Guotai Junan Futures: The core driver of glass decline is weak demand combined with high futures contango

In April, the spot glass market continued to be weak, with inventories in Hubei reaching a new high for the same period in history. Traditionally, April sees relatively optimistic market demand, and inventories have significantly declined from the high levels after the Spring Festival, but this year, that situation has not occurred, and nationwide inventories are also at relatively high levels compared to previous years. In terms of valuation, the May contract is about to enter delivery month, and high spot inventories exert considerable pressure on receiving goods, while the September contract still trades at a premium to spot, with the price difference between the September and May contracts reaching 130-140 yuan/ton. This can be considered as the September contract’s premium over warehouse receipts. Faced with a high futures premium, either production must be reduced or demand must clearly improve. However, the outlook for production cuts remains uncertain at present, and in terms of demand, by the end of April, glass demand had decreased by nearly 10% year-on-year. Therefore, short-term pressure remains significant. It is important to note that supply and demand may both change in the second half of the year. The supply side’s anti-deflation and anti-involution measures have not been disproven, while the demand side may see seasonal month-on-month improvements. Overall, the glass market in the second half of the year should not be overly pessimistic. (Guotai Junan Futures)