Glass Prices Surge with Industry Entering High-Profit Cycle

Glass prices have risen significantly since 2020, accelerating notably this year and repeatedly hitting record highs. On July 13, the main glass futures contract (FG109) closed at ¥3,004 per ton, breaking through the ¥3,000 threshold and setting another historic peak.

Amid soaring glass prices, corporate profits have climbed in tandem. Financial reports from multiple glass companies this year show substantial year-on-year growth. Driven by strong fundamentals, listed glass companies have also seen their stock prices enter a new phase.

A market analyst told National Business Daily: "Both traditional float glass leaders and photovoltaic glass leaders are currently in their most profitable state. Companies with cost advantages and new capacity expansions will fully benefit from this industry upcycle."

Glass Futures Surge 63% This Year

As an upstream material for construction, photovoltaics, and automobiles, the glass industry has long attracted capital attention. Since 2021, both spot and futures prices have experienced unprecedented increases.

Taking the current main glass futures contract FG109 as an example, its price has risen from ¥1,835 at the beginning of the year to ¥3,004 at today's close, a surge of 63.44%.

Regarding the recent price increases, Wang Chunxiu, fund manager at Dongtuo Investment, stated: "Since 2015, supply-side reforms in the glass industry have gradually improved supply-demand dynamics. Although pressures emerged last year due to the pandemic, prices rebounded rapidly after pandemic controls took effect, reaching a 10-year high. Current stringent environmental policies and strict capacity replacement regulations continue, while demand-side support comes from the peak period of real estate completion, recovering automotive consumption, and new growth drivers from photovoltaic glass. We believe supply-demand dynamics have significantly improved post-reform, with reduced cyclical volatility. Benefiting from supply-side reforms and strong downstream demand, glass prices will remain elevated long-term."

CITIC Futures recently analyzed the underlying logic of the glass market:

Supply: Strong profits for glass sheet producers have spurred active resumption and conversion of production lines. Further output increases are expected, with potential for modest production growth.

Inventory: Market enthusiasm moderated after policy interventions, reducing speculative trading. Inventory saw minor accumulation, but robust construction and installation during peak seasons maintained strong rigid demand, keeping inventories low.

Profitability: Increased shipments improved market conditions, with consecutive price hikes. Although raw material costs also rose, production profits fluctuated slightly while remaining elevated.

Overall, strong demand from downstream processors and construction sites during the peak season has driven noticeable growth in raw sheet orders, keeping spot markets firm. However, macro policy interventions for commodities have intensified market volatility. In the short term, prices may maintain a volatile yet strong trend.

Notably, regulators have noted the heated glass futures trading. On July 9, the Zhengzhou Commodity Exchange raised margin requirements for the glass futures 2109 contract: from July 16 and July 23 settlement, contract margins will be adjusted to 15% and 20%, respectively.

Rising Glass Prices Boost Corporate Profits and Stock Prices

High glass prices have naturally lifted corporate profits. With price increases sustained from last year through now, recent corporate financial reports reflect this positive impact.

Leading glass company Fuyao Group reported Q1 revenue of ¥5.706 billion, up 36.82% year-on-year, and net profit attributable to shareholders of ¥855 million, up 85.94%. Luoyang Glass reported Q1 revenue of ¥794 million, up 96.77% year-on-year, with net profit attributable to shareholders soaring 4,478.75% to ¥141 million.

Driven by strong fundamentals, glass company stock prices have surged. Luoyang Glass H-shares and Xinyi Glass hit historic highs today, while Luoyang Glass A-shares saw two consecutive limit-up gains. Both A- and H-shares of Fuyao Group are trading near record highs.

Commenting on recent glass stock trends, Liu Youhua, research director at Simuwang, noted: "The strength in glass stocks stems from two factors. First, the glass sector is cyclical, and valuations are currently at relatively low levels with room for recovery. Second, glass inventories have been declining rapidly, now at their lowest level in nearly eight years for the same period, driving sustained price increases and supporting improved sector profitability."

Wang Chunxiu further emphasized: "Benefiting from supply-side reforms and strong downstream demand, glass prices will remain elevated long-term. Both traditional float glass leaders and photovoltaic glass leaders are in their most profitable state. Companies with cost advantages and new capacity expansions will fully benefit from this industry upcycle."