Who is the leading company in this tens of billions carbon fiber market?

The carbon fiber industry has come a long way over the years, affecting nearly every market from aerospace to automotive and sporting goods. The main advantages of carbon fiber are high strength, high stiffness, low density and high chemical resistance, which makes the utilization of carbon fiber in various industries increase year by year.

According to statistics, between 2010 and 2019, the carbon fiber industry experienced uninterrupted growth, with demand increasing from £82.3 million in 2010 to £192 million (about $2.6 billion) in 2019. But in 2020, the outbreak of the COVID-19 novel coronavirus disease brought unprecedented disruption and the carbon fiber industry as a whole fell by 9.7%. In early 2021, the carbon fiber industry performed well, showing signs of a positive recovery. However, total carbon fiber demand grew by only 4.4% by the end of 2021 due to supply chain issues and declining demand from the aerospace and automotive industries. Rising wind turbine installations and increasing demand for advanced sports equipment are key drivers for the carbon fiber industry in 2021.

The aerospace sector, one of the main users of carbon fiber, has been severely impacted in 2020 and 2021. Before the pandemic, the Airbus A350 and Boeing 787 Dreamliner were being built at a rate of 12 and 14 per month, respectively. However, due to travel bans and other COVID-19-related crises, production of these aircraft dropped to 2 and 3 per month in 2021. As a result, aerospace carbon fiber demand is down 33% in 2021 after a sharp 46% drop in 2020.

The 2021 market is carbon neutral. From photovoltaics to third-generation semiconductors, all industry valuations are very high. But in fact, there is another sub-sector in the carbon neutral field that has been forgotten by most people, and that is carbon fiber. As a high-strength and light-weight material, carbon fiber plays an irreplaceable key role in many fields of carbon neutralization, and has great room for growth.

The application of carbon fiber is reflected in the subtleties. According to the research report released by Saio Carbon Fiber, the global carbon fiber market size in 2020 will be 2.615 billion US dollars. Among the downstream applications, aerospace accounts for the highest proportion, reaching 37.7%. In the three major carbon neutralization battlefields of wind power, photovoltaics and hydrogen energy, the application of carbon fiber corresponds to wind power blades, carbon-carbon composite materials and pressure vessels respectively.

Wind turbine blades are thin shell structures made of composite materials. The composite blades were originally made of glass fiber and unsaturated resin systems, which are also the materials that most blades are still using. With the pursuit of wind power generation efficiency, the size of wind power blades is getting larger and larger, and the requirements for material strength are increasing day by day. In this context, carbon fiber began to emerge. Carbon fiber is mainly used in the blade main spar or segmented blade link area, which bears the main load.

The development of wind power has set clear goals to ensure that the average annual installed capacity is more than 50 million kilowatts. After 2025, the average annual newly installed capacity should not be less than 60 million kilowatts. According to estimates by Changjiang Securities, the current onshore wind power and offshore wind power carbon fiber penetration rates are 10% and 30% respectively, and the wind power carbon fiber market size will increase from 2 billion yuan in 2020 to 12.9 billion yuan in 2030.

With the growth of the photovoltaic industry, the market size of China's carbon fiber in photovoltaics is expected to increase from 600 million yuan in 2020 to 2.3 billion yuan in 2030. Carbon fiber is also used in the field of hydrogen storage. High-pressure hydrogen storage cylinders are the mainstream method of hydrogen storage for vehicles. High-pressure hydrogen cylinders for vehicles are made of aluminum alloy or plastic as the inner liner, and the outer layer is covered with carbon fiber to enhance the structural strength of the hydrogen cylinder and reduce the overall weight as much as possible. According to the forecast of the China Hydrogen Energy Alliance, the sales volume of fuel cell vehicles in my country will reach 50,000 units/year by 2025 and 5.2 million units/year by 2050.

In 2020, the market size of carbon fiber for hydrogen cylinders for vehicles in China is only 100 million yuan. By 2030, the market size will surpass that of wind power and grow to 18.9 billion yuan. In other words, in the next 10 years, hydrogen cylinders for vehicles will become the largest source of growth in the carbon fiber market.

At the same time, the aerospace industry, the largest application market for carbon fiber, is still in a trough. Affected by the new crown epidemic, aircraft orders have been greatly reduced, which has directly led to a significant reduction in the demand for aviation composite materials. Hexcel (HXL.N), which supplies carbon fiber to Boeing, saw revenue fall by 36.22% and 20.07% in the first three quarters of 2020 and 2021, respectively. In the future, once the global new crown epidemic is under control, the recovery of the civil aviation industry will release a certain elasticity to the global carbon fiber market. According to estimates by Changjiang Securities, China's carbon fiber market will grow from 6.3 billion yuan in 2020 to 16.4 billion yuan in 2025, and will further grow to 43.3 billion yuan by 2030.

Big carbon fiber tow rises
In 2020, China's total carbon fiber demand was 48,851 tons, a year-on-year increase of 29%. Among them, the import volume accounts for 62% of the total demand. Similar to the chip industry, there is also a large space for the localization of carbon fiber. The domestic supply of carbon fiber was 18,500 tons, a year-on-year increase of 54.2%, and a rapid growth of more than 30% for three consecutive years. According to this trend, the supply of domestic carbon fiber is expected to exceed imports by 2023. Carbon fibers can be divided into small tows and large tows according to the number of fibers: generally, carbon fibers with a number of tows less than 24K are called small tows (1K represents 1000 filaments in a bundle of carbon fibers), and those above 24K are large tows .

The rise of large tows will undoubtedly become the biggest variable in the carbon fiber market. At this stage, although the performance of large tow is not comparable to that of small tow in the high-end aerospace field, due to its high production efficiency, it has a significant cost advantage in the low-end market. For example, the 50K large tow carbon fiber with a tensile strength of 4000 MPa and a tensile modulus of 240 MPa produced by SGL Germany, its unit price is less than one-third of the similar performance small tow carbon fiber produced by Toray, Japan.

In China, the market share of large tow products has also continued to increase, from 42.2% in 2019 to 45.2% in 2020. At present, the domestic carbon fiber industry is on the eve of the outbreak of production capacity. The existing small tow production capacity of Zhongjian Technology is 400 tons/year, and the company plans to increase the new production capacity of 1,500 tons/year. The project still needs to be approved by the China Securities Regulatory Commission. Guangwei Composites currently has a small tow production capacity of 1,855 tons/year, and a small tow production capacity of 2,000 tons/year under construction. It is expected to be put into operation in 2021. The planned production capacity of large tow in Inner Mongolia is 10,000 tons/year, and the first phase is under construction with a production capacity of 4,000 tons. ton/year, and it is expected to be put into production in 2022. Shanghai Petrochemical's existing large tow production capacity is 1,500 tons per year, and a 48K large tow project with a production capacity of 12,000 tons per year is under construction. The total investment of this project is 3.5 billion yuan. It is expected to be completed and put into operation by 2024.

Jilin Carbon Valley currently has a total production capacity of 50,000 tons of carbon fiber tow precursors. Before the end of 2021, Jilin Carbon Valley will put into operation two more production lines, bringing the production capacity of precursors to 60,000 tons. In April 2021, Jilin Carbon Valley launched a 150,000-ton large tow raw silk project. The project will build 12 large tow raw silk production lines, which will be constructed in three phases. The first phase of four production lines is expected to be put into operation in 2022, and all of them will be available in 2025. When completed and put into production, Jilin Carbon Valley will become the world's largest large tow carbon fiber production enterprise.

Jilin Chemical Fiber currently holds a 49% stake in Jilin Baojing Carbon Materials Co., Ltd. Jilin Baojing is mainly engaged in the research and development, production and sales of 25K ~ 50K large tow and low-cost carbon fibers. Currently, it has an annual production capacity of 8,000 tons of carbon fibers. By the end of 2025, an annual production capacity of 12,000 tons of carbon fiber will be formed. At the same time, Jilin Kaimeike Chemical Co., Ltd., a wholly-owned subsidiary of Jilin Chemical Fiber, has a capacity of 600 tons of carbon fiber under construction.

Comparing the future production capacity of various listed companies with the current production capacity, Shanghai Petrochemical has made the largest expansion of carbon fiber production, and the new production capacity will be 8 times the existing production capacity. Combining the production date, Guangwei Composites has the strongest short-term explosion. Considering that the price of large tow is only one-third of that of small tow, the production capacity of large tow is converted into the production capacity of small tow at a ratio of 3 to 1. When the new production capacity is put into operation, it will be about 2.5 times the current production capacity. At the same time, Guangwei Composites is also the company with the most profound accumulation in the field of wind power carbon fiber among the existing listed companies. The company's second and third largest customers in 2020 are Dupie Wind Power Blade Co., Ltd. Will benefit from the outbreak of the wind power market in the next few years.

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