In-depth Report on Carbon Fiber Industry: AAnalysis of Market Demand and Supply Pattern

 

1 Carbon Fiber: Light and High-Strength “Black Gold”

 

Carbon fiber is an inorganic fiber with a carbon content of more than 90%. It is formed by the cracking and carbonization of organic fibers (viscose-based, asphalt-based, polyacrylonitrile-based fibers, etc.) under high temperature conditions above 1000℃. It has the mechanical properties of “lightweight and high strength”. Its specific gravity is only about one-fifth of that of steel, but its strength can reach 5~7 times that of steel. It also has excellent properties such as high temperature resistance, corrosion resistance, good electrical and thermal conductivity. It is called the king of new materials and also known as “black gold”.

Carbon fiber has become an important strategic material for the development of national defense and military industry and national economy with its excellent properties of high strength, high modulus and light weight. It not only has an irreplaceable position in military fields such as aerospace, but also shines in wind turbine blades, sports and leisure, pressure vessels, building protection, automobile transportation and other fields.

 

1.1 Classification of Carbon Fiber in Different Dimensions

 

Carbon fiber can be classified according to different dimensions such as raw fiber type, tow specification, morphology, and mechanical properties.

According to the type of raw fiber, it can be divided into polyacrylonitrile (PAN) based, asphalt based and viscose based. Among them, PAN based is the main product of carbon fiber today due to its excellent mechanical properties and wide application fields. Its output accounts for more than 90% of the total output of all carbon fibers in the world. Therefore, carbon fiber generally refers to PAN based carbon fiber. Unless otherwise specified, carbon fiber mentioned in the subsequent content refers to PAN based carbon fiber.

According to the tow specifications, it can be divided into aerospace grade small tow carbon fiber below 24K (1K means that a carbon fiber tow contains 1000 monofilaments) and industrial grade large tow carbon fiber above 48K. At present, small tow carbon fiber is mainly provided by Japan and South Korea. The main producers of large tow carbon fiber are the United States, Germany and Japan, with an output of about 33% of small tow carbon fiber, and the maximum count has developed to 480K.

 

 

According to the form, it can be divided into filament, short fiber and chopped fiber. Filament is used in industrial structural parts and aerospace structural parts, short fiber is mainly used in the construction industry, such as short carbon fiber graphite low-frequency electromagnetic shielding concrete, industrial carbon fiber felt, etc. Short chopped fiber is mainly mixed with various matrix plastics to make modified carbon fiber engineering plastics, and then sold to injection molding machine factories to make parts.

According to mechanical properties, it is divided into general-purpose and high-performance types. The general-purpose type has a strength of 1000MPa and a modulus of about 100GPa. High-performance carbon fiber is further divided into high-strength type (strength 2000MPa, modulus 250GPa) and high model (modulus above 300GPa). The strength greater than 4000MPa is also called ultra-high strength type; the modulus greater than 450GPa is called ultra-high model.

 

1.2 The Midstream Link is The Core Of The Industrial Chain

 

The carbon fiber production process is long, and the process, technology and capital barriers are high. The complete carbon fiber industry chain includes the complete manufacturing process from primary energy to terminal application.

The upstream is mainly the supply link of chemical raw materials. Acrylonitrile is obtained from petroleum, coal, natural gas, etc. after a series of processes such as refining and ammoniation. The midstream is the core of the industry. After spinning polyacrylonitrile, polyacrylonitrile (PAN) precursor is obtained, and then carbon fiber is obtained after pre-oxidation, low-temperature and high-temperature carbonization; it can also be made into carbon fiber fabrics and carbon fiber prepregs as raw materials for the production of carbon fiber composite materials. Carbon fiber is combined with resins, ceramics and other materials to form carbon fiber composite materials, and finally various molding processes are used to obtain the final products required by various downstream fields.

The core of the carbon fiber industry chain is the midstream links. From precursor to carbon fiber composite materials, the process involved is long, the equipment and production lines are complex, and the product types are wide. It is a typical capital-intensive and technology-intensive industry. The product forms involved in the midstream of the industry chain mainly include four categories: carbon fiber, carbon fiber fabric, carbon fiber prepreg and carbon fiber composite products.

 

1.2.1 Important Intermediate Products: Carbon Fiber Fabric and Prepreg

 

Polyacrylonitrile (PAN)-based carbon fiber is the mainstream of carbon fiber due to its relatively simple production process and excellent product mechanical properties, accounting for more than 90% of the market share.

 

The production of polyacrylonitrile (PAN)-based carbon fiber is mainly divided into two steps. The first step is to form carbon fiber precursor by polymerization and spinning of polyacrylonitrile. The second step is to send the precursor into an oxidation furnace to obtain pre-oxidized fiber (commonly known as pre-oxidized fiber) after finishing. The pre-oxidized fiber enters the carbonization furnace to obtain carbon fiber. The carbon fiber is surface treated and sizing to obtain carbon fiber products. The whole process is long, with many steps, and the technical and production barriers are very high.

