Chinese glassmakers seek expansion

Intensified competition and declining profit margins in China“s glass manufacturing market are forcing industry heavyweights to polish up their business strategies to survive. China“s glass industry…

Intensified competition and declining profit margins in China“s glass manufacturing market are forcing industry heavyweights to polish up their business strategies to survive. China“s glass industry had been severely hurt by the Asian financial turmoil and a domestic market glut for two years before the central government brought glass production under strict control in 1999. After hundreds of small glass factories were closed down, glassmakers started to shine again in the first half of 2000 when the sector became the most profitable in the construction material industry. But the glory lasted only half a year as competition heightened. A new batch of Chinese companies were lured by lucrative prospects into the glass industry, resulting in a sharp increase in output and plunging sales prices. Earlier this year, the government intervened again by limiting the number of glass making projects nationwide. Though the move is easing the pressure from the glut and lifting prices, domestic glassmakers are still facing challenges. Supply is still surpassing demand. The nation“s glass industry is in urgent need of restructuring to increase its competitiveness in the global market. China currently has more than 600 glassmakers, producing 26% of the global plate glass output. The world“s top five multinational glass manufacturers control 68%. Size and scope have become critical for a company to survive. This irreversible trend will be further reinforced after China“s imminent accession to the WTO. By buying a 75% stake in Guangdong Float Glass Co Ltd for US$ 17.6 million, Shanghai Yaohua Pilkington Glass Co Ltd kicked off its acquisition campaign last year. China“s leading glass maker later acquired a 40% stake in Shanghai Fuhua Glass Co for US$ 2.47 million, and is in the process of purchasing a Sino-Japanese plant in Tianjin City. Two other heavyweights, China Luoyang Float Glass Group Co Ltd and Qinhuangdao Yaohua Glass Co Ltd, also are poised to start their acquisition drive.