Market Analysis: Clear Future: China´s Glass Industry
cctv.com 08-07-2003 16:44
The demand for glass has skyrocketed since recent booms in the construction and automobile sectors. While China produces one third of the glass used worldwide and the common glass market faces severe oversupply, China still relies on imports for high quality glass. The white-hot competition has also given rise to huge market opportunities for overseas glass equipment manufacturers. In this week's market analysis, we look closely at the Chinese glass market and see how some overseas glass producers and glass manufacturing equipment suppliers are exploring the market in a variety of ways.
In preparation for the 2008 Olympic Games to be held in Beijing and the 2010 World Expo to be held in Shanghai, China can virtually be called the biggest construction site in the world. The booming building sector and the rising car sector translate into a huge market for glass. The massive Chinese market has drawn many foreign glass producers into the market. An important way of promoting their products and equipment and exchange techniques with other producers is to attend the China Glass Show. The 2003 China Glass Show recently held in Shanghai attracted many foreign and Chinese market players.
鈥淚 think China is becoming a more and more prosperous market, also techniques for glass are improving. Therefore, China Glass 2003 is a great opportunity to introduce our capabilities into the Chinese market,鈥 said Dr. Johannes Struempfel, head of Department Von Ardenne Anlagen Technik.
North Western Lead Company (Hyde) Ltd. is getting its foot in the door in a smart way. It does not produce any glass, instead, they supply lead tapes that turn common glass windows and doors into beautiful and one-of-a-kind pieces of art. Although this Irish company has only no more than 50 employees, their products are sold worldwide. The company's business in China is still getting started, but Hyde? Or North Western is so sure about the market's future that its general manager, Stephen Hart attends the China Glass Show every year in person.
鈥淚 always attend these Chinese glass shows whether they are in Beijing or Shanghai, because we feel it important for me to see what the market is and to talk to our customers,鈥 said Stephen Hart, general manager of North Western Lead Company (Hyde) Ltd.
These lamps are produced by the Chinese subsidiary of a US company in Dalian. Although most of the foreign glass producers are won over by the Chinese market, to avoid the fierce local market competition, this company now exports most of their lamps to western countries.
鈥淚 began to work in this company since 1992. Generally, our business is OK. Especially in the last two years, the market competition has intensified. Now our product prices are also relatively low. But generally, the business conditions are acceptable both in China and abroad,鈥 said Geng Zhonghai, technician of Furen Glass Products (Dalian) Company Limited.
To avoid price wars with local glass producers, most of the foreign glass producers tend to capitalize on their technology advantages and focus on products that local producers cannot provide. SCHOTT is a German company focusing on providing precision materials and equipment made of glass. Its customers include such electrical appliance makers as Siemens, Eletrolux, as well as the Haier Group. In addition, it produces coffee machines and special glass used in laboratories and telecommunications.
鈥淵ou have to see the quality of the products, the particular technical advantage that gives relationship to the price. So usually the price pressure is not as high as if you talk about commodity glass type, and accordingly we try to keep the technology to have less price pressure,鈥 said Lorenz P. Festersen, managing director of SCHOTT Glass China Ltd.
Their cutting edge technology and massive R&D efforts help SCHOTT avoid market competition and see rapid business expansion. Although the company's office in Shanghai already quite big, they are planning to double the office area here. It has set up offices in Shanghai and Beijing, and a factory in Suzhou. But to them, such a business presence is not enough and they are planning for more.
鈥淲e are adding a second project, a processing plant to this factory, which is up to be running at the end of the year. And in general, China has a high priority with our management in Germany as much so that the next corporate world conference, which happens annually in SCHOTT, is going to happen here in Shanghai,鈥 said Lorenz P. Festersen, managing director of SCHOTT Glass China Ltd.
Before 1995, China faced glass shortage and the lucrative returns from investments in the glass industry lured many producers into the sector. As the market grew, some producers have resorted to price cuts and severely slashed the industry's profit margin. Some leading local Chinese producers even suffered losses in the past few years. To guarantee the industry's health, the Chinese government has ordered some small glass factories to be closed and no longer approves applications to invest in production lines for ordinary glass production.
鈥淐urrently, new investments should concentrate on quality float glass and heavily processed products with market demand, and avoid investments on low quality production facilities,鈥 said Zhang Baiheng, secretary general of China Building Glass and Industrial Glass Association.
