Analysts have warned that the glittery performance of stocks in China“s glassmaking sector over the past few days may not reflect the actual state of the industry, which has been in a slump for more …
Analysts have warned that the glittery performance of stocks in China“s glassmaking sector over the past few days may not reflect the actual state of the industry, which has been in a slump for more than a year. Luoyang Glass Co. Ltd., a leading glass manufacturer, has witnessed its yuan-denominated A shares jump 40% since 24 January, despite the company“s warning of a 50% plunge in profit for 2001. “A rebound on the local stock market was primarily responsible for the impressive showing of glass makers. But the sector still carries high-investment risks,” said analyst Qian Hongwei from China Securities. The State Economic and Trade Commission had earlier warned that excessive glass production would cause an oversupply in the market and a price decline. Analysts forecast that the sluggish conditions in the glass manufacturing industry will last a long time. Pan Jianping, an Industrial Securities analyst, said a glut in the domestic market and shrinking profit margins will continue to plague the industry for at least another two years. In a bid to relieve the glut, the central government last year started limiting the number of glass-making projects. “But supply still surpasses demand and the situation won“t change in the near future,” Pan said. In early 2000, the government“s move to shut down small production lines helped shore up the sluggish glass market. However, intensified competition put an end to that rosy period. The number of domestic glass manufacturers has skyrocketed since the end of the year, with 39 newcomers entering the market in 2001. In its annual earnings report, Qinhuangdao Yaohua Glass Co. Ltd. said the profit margin in the domestic glassmaking industry narrowed by more than 50% in 2001, when profits in the low-end plate-glass sector dropped 8.3%. To survive the downturn, analysts suggested that Chinese glassmakers polish their business strategies. Due to limited room for a price increase in the low-end glass market, Shanghai Yaohua Pilkington Glass Co. Ltd. said it is focusing on high-quality products, a market that is growing fast. Yaohua Pilkington, a major glass manufacturer in Shanghai, has expanded into the highly profitable auto-glass business.