Carbon fiber fabric is an important application form of carbon fiber. Carbon fiber fabric is a sheet material formed by the mutual crossing and entanglement of continuous carbon fibers. According to different production processes, it is divided into carbon fiber woven fabric, carbon fiber knitted fabric, carbon fiber felt and carbon fiber special-shaped woven fabric. Carbon fiber woven fabric is the main domestic product. The domestic companies that supply carbon fiber fabrics are mainly Guangwei Composites and Zhongjian Technology.

Prepreg is an intermediate product between raw materials and final composite materials. Its manufacturing method is mainly to arrange carbon fibers in one direction and soak carbon fibers or cloth in resin to transform them into sheets, including single-item prepreg (non-woven cloth), bidirectional prepreg (tape, cloth), and bundled filament prepreg. It is an extremely important intermediate material in processes such as autoclave, molding, bag pressing, and rolling, and is used in pressure vessels, aerospace, rail transportation, automobiles and ships, sports equipment, medical equipment, and other fields. Domestic listed companies that provide prepregs mainly include Guangwei Composites and AVIC High-Tech.

Carbon fiber composite materials are mainly structural or functional materials made of carbon fiber as a reinforcing material and resin as a matrix material. At present, carbon fiber composite materials are mainly resin-based composite materials (CFRP), accounting for more than 90% of the total carbon fiber composite material market share.

Carbon-carbon composite materials are also an important member of the carbon fiber composite material family. They are widely used in photovoltaic thermal field components and aerospace components due to their strong temperature resistance. In recent years, with the rapid development of the photovoltaic industry, the demand for carbon-carbon composite materials has surged; in 2021, the domestic carbon-carbon composite material revenue was about 7.4 billion, becoming the third largest application market in China.

my country began to develop polyacrylonitrile-based carbon fibers in the 1960s. So far, my country has established its own carbon fiber technology system and a relatively complete carbon fiber industry, involving more than 10 companies and research institutes. The main listed companies in the industry chain are Zhongjian Technology, Zhongfu Shenying, AVIC High-Tech and Guangwei Composites.

 

 

1.2.2 Low-cost Large Tow Development Promotes Civilian Applications

 

Carbon fibers can be divided into small tow and large tow according to the size of the tow. Small tow generally refers to carbon fibers with a tow specification of 1~24K, and large tow generally refers to carbon fibers with a tow specification of ≥48K. Small tow has excellent mechanical properties and is mainly used in the aerospace field; large tow is mainly used in industrial fields such as energy, transportation, and textiles.

Compared with small tow, large tow has the advantages of low cost and high productivity. Large tow uses low-priced civilian PAN yarn as raw yarn, and its performance is almost the same as that of special raw yarn for making small tow carbon fiber, but the price is only one-fourth of the raw yarn for preparing small tow carbon fiber; and the price of raw yarn usually accounts for about 60% of the cost of carbon fiber preparation. Therefore, the price of large tow carbon fiber is only 50%~60% of that of small tow carbon fiber.

From the 1980s to the 1990s, almost all leisure sports products were made of small tow carbon fiber. However, since the mid-1990s, large-tow carbon fiber has gradually replaced small-tow carbon fiber at a lower price and has become one of the main reinforcing materials for the preparation of leisure sports goods. And with the development of related industries such as the automotive industry and wind turbine blades, the demand for large-tow carbon fiber has also grown rapidly. In 2019, the market share of large-tow carbon fiber was 42.2%, and it reached 45.2% in 2020.

Due to its low cost, high cost performance and wide application, large-tow carbon fiber has a broad market space and development potential. Domestic companies are also actively planning and building large-tow carbon fiber expansion projects. The next 3 to 5 years will be the golden period for the development of low-cost large-tow.

 

1.2.3 Dry-jet Wet Spinning Technology has Obvious Speed and Performance Advantages

 

The raw fiber preparation process is the core technology of carbon fiber. Generally, qualified raw fibers with stable quality can produce 1kg of carbon fiber with about 2.2kg of raw fibers, while poor quality raw fibers require 2.5kg or even higher, which increases the production cost. In the production of carbon fiber, the raw yarn accounts for 50% to 65% of the total cost, so the quality of the raw yarn directly determines the quality, output, production cost and market competitiveness of carbon fiber products.

There are three raw yarn production processes: wet spinning, dry spinning and dry-jet wet spinning. Currently, wet spinning and dry-jet wet spinning are more commonly used.

 

 

Wet spinning is the earliest and most widely used method in the production of PAN-based carbon fibers. In this spinning method, the spinneret is immersed in the solution, and the spinning stream produces a violent coagulation process from the surface to the inside due to the concentration difference. However, due to the different degrees of diffusion between the outer layer and the inner layer, there are differences in the time of diffusion, which usually makes the internal and surface structures of the fiber quite different, with a dense skin structure, a loose core structure, and a messy chemical structure.

These defects will be inherited by the carbon fiber, and the speed is limited by the double diffusion speed of the solvent and the coagulant and the fluid resistance of the coagulation bath. The process flow is complex and the production cost is high.

