An outlook on China’s carbon fiber market

According to Lin Gang, general manager of ATA CFT Guangzhou Co. Ltd. (Guangzhou, China), in his recently published global carbon fiber report, as of 2023 China is the second largest carbon fiber composites market in the world (the U.S. still claiming the top spot). Based on his collected data, China consumes approximately 69,000 metric tons (MT) of the world’s total 115,000 MT carbon fiber demand and represents 28% of global carbon fiber-reinforced polymer (CFRP) revenue, with Europe, Japan and other countries close behind. There are many factors involved that are affecting China’s current market position — capacity, price reductions caused by ongoing supply chain challenges, market specialization and more — all of which are discussed in greater detail below.

As CW seeks to form a holistic view of the state of the global carbon fiber market, better understanding the statistics, trends and observations surrounding carbon fiber in China is becoming increasingly necessary. The 70-page report developed by Lin, which studies the carbon fiber market primarily between 2022-2023, sought to open this discourse. CW provides a brief overview here of the key discussions, points and conclusions drawn by Lin’s research, with commentary from additional sources to provide context and perspective.

A brief note on Chinese carbon fiber

Not all carbon fiber is created equal. Variation in modulus, tow size and other characteristics affect what carbon fiber types dominate certain end markets. For instance, applications like wind turbines use mid-range carbon fiber variants ranging from T300 to T700 (Toray, Tokyo, Japan), while high-end variants like T800 to T1200G carbon fiber are used in aircraft.

Chinese carbon fiber is understood to be generally on par with the rest of the world. According to Lin’s report, Chinese carbon fiber manufacturers have proven their strength in mastering already well-established material technologies, which has enabled the country’s carbon fiber to gain share in wind, industrial, automotive and other markets. However, as implied in some of his discussion, China is weaker when it comes to carbon fiber production for use in high-performance aerostructures  (see Figs. 1a and 1b) — it is an end market where requirements and regulations are much more demanding, thus making long-term experience necessary, but where a significant amount of high-performance carbon fiber (such as T800-T1200-type) is being produced by other global players. For example, Lin reports that global aerospace “application capabilities” — i.e., the prevalence of global carbon fiber supply in a specific end market — are ~22,000 MT while China lags behind at ~7,000 MT.

These data are further exemplified by Lin’s breakdown of Chinese carbon fiber volume versus revenue by market (Figs. 2a and 2b). While 47.8% of China’s 2023 revenue is dominated by aerospace — this includes unmanned aerial vehicles (UAV) and defense (Fig. 3), both of which are large consumers — CFRP volume shows aerospace to be only the fourth largest in demand at 11.6%; in both cases sports/leisure and wind remain in the top three positions.

 

Increased capacity, lower demand

Global carbon fiber production demand across all end markets indicate an exponential increase leading up to 2030, and — assuming this trend continues — could reach ~280,000 MT (Fig. 3), says Lin. This outlook is backed by global data acquired by advanced materials M&A specialist Future Materials Group (FMG, Cambridge, U.K.), which mirrors Lin’s report. According to FMG, global demand of carbon fiber the last few years is as follows:

• 2021: 115,000 MT
• 2022: 20,000 MT
• 2023: 140,000 MT

Where the FMG and the report differ, is Lin’s suggestion that there is a decrease in current demand for global and Chinese carbon fiber. Lin reports a 14.8% decrease between 2022 and 2023 globally (2023: 115,000 MT vs. 2022: 135,000 MT) and a 25.7% decrease between these same years in China (2023: 69,075 MT vs. 2022: 74,429 MT).

Myriam Yagoubi, manager at FMG, believes the discrepancy may lie with the wind industry. “Although growth in demand was slower between 2021 and 2022 [globally], it has picked up again,” she explains. “I think our main difference concerns global wind demand. We [regions outside of China] have a more positive view, especially with the demand of Western wind OEMs.”

Lin and Yagoubi also address the issue of revenue loss from 2022 to 2023. Lin reports that global revenue has shown a 12.3% decrease (2022: $26.61 billion vs. 2023: $22.96 billion). According to Yagoubi, “2022 was a difficult year. Wind demand was down, and other market demands were slowing, but this was off the back of strong demand through COVID-19, so the momentum change was felt strongly by industry. Of course, the exceptional demand seen through COVID (and associated prices increases) was never going to be maintained.” In conclusion, FMG is still seeing ongoing growth in global demand at rates quite similar to historical (7-10%).

It might make more sense, then, to consider that global demand hasn’t decreased — China’s demand has. When looking to carbon fiber production by region over the last couple of years, Lin’s data show that China has far surpassed its competitors, making up nearly half of global capacity (Fig. 4). At the same time, however, the country is seeing lower carbon fiber demand. 

For comparison, Lin reports that annual demand growth in China, 2021-2023, was:

• 2021: 27.7%
• 2022: 19.3%
• 2023: -7.2%

Conversely, China’s operating capacity during the same time period ranks it first globally:

• 2021: 30.5%
• 2022: 43.3%
• 2023: 47.7%

According to Lin, China’s 2023 production capacity reportedly reached 138,330 MT, which is 26,280 MT more than 2022. In these circumstances, Lin anticipates “a price bloodbath and high inventory.” The report points to several potential reasons for this shift.

Market fluctuation

The effects of COVID-19 are still being felt, affecting inventory and demand. A majority of carbon fiber manufacturers between 2022-2023 (minus Japan) have seen a price decline. Lin says China’s carbon fiber producers saw prices drop from an average of $33/kilogram in 2022 to $18/kilogram in 2023 (Fig. 6).

It is also important to study how carbon fiber-consuming markets in other countries compare to China. Each country has its own end market specializations based on the carbon fiber variants it provides. Lin states that China’s main markets include wind, sports/leisure, carbon-carbon (C/C) composites, construction and electronics, with enormous application potential for automotive (Fig. 1a).

By contrast, carbon fiber supply from countries like Japan, Europe and the U.S. is more prevalent in pressure vessels and aerospace markets — not only do they comprise 31.3% of global carbon fiber demand, but these regions in particular have “deeper cooperation, and more well-developed demonstration of these applications [when compared to China]” Lin says. This has formed a “closed-loop industrial chain,” though China’s recently debuted Commercial Aircraft Corp. of China (COMAC) C919 hints at the region’s determination to re-establish itself in commercial aircraft.

Notably, says Lin, aerospace, which took a significant hit starting in 2020, has been in a state of rapid recovery since 2023 and the market for pressure vessels has shown relative stability. This is in direct contrast to C/C composites, where Lin notes that prices have declined, along with weakened demand in wind and a sharp decline in sales for sports/leisure markets after strong growth in 2020 during COVID-19.

Global market, reduced imports

Beyond numbers, Lin also suggests that the current carbon fiber supply situation in China — and perhaps even the world — can be attributed to two key things: a lack of understanding internationally of Chinese carbon fiber manufacturers and geopolitical tensions.

The report generally describes Chinese products (think textiles, toys, houseware and so on) as “cheap and of good quality” that “have gained [an] extensive reputation internationally.” However, for more highly technical products — especially advanced materials like carbon fiber and composites generally — the region has been ignored or overlooked. And for those companies outside of China that are using Chinese carbon fiber, it may simply be out of a need rather than a want.

“China’s carbon fiber has made significant progress over the past decade,” Lin notes, “but it has now caught up with the market’s supply shortage and high prices.” In other words, carbon fiber production in China has eliminated domestic fiber supply shortfalls, but Chinese carbon fiber producers have lost the ability to maintain relatively high prices.

As shown in Fig. 7, China’s domestic production of carbon fiber has indeed increased sharply over the last couple of years, while imported carbon fiber has declined. Since 2022, domestic carbon fiber has become the Chinese market’s dominant supply — and if trends continue, will become China’s only supply in the next couple of years, Lin suggests. Customs data reaffirms this, showing that the export of Chinese carbon fiber is negligible. This significant decline in imports is said to be mainly due to what Lin says is “the enhanced import substitution of domestic carbon fiber and due to the less-than-expected development of the Chinese market.”

Geopolitical tensions are also a factor. U.S. tariffs on Chinese carbon fiber, China’s ongoing relationship with Russia and China’s aggression toward Taiwan make it difficult for real and potential carbon fiber customers outside of China to have faith in consistent carbon fiber supply from Chinese manufacturers.

Lin acknowledges these tensions, which “have already pushed Western clients to evaluate the risk of Chinese carbon fiber,” he says. “China’s carbon fiber industry has done a good job in working out high-performance, low-price carbon fiber to help customers expand their applications. However, China’s serious overcapacity and its involution [a term used in China that could be translated to a ‘race to the bottom,’ leading to the devolution of an industry plagued by hyper-competition] are not good for the world and could pose serious complications to decades of carbon fiber market development.” Should other regions embrace or cut the tie with Chinese carbon fiber? This is a headache of a question for the world.”   

Path forward for Chinese and global carbon fiber markets

“The Chinese market is characterized by comprehensive and low-cost manufacturing capabilities,” Lin describes. “For [some] application markets that have [well-established products] [Fig. 8] we have become the strongest in the industry, such as sports equipment, wind power pultruded plates, C/C composites and so on. Of course, this is also a double-edged sword — the business that could make China profitable in a few more years could also experience violent fluctuations. We seriously lack the ability and patience to explore new application ecosystems, which is the biggest difference and gap compared to Europe, Japan and the U.S.”

Based on data, Lin says that “production expansion or new construction [of carbon fiber lines], excess production capacity and intense competition” will undoubtedly be the industry’s key challenges in the coming years, not just for China but globally as well. Nevertheless, factors like ongoing supply chain challenges stemming from COVID-19 will gradually resolve and the market will recover. “Carbon fiber manufacturers should remain patient,” Lin adds.

What does Lin think Chinese carbon fiber suppliers look to in order to ensure the industry develops healthily and sustainably under such circumstances?

• Strive to bring China into the international carbon fiber supply chain. He suggests that suppliers continue active expansion into other applications through the development of an “innovative ecological chain.” Lin says that Chinese carbon fiber suppliers not only need to explore their domestic innovation industry chain, but also actively participate in the construction of the international innovation ecosystem.
• Pursue mutual learning and consensus through professional cooperation and public development among China’s top 10 enterprises, or risk comprehensive losses in carbon fiber supply chain as a whole. Lin emphasizes that Chinese companies should focus their main efforts on “technology development to reduce [carbon fiber] costs, increase efficiency and stabilize quality.”

Uncertain market demand, technological innovation and a rise in production capacity will inevitably lead “to an industry reshuffle,” Lin admits, adding that some of these challenges have also stimulated new investors to enter the composites industry. However, he says, nothing can be achieved overnight, and will require great patience, tolerance, resilience and perseverance.