Demand is not weak in off-season
Glass demand in July and August this year showed the characteristics of not slack in the off-season. On the one hand, the number of orders for downstream deep processing of glass continues to increase. According to statistics from Longzhong Information, orders for downstream deep processing of glass began to improve in July this year, and continued to increase from 15.1 days in early July to 20.1 days in mid-August, which was significantly better than the same period last year. On the other hand, glass factory inventories dropped significantly during the off-season this year, from 55.8972 million heavy boxes in early July to 41.0678 million heavy boxes in mid-August, a decrease of 26.53%. The destocking time was earlier than the same period last year, and the destocking range was significantly higher than last year.
Average performance during peak season
Since the demand for glass in the off-season is not weak, the market is more looking forward to the peak season of this year's "Golden September and Silver Ten". However, after entering September, the demand for glass has been average. Data show that as of mid-September 2023, the number of order days for deep processing enterprises was 18.5 days, 1.6 days less than in mid-August, and a month-on-month decrease of 7.96%. Deep processing orders have fallen, the pace of downstream inventory replenishment has slowed, and wait-and-see sentiment has increased. The daily production and sales of glass in September were basically stable in the balanced range. Although there are no signs of significant accumulation of inventories yet, compared with the market's expectations for this year's glass peak season, the market trading atmosphere is not as good as expected.
At present, the inventory pressure of glass factories is not great. In the absence of obvious inventory accumulation, glass factories will not carry out large-scale price reduction promotions, but there is no strong driver for further increases. As terminal demand has not fulfilled market expectations, the enthusiasm of the midstream and downstream to obtain goods has further weakened, spot prices have begun to show signs of loosening, and the market has also oscillated back from its high level. As the National Day holiday approaches, we need to pay attention to whether the pre-holiday stocking efforts of glass downstream this year can drive spot prices to further rise. If subsequent demand has not increased significantly, we need to be wary of the risk of a sharp fall in market prices during the peak season that is less than expected.
To sum up, the rise in glass futures prices is mainly driven by factors such as strong demand in the off-season, favorable policies and rising raw material prices. After entering September, although the demand for glass has been average, inventory has not accumulated significantly, spot prices have stabilized, and futures prices have fallen slightly in the long-short game. Entering late September, the market still expects downstream stocking before the holiday, and production and sales are expected to improve in the short term. However, if subsequent demand continues to be tepid, short-selling opportunities may be considered if the peak season is less than expected.
