufacturers ramped up production capacity to cut out a larger piece of the market. But the good times soon gave way to a vicious cycle as oversupply started to wreak havoc in the industry.
The State Council, China’s cabinet, has identified five key sectors with the most pressing need to squeeze out excess capacity, and sheet glass production is one of them.
The problem reared its ugly head when the price of flat glass turned weak shortly after the recent “golden week” holiday, the China Securities Journal reported. This happened despite the fact that the markets for the product, including housing, television and smartphone, have remained vibrant.
According to the report, the combined weight of capacity across the country as of Oct. 11 was about 884 million boxes a year. It is worth noting that newly added capacity this year alone accounts for about 13 percent of the total. As competition intensified, industry inventory started to rise.
With the onset of winter, the domestic home-building and construction markets will hibernate into an off-season, which in turn is expected to send more chill into the price of glass.
Xinyi Glass Holdings Ltd. (00868.HK) is arguably the best performer in the sector with a 66 percent gain in its stock price year to date. Just don’t be surprised if the counter develops a few scratches as it travels a bumpy road.
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