Liu Xianghua, Song Hao, Lu Jun, Zhou Xiaohong, Qilu Petrochemical

Carbon fiber is usually compounded with resin, metal, and ceramic to make composite materials. The demand for carbon fiber composites is increasingly higher these years, largely from sectors such as aerospace, aviation, automobile, electronics, machinery, chemical industry, light textile, sports equipment and leisure products. Thus, the market outlook for carbon fiber is bright.

Domestic market

China's fiber industry has witnessed the following development stages since the inception in the 1960s: the capacity accounted for about 1% of the world's total in 2005; the low-end capacity under construction was over-supplied in 2010; the demand saw more than two-digit growth during the 13th Five-Year Plan period (from 2016 to 2020).

There is an increasing number of carbon fiber varieties in China, and the quality is becoming higher and higher. A complete industrial system has been set up, from the research and development of preparation technology of polyacrylonitrile carbon fiber products such as CCFM-550 (grade M55J), CCF-4 (grade T800), CCF-3 (grade T700) and CCF-1 (grade T300), to commissioning, and then to thousand-ton-scale industrialization. The carbon fiber products well-positioned for industrialization are high-strength, high-strength medium-modulus, high-modulus, as well as high-strengthhigh-modulus series.

The application of T300 carbon fiber series in China's aviation field is becoming more and more mature, and the application in civil market is also being gradually developed. Since the dry-jet wet spinning process was developed, the commercial production and application of T700 high-performance carbon fiber has geared up. In addition, China innovatively developed the preparation process of wet spinning T700 carbon fiber, and the products have been applied in the aviation field. Under laboratory conditions, T1000, T1100 and M55J high-performance carbon fibers have achieved breakthroughs in the key preparation technologies.

1. High dependency of imports due to domestic undersupply

At present, the self-sufficiency rate of carbon fiber in China is less than 40%. The total demand for carbon fiber was 48 900 tons in 2020, while the supply of domestic carbon fiber only reached 18 500 tons. The gap of 30 000 tons was largely covered by imports, leaving room for domestic producers to accelerate their production to erode the market shares of imports.According to the data of BAIINFO, the overall operating rates were not high as of October 2021, although China's carbon fiber capacity reached 41 800 t/a. The market has been in the state of "output much lower than capacity" for a long time, and the capacity utilization rate was only about 55% in 2021. However, the capacity utilization rate of leading carbon fiber producers was as high as about 90%. So far, China's carbon fiber inventory has fallen to a low level. The capacity utilization rate of carbon fiber is expected to increase to 55% by 2025.

Figure 1 Application distribution of carbon fiber in China

Nearly 90% of global carbon fiber sports devices, including golf clubs, bicycles, and fishing rods, are produced in China. Both high-end and low-end grades are needed. The consumption of T300 and T700 is the highest, coupled with needs for a small number of T800 and high-modulus products. As for specifications, 3K and 12K are the focus, and there are needs for a variety of products.

2. Sharply increased demand for new energy

According to relevant research reports, the demand for carbon fiber from wind power sector in China was about 20 000 tons in 2020. Against the backdrop of the prevailing carbon neutrality policy, the wind power market will develop rapidly. Thus, the demand for large-scale and high-power fan blades will drive up the demand for carbon fiber. In 2025, China's demand for carbon fiber from wind power sector will reach 55 000 tons. At present, the import dependency ratio of China's wind power carbon fiber producers (mainly fed by imported raw materials) and users is as high as 85%. It is expected that with the breakthrough of domestic large tow technology, the domestic output will increase significantly to replace imports.

As green hydrogen energy is being widely used, the consumption of carbon fiber from pressure vessels sector, which accounts for 4% of the total nowadays, will also increase significantly in the future.

The development of new-energy hydrogen energy vehicles will also bring up the demand for hydrogen storage bottles, which will increase their demand for carbon fiber. According to the white paper on China's hydrogen energy and fuel cell industry issued by China Hydrogen Energy Alliance, it is estimated that the number of hydrogen energy vehicles in China will reach 50 000 and the number of hydrogen refueling stations will reach 200 by 2025; the number of hydrogen refueling stations will reach 1 500 and the number of fuel cell vehicles will reach 15 million by 2035. It is estimated that by 2025, the demand for carbon fiber from hydrogen storage bottles will reach about 2 500 tons.

Carbon-carbon composites are expected to keep growing rapidly, as driven by the photovoltaic industry. This will drive up the demand for carbon fiber. The demand for carbon fiber from photovoltaic carbon composites is expected to reach 21 000 tons in 2025.

3. Concentrated supply

The market concentration is high, as the carbon fiber capacity is mainly concentrated in leading producers, with the market share of the top five accounting for about 77%. Although there are more than 30 carbon fiber producers in China, most of them are small-sized and the nominal capacity of single line is only 100 tons, which is far less than the commercial production scale.

4. Accelerated capacity expansion

The effective capacity of carbon fiber and precursor will expand rapidly during the 14th Five-Year Plan period. According to rough statistics, China's carbon fiber capacity in planning and under construction totals 243 000 t/a, and the capacity utilization rate will increase steadily. Thus, the supply tightness is expected to be eased in the future.

According to Chinese government’s targets of carbon fiber, domestic carbon fiber composites should meet the technical requirements of important equipment such as large aircraft, and the annual consumption of domestic carbon fiber should reach more than 4 000 tons in the fields of marine and construction engineering as well as new energy vehicle manufacturing demonstration application. In addition, the high-performance fiber demand should be largely covered domestically. The application of high-performance fiber composites in industrial equipment should account for more than 50%; the application in the new generation of aerospace equipment should be wider, such as demonstration application in the field of civil aircraft and the achievement of civil aviation certification.

As for the development focus of China’s carbon fiber industry, the technical maturity of domestic high-strength carbon fiber and its composites should reach level 9, the technical maturity of high-strength medium-modulus, high-modulus high-strength carbon fiber and its composites should reach level 9, and some key components of aviation carbon fiber composites should obtain CAAC/FAA/EASA airworthiness certificates; producers should develop carbon-carbon composites with low cost and high performance. The key equipment should be large-scale production equipment for 24K tow carbon fiber and continuous automatic smart manufacturing equipment for carbon fiber composites.

Some domestic leading producers

1. Zhongfu Shenying: Continuous breakthroughs in both technology and products

Zhongfu Shenying Carbon Fiber Co., Ltd. was established in Lianyungang in 2006. In October 2007, the company drew investments from China National Building Material Group Co., Ltd. and started the construction of 10 000t/a carbon fiber production base. A 1kt/a SYT35 (T300) carbon fiber production line was built in 2008. In 2012, the producer put the 1kt/a SYT49 (T700) unit into operation after breaking through the bottleneck of dry jet wet spinning technology through three years of independent research and development. In 2017, it was able to secure stable production and sales of 1kt/a SYT55 (T800). The producer took the lead in realizing the commissioning of 100-ton SYT65 (T1000) in 2019.

Zhongfu Shenying was the first to develop small tow technology in China, and its products are widely applied in downstream sectors, including aerospace, wind power blades, sports and leisure, pressure vessels, carbon-carbon composites and transportation construction.

2. Guangwei Composites: Market coverage along the whole industrial chain

Founded in 1992, Guangwei Composites is the first A-share listed company in the domestic carbon fiber industry, and its business covers carbon fiber, carbon fiber fabric, carbon beam, prepreg and machinery manufacturing in order to achieve comprehensive development along the whole industrial chain. The capacity is expected to increase by 4 000 tons/year in 2022 to 7 855 t/a, and another 6 000 t/a capacity will be put into operation later.

3. Jilin Tangu: Leading carbon fiber precursor producer

Jilin Tangu Carbon Fiber Co., Ltd. was the first in China to produce carbon fiber polymer by two-step ternary aqueous suspension polymerization and to produce carbon fiber precursor by wet process with DMAC as solvent. The producer reported its revenue at RMB1.1 billion in 2020, of which the carbon fiber business revenue reached RMB590 million, up by 91.4% year on year. The profit was mainly from the carbon fiber business while the gross margin of acrylonitrile was extremely low. As a result, after June 2020, the company stopped the acrylonitrile trading business and focused on the carbon fiber business.