Since 2009, due to the growth of costs from raw materials and labor, the prices of products have risen in many industries. With the continual rise in the price of raw materials (fuel, glass, PVB film,…
Since 2009, due to the growth of costs from raw materials and labor, the prices of products have risen in many industries. With the continual rise in the price of raw materials (fuel, glass, PVB film, ink, etc.) and transportation costs, the Chinese auto glass industry is facing large cost and market pressures, making price rises inevitable. The prices of fuel oil and soda have grown significantly since the beginning of 2010. It is predicted that they will remain high throughout the year. Due to the financial crisis in 2008, Chinese float glass industry underwent an unprecedented depression at the beginning of 2009. The price of float glass broke the record low of CNY 1,000 /ton. Nevertheless, boosted the macro-economic control policies (domestic demand stimulation, auto sales promotion, etc.) by the Chinese government, the glass and cement industries emerged from the slump. The price of float glass in China began to rise from the 2Q 2009 and has reached the present historical high of CNY 2,500 /ton. According to statistics, in 1Q 2010 the average price of heavy oil (coal tar) was CNY 2,668/ton, an increase of CNY 256/ton (over 10%) over that in 4Q 2009; year-on-year growth was CNY 498/ton. The average price of soda ash was CNY 1,319/ton, rising by CNY 126/ton compared to that in 4Q 2009 and CNY 186/ton year-on-year. The average price of coal was CNY 792/ton, growing by CNY 38/ton over 4Q 2009 and CNY28 /ton year-on-year. In 1Q 2010, the ex-works price of Chinese industrial products rose by 5.2% year-on-year. On a month-on-month basis, the price rose by 0.5% in March 2010. In 1Q 2010, the purchasing price for raw materials, fuel and power increased by 9.9% year-on-year. In the latest three months, the international futures price of crude oil exceeded first USD 70 and then USD 80. On 16 April 2010, the price even reached 85.84 USD/barrel. It is predicted that the price will stay at about USD 80 /barrel. In China, the downstream sectors of petroleum (PVB film, ink, etc.) have raised prices to alleviate the pressure. It is believed that the upward tendency of raw material prices cannot be prevented in the short term. Therefore, Chinese auto glass companies will face long term internal and external pressures. Since the Spring Festival of 2010, due to the economic recovery and increase in orders, economically-developed regions such as the Pearl River Delta and Yangtze River Delta are suffering labour shortages. The shortage has also spread inland from coastal areas. Thus, companies are raising wages to solve the problem of recruitment, thereby ensuring normal operation and the fulfillment of orders. The growth in wages is favorable for the acceleration of the industrial upgrading, but will raise output costs. In 1Q 2010, Chinese auto production totaled 4.55 million, rising by 76.99% year-on-year. Output is conservatively estimated at 15 million for the whole of 2010. This suggests that the auto glass OEM market will reach 15 million sets. Providing that the replacement rate in the auto after-sales maintenance market is 10%, at least 7 million sets of auto glass are required for the more than 70 million vehicles accounted at the end of 2009. Influenced primarily by the price growth of upstream raw materials (crude oil, natural gas, float glass, etc.), the Chinese auto glass industry is under pressure to raise prices. Moreover, the upward trend of the auto market directly pushes the expansion of demand for auto glass. It is forecast that the auto glass industry will generally maintain the prosperous growth trend, but there will be great cost pressure.