What's Next for the Chinese Glass Industry?

What's next for the Chinese glass industry? That was the question asked and answered by Jim Gresehover of Guardian Industries who spoke about the state of the float glass industry in China on Monday morning during Glass Week 2006.

Gresehover first attempted to define the size of the market. He asked the group to consider the relative numbers of float plants throughout the world:

Region Number of Float Plants

The Americas 35-40
Europe/Middle East 35-40
Asia (exclusive of China) 35-40
China 140

He also detailed some of the rapid growth in float glass plants there:

Year Number of Float Plants in China
1980 1
1988 18
1992 25
1997 60
2000 69
2003 103
2005 120
2006 160 (estimated)
2007 179 (estimated)

The Jiangsu Company itself has 20 float plants in China. "Figure the average output is 500 tons of glass a day for a plant in China," said Gresehover, "this means Jiangsu is making around 100,000 tons of glass a day." He added the company named Qinhuangu has a 900-ton per day capacity.

Gresehover said that the monetary threshold for building a float plant is also much lower than in the United States. "You can get a float plant up and running in China for about $20 million," said Gresehover, of the cost which is generally believed to be approximately one-fifth of what it costs in United States. He also categorized the type of glass being made in China along quality lines. He estimates:

Glass Quality Approximate Percentage

High 4%
Low and Medium 71%
High (from foreign manufacturers) 14%
Sheet 12%

Gresehover then attempted to answer the question he asked at the beginning of the session: Where is the Chinese glass industry going?

"We expect the expansion to slow and some consolidation to occur. We also expect to see some true change in the industry there," said Gresehover. "Smaller companies that got into the business now want to get out, they are not making any money," he said.

Gresehover cited as example the Chinese investment firm of Hony Capital which recently completed a consolidation of three companies: China Glass, Beifang and Haibowan. "Although they are a catalyst for consolidation, it remains to be seen what the effects of it will be," he opined. Consolidation has already occurred in the automotive glass, laminated glass and glass processing equipment segments.

Gresehover also said that the Chinese company Farun recently was a catalyst for price change. It changed its pricing significantly and caused a lot of price reduction.

And there are now signs of project delay and cancellation of projects, which shows caution by outside investors, according to Gresehover. Additionally, many companies are undergoing a crisis of identity. "They are trying to figure out what type of company they should be. They are trying to find their niche," he said.

But, Gresehover added, there are also some signs of resistance to consolidation, including the fact that the industry does put scores of people to work who otherwise would be on welfare. Also, there has been some market growth and many companies in the industry are profitable. Nine float plants bring in $4 million a year in profit.

"Everyone of those guys [in upper management at Chinese float plants] drives a Mercedes and can get reservations at any restaurant and that's a sign of profit there," he said.

Photo Caption: Guardian's Jim Gresehover briefs the attendees at Glass Week 2007 on the colossal growth in float glass plants in China during the past few years. Photo courtesy of Brian Pitman.

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