To survive the cutthroat market competition, many Chinese glass producers are now turning their attention to technology upgrades. The rising demand for advanced glass-producing technology and equipment has prompted many foreign brands into the market. Bystronic Glass has set up an office in the Pudong New Area of Shanghai. From here, they can provide faster machine delivery and better after-sales service, which is an important advantage under current market conditions.
鈥淚t is getting bigger and bigger, a lot of houses are built in China, also a lot of glass is needed. We see quite good changes to sell our machines here. So the market is really growing, especially in the Shanghai and Beijing area,鈥 said Ralf Wolter Slaes, director of Asia Bystronic Glass Lenhardt Technology.
Local sales agents play an important role in helping the world-famous brands enter the Chinese market. Bill Wang is the chief representative for Super Spacer. With their quality products and technologies, they offer a warranty period of 20 years for glass insulated with their spacer, in comparison, the local insulating glass providers usually only offer a warranty period of five years.
鈥淲e do not want to expert products to China forever, we want to grow with the market. I think here education is the first, let people know that is the good IG. That is why we spend a lot of time do the seminar and to communication with people,鈥 said Bill Wang, chief representative of Joint Pacific Group Inc.
Quality insulating glass represents an important development direction. To save energy, the Chinese government requires that all glass walls on buildings should be insulating glass. In view of the huge market potential, some companies are bringing their insulating technologies to China. Lisec is a private Austrian glass equipment producer. Since building a factory for glass machinery in 2001, the company has invested in another factory to make aluminum frames used in insulating glass production.
鈥淭he Company here was founded about four years ago. First we check the feasibility in Japan, Korea, and Taiwan, but finally we decided for Shanghai, because the business environment here is most suitable,鈥 said Peter Lisec from Lisec Shanghai Glass Technology Co., Ltd .
One thing that makes Lisec Shanghai stand out is its independence in business decision making from its parent company in Austria. They built their factory like a garden and home to the foreign management team as part of their commitment to the Chinese market.
鈥淭he foreign managers are here long-term, not the normal one or 2-year contracts, but they stay here, they live here, and they work here, and they understand the Chinese mind, so communications between the Chinese people and our foreign people is quite good,鈥 said Peter Lisec.
In Beijing, the Dong-IL Group from South Korean has set up a factory for glass cutting and edging machines. With its Asian origins, its machines are of similar performance but cheaper than those from the western manufacturers. As their products are very popular among the customers, they are also planning for further expansion.
鈥淚n the beginning, the company's size was small. With the continual product developments and increases in the customers' demand for our products, the company's size has been expanding. But in view of the client's orders, the existing scale is not enough. Next year we plant to build a new factory and enlarge the production scale,鈥 said Oh Byung Sik, chairman of Dong-IL Group.
The market entry of leading foreign companies has boosted the development of local companies. Technical cooperation with a Japanese company has sharpened the competitive edge of Zhongshan Fushan Glass Machinery, a company based in Guangdong. Today, quality products have won Zhongshan Fushan worldwide recognition and several foreign companies are waiting in line to talk about joining hands.
鈥淣ow our products are used in six continents. These products have also attracted attention of enterprises of the same industry. They are discussing cooperation and sales service with us. During the last two days at this show, we have sold lots of machines and signed over 1 million US dollars of contracts,鈥 said Li Kaili, Chairman of Zhongshan Fushan Glass Machinery Co., Ltd.
In China, the deep-processing rate of glass is only 20 percent, only one fourth to one third of the rate in developed countries, but the existing supply and production capacity for ordinary glass is much more than what's needed. Top task facing the industry is technology upgrading. Technical advantages can help the market players win not only market competition, but also preferential government policies.
鈥淲e especially welcome the competent manufacturers with advanced technologies to invest in China, so as to lift the overall standard of Chinese glass deep processing machines and narrow our gap with the world standard,鈥 said Shao Guanghua, secretary general of China Glass Technology and Equipment Association .
Experts say that the current price war cannot last for a long time and will lead to some industrial reshuffling. Mergers and acquisitions will eliminate some enterprises with low competitiveness and decrease the market competition.
China's WTO entry has brought market opportunities and competition closer to the Chinese glass producers and glass equipment manufacturers. It will also help narrow the technological gap between the Chinese and foreign glass producers and make the Chinese glass market more open, standardized and of course, transparent, and standard.
Editor:Liu Baoyin Source:
