Typesetting/Mung bean soup under the stars

Carbon fiber, as strange as it sounds, is actually a new type of fiber material with a carbon content of more than 90%, and is a super powerful thread composed of extremely fine carbon atom beams. If you compare carbon fiber with our hair, the diameter of carbon fiber is about 1/10 of that of hair. However, this extremely fine material has excellent physical and chemical properties, which makes it widely used in wind power, aerospace and automotive applications.

Carbon fiber (top) and human hair (bottom) Source: Public information inquiry

The recent rise of the low-altitude economy has brought an east wind to carbon fiber. According to reports, Xpeng Huitian's Voyager X2 and Fengfei Aviation's Shengshi Dragon have both used carbon fiber composite materials on a large scale. This not only shows that the application of carbon fiber in the field of low-altitude economy has been implemented, but also shows that the rise of low-altitude economy in the future may bring about a new explosion of demand for carbon fiber.

The Xpeng X2 body uses an all-carbon fiber structure Source: Carbon Fiber Chain

First, the low-altitude economy is heating up, and carbon fiber benefits

The

biggest advantage of carbon fiber is that it is light, the weight of carbon fiber of the same volume is only about 1/4 of steel, but its tensile strength can reach several times or even dozens of times that of steel. At the same time, carbon fiber has extremely stable chemical properties, oxidation resistance, corrosion resistance, and low expansion coefficient. All these advantages make carbon fiber a new favorite of industrial materials, and it is also known as the king of new materials.

Because of its lightweight characteristics, carbon fiber is widely used in sub-sectors such as wind power, aerospace, sports and leisure, and automobiles. In addition, in the field of low-altitude economy, aircraft weight reduction is undoubtedly the focus of the industry, and carbon fiber has become the preferred material because of its lightweight characteristics.

New Materials in the Low-Altitude Economy Source: CNCIC

Since the beginning of this year, the low-altitude economic heat has continued to rise. At the CIIE held in Shanghai recently, the enthusiasm shown by customers for the low-altitude economy also provided support for the future development of the low-altitude economy. A number of low-altitude economic orders are hot, and they have obtained billions of orders. Shanghai has launched a blockbuster, Hongqiao International Open Hub Intercity Low-altitude Test Route was released, and Hongqiao International Low-altitude Economic Industrial Park (Changning Park, Qingpu Park) was also officially unveiled. This means that the low-altitude economy will become a more complete and systematic industrial chain, which will be able to better gather resources to achieve development.

Based on this, the industry is generally optimistic about the prospects of carbon fiber. As predicted by Stratview Research, the demand for composites in the eVTOL industry will grow significantly over the next six years, and is expected to surge from about 500 tons in 2024 to about 11,750 tons in 2030, an increase of more than 20 times.

The Hongqiao International Open Hub Intercity Low-altitude Test Route was officially released at the meeting Source: Shanghai Development and Reform

However, the development of low-altitude economy is bound to be a long process, and the drive of carbon fiber will not be achieved overnight. First, the technical standards in the initial stage of the industry have not yet formed a unified system, and the supporting infrastructure equipment, safety issues, and regulatory systems required for commercialization are all problems that need to be solved in the long term. Therefore, we can expect the opportunities that the low-altitude economy will bring to carbon fiber, but we cannot be blindly optimistic.

Second, domestic overcapacity and corporate profit margins are compressed

The development of low-altitude economy has opened up the imagination space of carbon fiber track to a certain extent. But we need to be vigilant that carbon fiber is currently in the stage of overcapacity.

In 2020, China's carbon fiber enterprises will usher in development opportunities due to Japan's export restrictions, and the carbon fiber localization rate will be about 70%. However, the rapid development has not unexpectedly led to the rapid expansion of China's carbon fiber production capacity.

According to relevant statistics, in 2023, China's carbon fiber production capacity will be nearly 140,000 tons, a year-on-year increase of 21%, and the output will be about 70,000 tons, although it has also achieved a year-on-year increase of 53%, but according to this data, the capacity utilization rate is only 50%. The global demand for carbon fiber in 2023 will be 115,000 tons, a decrease of 14.8% compared with 2022. In contrast, the scale of China's carbon fiber production capacity has exceeded the global demand.

China's carbon fiber production and operating rate Source: Baichuan Yingfu

With the continuous explosion of production capacity, since the second half of 2022, domestic carbon fiber prices have declined rapidly, and as of now, carbon fiber prices have fallen by nearly 70% compared with the peak.

Affected by the intensification of market competition, changes in the relationship between supply and demand, and the reduction of product prices, industry enterprises such as the leading Zhongfu Shenying (688295) (carbon fiber products account for more than 99%), revenue and gross profit margin have declined significantly. China's carbon fiber enterprises are currently struggling.

Zhongfu Shenying performance Source: wind

Third, there are structural growth opportunities for high-performance carbon fiber

Although China's carbon fiber enterprises are compressed by the decline in prices, the performance changes of foreign carbon fiber high-end product manufacturers also show opportunities for the development of high-end production capacity. At the same time, Japanese carbon fiber companies Toray Industries, Inc. and Teijin Ltd. recently released their financial reports for the first half of fiscal year 2024, showing that both companies' carbon fiber businesses have achieved strong growth.

Friends who are familiar with the industry may know that Japan is the main master of carbon fiber technology in the world. Japan produces carbon fiber that is the world's leading in terms of quantity and quality. Toray is the world's representative of high-performance carbon fiber products and technology research and development.

According to Toray's financial report, the company's consolidated revenue in the first half of the year increased by 7.9% year-on-year, of which the revenue of the carbon fiber composite business segment increased by 8.3% year-on-year. Core operating income surged by 62.6% year-on-year, of which the carbon fiber composite business segment increased by 54.4% year-on-year. The financial report pointed out that the performance growth of carbon fiber mainly comes from the global aviation industry and the growth of demand for wind power.

Toray's performance Source: Carbontech

Foreign high-end production capacity enterprises have stronger pressure resistance due to the accumulation of technology and customer resources. If China's carbon fiber enterprises want to have a more stable performance, they are bound to work hard to break through the bottleneck of high-performance carbon fiber industrialization.

Note: This article does not constitute any investment advice. The stock market is risky, and you need to be cautious when entering the market. There is no harm in buying and selling

View original image 215K