Corona Virus affect the survival of China glass companies

Corona Virus affect the survival of China glass companies

China glass companies are undergoing a life-and-death test caused by the corona virus.
For glass companies, the crisis caused by the corona virus is only temporary, and the coming of the historical turning point in real estate demand is the real life and death test.

1. The delayed resumption of real estate affected by the corona virus has caused historical highest inventory in the China glass industry,currently the float glass stocks in China reach 4.30 million tons.
According to statistics from professional organizations, the highest inventory of flat glass in the past was up to about 2.15 million tons. However, by march 5th, the statistical inventory of key enterprises nationwide has reached 4.3million tons, and the inventory is still increasing.
In particular, Hebei, the main producing area, has 0.9 million tons in stock; Hubei is a key epidemic area, and it is also the main glass producing area. Inventory is also as high as 0.5million tons.

Corona Virus affect the survival of China glass companies

2. The major demand for float glass comes from real estate, accounting for up to 75%.
Due to the nature of the work and the scattered personnel resources, the resumption of construction work is very slow. According to the survey, less than 50% construction sites have resumed work, It is expected that the resumption of work will be basically completed in early April.
The pneumonia epidemic caused at least 45days of delay in the construction period. Even after workers returned to work in April, they worked overtime every day and had no weekends. It would take at least three months to fully make up for the period.

3.  The main production area, mainly transportation, and logistics almost stopped
In addition to the slow resumption of work in the backlog of inventories in Hubei, another important reason is that blocked traffic caused by epidemic control.
In Hubei, vehicles that were driven out were required to be quarantined for 14 days before returning, and could only return once a month, which severely affected logistics efficiency.
On February 28, Shahe City, Hebei, the main glass producing area, required that vehicles that had driven out of Shahe and had visited key epidemic areas were not allowed to return; all transportation enterprises and self-employed persons in the city were not allowed to drive out of Shahe for operation without the approval of the report. This requirement has not been lifted so far, causing the glass out of Shahe to be almost stagnant.

Corona Virus affect the survival of China glass companies

4.  Manufacturer has lost blood for 2 months, bleeding continues
Under the pressure of historically extremely high inventory, manufacturers are also trying to recruit and resolve urgent needs.
Beginning last week, there have been glass companies that have decreased their prices, and various types of preferential policies to transfer inventory to middlemen and processing enterprises.
The price reduction is just the beginning, and more substantial and sustained price reductions are still on the way.
This is due to the continuous operation of the glass industry throughout the year, and it is difficult to reduce production capacity at the production end. Once the sales are not smooth, it can only passively accumulate storage.
The inventory of most glass companies has exceeded 45 days, far exceeding the average inventory of 15 days in history; that is, the glass companies have lost nearly two months of cash flow and are still in the process of blood loss.
Of course, benefiting from the reform of the national supply measurement, in the past three years, the glass industry has taken a bull market pattern, and corporate profits are relatively rich.
With a strong ability to resist pressure, float factories generally has the strength to endure 2 to 3 months.
In terms of demand, the peak of real estate has passed, the pneumonia epidemic has worsened the real estate, the downward trend in demand for architectural glass has arrived ahead of time,  In order to live longer, glass companies will give priority to recovering cash flow when doing the multiple-choice question of carrying inventory pressure and maintaining cash flow, and will not be overwhelmed by short-term inventory pressure. After all, the crisis is here, and survival is the first priority.

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