Since March, Guangdong ceramic factories have been producing bricks one after another, and the demand for production raw materials has recovered significantly. However, glaze companies as suppliers are not as happy about this as in previous years, but are more worried.
“In the past, raw material prices may have risen by about 5% or 10%, but now they have risen by 30% or 40%, and they have risen rapidly in a short period of time.”
Many heads of glaze companies told "Ceramic Information" that since the beginning of the year, the prices of various chemical raw materials for glaze production have skyrocketed, and bulk materials such as potassium feldspar have also experienced varying degrees of increase. But on the other hand, ceramic companies that are subject to cost reduction requirements from real estate developers have transferred part of the cost pressure to raw material suppliers.
One "up" and one "down"
Glaze companies are on the verge of losing money
Mr. Wu, general manager of a glaze-making company in Foshan, is feeling pressured to purchase raw materials after the new year: "Raw materials are really rising now. Chemical raw materials, zinc, strontium, barium, aluminum and other oxidized and calcined materials are all rising. Iron ore, precious metals, Rare earth prices have skyrocketed. In early March, cobalt prices rose to more than 400,000 yuan/ton, from more than 5,000 yuan/ton to 9,000 yuan/ton. Strontium carbonate accounts for about 10% of the glaze. This item increases the cost by 400 yuan/ton, and it is impossible to make a profit of more than 400 yuan per ton of glaze.”
Mr. Wu analyzed that since the prices of various raw materials reached their peak in 2015-2016, they have actually fallen back in the following few years. However, since the beginning of this year, raw materials have soared, and glaze companies have been unable to win based on quantity. The cost model is no longer feasible, the market cake will become smaller and smaller, and glaze companies that are trying to survive in the cracks are already on the verge of losing money.
“At the end of last year, goods were tight, and we saw the trend of rising raw material prices. We originally wanted to stock up on some calcined raw materials, but manufacturers have stopped quoting prices, and we couldn’t stock up even if we wanted to. I didn’t expect the price to rise so sharply all of a sudden. Normally there is no such sharp increase." Mr. Wang, deputy general manager of sales of a large glaze company in Foshan, said bluntly that the pressure to survive does not only come from the surge in raw materials. "Nowadays, customers generally don't accept your price increase and ask you to reduce it. At the end of last year, a well-known ceramic company we supply and a large real estate developer we cooperate with issued a cost reduction task, and they have now assigned this task to their suppliers. At this time, if the price of glaze is reduced, the cost will break through.”
《"Ceramic Information" comprehensively learned that the above situation is not an isolated case. As the concentration of the ceramic industry continues to increase, leading companies rely on their production capacity and brand advantages to cooperate increasingly closely with real estate developers in strategic procurement. However, ceramic companies, as suppliers to large real estate developers, do not have a say.
"Glaze companies have no say in front of ceramic companies. There are too many large and small glaze companies. If you are asked to be demoted, you will do it if you don't do what others do. They all want others to squeeze them away and only you will be left. "In fact, it is impossible to squeeze out one company and another one will come in." Some employees of glaze companies lamented that among the suppliers of ceramic companies, there are almost no monopoly industries such as natural gas and raw minerals. There is the possibility of passive price reduction, so the task of reducing procurement costs for ceramic companies can mostly only be undertaken by glaze and other suppliers.
Relative to quality and innovation
Ceramic factories are more concerned about price
"Real estate developers suppress the prices and payment periods of ceramic companies. Ceramic companies suppress ours. They have long payment periods and low prices. It would be great if the middlemen are not squeezed to death. There is no need to talk about innovation or quality. In order to survive, some people Innovation' can be bad."
A glaze dealer revealed in an interview that since the glaze industry has little difference in formulas and high price transparency, ceramic companies pay more attention to comparing prices and billing periods when purchasing. "Some companies can reduce their profits very low as long as they do cash transactions, even if they only have 1% profit. After all, the longer the account period, the greater the risk."
"We have developed many innovative products, such as translucent glazes and crystal flower products, but these products are very niche. For the sake of sales and performance, large companies still have the greatest demand for ordinary full polished glazes." Mr. Wang introduced , as a leading ceramic glaze company, the company does not lack innovative products, but in the current cost-first environment, it is difficult to promote them.
"Ceramic Information" learned from a number of glaze companies that thanks to the popularity of high value-added large slabs/rock slabs, products such as digital glazes and dry granules that have been promoted for many years have gradually been widely used. On the other hand, many glaze companies have also made many more detailed innovations. But now, with the rapid increase of large slab/rock slab production lines, their profits are not as good as before, and the demand for glaze innovation has weakened. "Some effects are absolutely achievable if you really want to do them, but customers are more concerned about the price than the product," Mr. Wu said.
Reducing costs, seeking survival
Profits have been compressed repeatedly
With profits repeatedly hitting the bottom line, glaze companies are finding ways to increase profit margins. On the premise of ensuring product quality, the most prominent thing is the change in production mode.
“If we didn’t install automation equipment last year, those big manufacturers wouldn’t be able to supply it. After we installed automation, it used to require dozens of people, but now it only takes a few people to do it, which is equivalent to reducing the internal cost a little bit. The profit can be relatively higher." Mr. Wang said that due to the shortage of workers and high labor costs, the company increased efficiency and reduced costs by improving automation equipment.
It is reported that in order to minimize production costs, some glaze companies have now reached another cooperation model with ceramic companies - to go to the factory to prepare glaze. That is to say, the raw materials were originally mixed into finished products in the glaze factory and then transported to the ceramic factory. Now the raw materials are transported directly to the ceramic factory, and then the glaze company sends professional technicians to prepare the glaze and put it directly into production. "But this model is only suitable for larger ceramic factories. After all, glaze production also requires a certain amount of space." Mr. Qiu, general manager of a glaze company in Foshan that has grown rapidly in recent years, said that the model of going to the factory to prepare glaze is the most popular one. The main reason is to save the cost of secondary transportation.
Similar to the factory-based glaze distribution model, in the fierce competition environment, many glaze companies with only a few people have appeared in the ceramic industry. They are usually founded by technicians from some large glaze companies and only work with 1 to 2 people. Cooperation with ceramic factories. "The boss is also a technician and knows the formula. He goes directly to the cooperative ceramic factory to make the glaze, and then hires one or two people to help. The cost is low and the operation is flexible. Even if there is only one customer, he can survive." A glaze company practitioner told "Ceramic Information".
But no matter which method is used to reduce costs, the final profit margin will soon be compressed. Therefore, many glaze companies believe that in this era of meager profits, the only thing is to see who survives to the end.
(The article is reproduced from Ceramic Information)
