(CRI, Shanghai)--Since 2009, due to the growth of costs from raw materials and labor, the prices of products are raised in many industries. As the prices of raw materials (petroleum, glass, PVB film, ink, etc.) and transportation costs rose constantly, Chinese auto glass industry faces great cost and market pressure. Under this situation, it is an inevitable trend for the price of the auto glass to be raised. In the manufacture cost for auto glass, heavy fuel oil cost takes the largest part (about 40%), followed by soda ash cost (25%). The prices of the two raw materials have seen significant growth since the beginning of 2010. It is predicted that the prices will maintain high in the later period. The price growth greatly influences the gross profit of glass manufacturers. Due to the financial crisis in 2008, Chinese float glass industry underwent unprecedented depression at the beginning of 2009. The lowest price of float glass broke the record low of 1,000 CNY/ton. Nevertheless, boosted by the macro-economic control policies (domestic demand stimulation, auto sales promotion, etc.) by Chinese government, the glass and cement industries got out of the slump successively. The price of float glass in China began to rise since 2009Q2 and has reached the historical high of 2,500 CNY/ton at present. Additionally, the price of advanced float glass for auto glass has acquired larger growth. According to statistics, in 2010Q1, the average price of heavy oil (coal tar) was 2,668 CNY/ton, an increase of 256 CNY/ton (over 10%) over that in 2009Q4; the YOY growth was 498 CNY/ton. The average price of soda ash was 1,319 CNY/ton, rising by 126 CNY/ton compared with that in 2009Q4 and 186 CNY/ton YOY. The average price of coal was 792 CNY/ton, growing by 38 CNY/ton over 2009Q4 and 28 CNY/ton YOY. In 2010Q1, the ex-factory price of Chinese industrial products rose by 5.2% YOY. On the month-on-month basis, the price rose by 0.5% in March 2010. In 2010Q1, the purchasing price for raw materials, fuel and power increased by 9.9% YOY. In the latest three months, the international futures price of crude oil exceeded USD 70 and USD 80 sequentially. On April 16th, 2010, the price even reached 85.84 USD/barrel. It is predicted that the price will maintain about 80 USD/barrel in the later period. In China, the downstream sectors of petroleum (PVB film, ink, etc.) have raised the prices to alleviate the cost pressure. The growth of petroleum price directly leads to the substantial increase in the transportation cost of logistics enterprises. It is believed that the upward tendency of raw materials prices cannot be prevented in the short term. Therefore, Chinese auto glass enterprises will face internal and external pressures in a pretty long period. Since the Spring Festival of 2010, due to the economic recovery and order increase, economically-developed regions such as the Pearl River Delta and Yangtze River Delta suffer the deficiency of peasant workforce. The shortage has also spread to Chinese inland areas from coastal areas. Thus, enterprises raise the wages to solve the problem of recruitment, thereby ensuring the normal operation and satisfying order demands. The growth of wages is favorable for the acceleration of the industrial upgrading, but will definitely raise enterprises production cost. In 2010Q1, Chinese auto production totaled 4.55 million, rising by 76.99% YOY. The production is conservatively estimated to be 15 million in the whole 2010. This suggests that the auto glass OEM market will attain the scale of 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 demanded for the over 70 million vehicles accounted at the end of 2009. On the whole, costs will promote the continual growth in the prices of finished products. Influenced prominently by the price growth of upstream raw materials (crude oil, natural gas, float glass, etc.), Chinese auto glass industry is pressured to raise the price. 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 maintain the prosperous growth trend generally, but there will be great cost pressure.
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