Dry spinning, like wet spinning, is a type of solution spinning. If the fiber-forming polymer can find a solvent with a low boiling point and good solubility to make a spinning solution, the spinning solution can be spit out from the tiny holes and enter the heated gas; the solvent in the spinning solution evaporates, the polymer filaments gradually solidify, and the finished fiber can be obtained after post-processing such as stretching, shaping, washing and drying.

Dry spinning can be carried out in a continuous production process with high spinning speed, large output, less environmental pollution, and better fiber quality, chemical resistance and dyeing performance than wet spinning fibers. The disadvantages are that the produced fiber has poor chlorine resistance, the process technology is difficult, and the production cost is higher than the dry-wet method, but lower than the wet method.

The dry-jet wet spinning process effectively combines the dry method and the wet method, dissolving the fiber-forming polymer in a certain solvent to prepare a spinning solution with a suitable concentration, and then spits out the spinning solution from a tiny hole. First, it passes through a very short air interlayer, where the polymer in the liquid crystal state is conducive to high orientation under high-multiple stretching conditions due to the small resistance of the filaments; then the filaments enter the low-temperature coagulation bath to complete the solidification and molding, and the liquid crystal macromolecules are in a highly ordered frozen liquid crystal state. The finished fiber has high strength and high modulus mechanical properties.

Dry-jet wet spinning has obvious advantages in both spinning speed and raw fiber performance, and has the advantages of high production efficiency, good carbon fiber quality, and low production cost. At present, the international high-end carbon fiber mainly adopts dry-jet wet spinning technology, such as T700, T800, and T1000.

Internationally, Japan’s Toray and the United States’ Hershey took the lead in achieving breakthroughs in dry-jet wet spinning technology, with spinning speeds as high as 600~1200 meters per minute. my country’s dry-jet wet spinning technology was broken through by Zhongfu Shenying in 2013, making the spinning speed reach more than 400 meters per minute, which is 5 times that of traditional wet spinning.

However, due to the difficulty of dry-jet wet spinning technology, only a small number of companies have mastered the production technology and formed mature carbon fiber products. At present, most domestic carbon fiber manufacturers still mainly use wet spinning technology.

 

 

1.3 Aviation Demand Drives the Development of High-Performance Carbon Fiber

 

Tensile strength and tensile modulus are the two most important indicators for measuring carbon fiber performance. In 2011, my country’s “polyacrylonitrile-based carbon fiber” standard was officially released and implemented. Benchmarking the performance of Japan’s Toray products, high-performance carbon fiber is divided into four types according to tensile modulus and strength: high-strength type (GQ), high-strength medium model (QZ), high model (GM), and high-strength high model (QM).

Driven by aviation demand, domestic carbon fiber high-performance technology has been continuously developed and successfully developed, and has entered an orderly development stage. At present, domestic carbon fiber companies have achieved large-scale production and stable supply of domestic T300 and T700 grade carbon fibers, and their performance has reached or even exceeded international standards. For example, GQ3522 (T300 grade) of Guangwei Composites and ZT7 series (higher than T700 grade) of Zhongjian Technology are both stable supply products in the domestic aerospace field.

The engineering production of T800-grade and M40J-grade carbon fibers has also been realized, and the key preparation technologies of T1000-grade, T1100-grade and M55J-grade high-performance carbon fibers have also been broken through, and mass production and application are just around the corner. (Report source: Future Think Tank)

 

2 Carbon Fiber Market Demand

 

Carbon fiber has comprehensive properties that are unmatched by any other material at present. It is widely used in the defense industry and high-performance civilian fields, involving aerospace, marine engineering, new energy equipment, engineering machinery, transportation facilities and other industries. It is a strategic new material that the country urgently needs and has broad application prospects.

 

2.1 Steady Growth in Global Market Demand

 

Global demand for carbon fiber has grown steadily. In 2020, the global demand for carbon fiber still exceeded 100,000 tons despite the impact of the epidemic, reaching 106,900 tons, a year-on-year increase of 3%; in 2021, it increased by 10.4% year-on-year and demand reached 118,000 tons. From 2015 to 2021, the global demand for carbon fiber had a CAGR of 12.2%.

 

 

Looking at the global market, the top three areas of carbon fiber demand in 2021 are wind turbine blades, aerospace, and sports and leisure, accounting for a total of 57.7%. Among them, the demand for wind turbine blades is 33,000 tons, accounting for 28%, a decrease of 0.6 percentage points from 2020; wind turbine blades are generally considered to be the most important growth market for carbon fiber, especially the blades required for manufacturing ultra-large wind turbines, which must use carbon fiber with light weight, high strength and good rigidity.

Compared with 2020, the sports market has a strong growth of 20%, returning to the second largest market position in the world. The third is aerospace, with demand remaining the same as in 2020, both at 16,500 tons, accounting for 15%, a decrease of 1.4% from 2020, mainly because the civil aviation industry has been greatly affected by the impact of the epidemic.

In terms of demand, the global sales of carbon fiber in 2021 was US$3.4 billion, a year-on-year increase of 30% from US$2.615 billion in 2020. On the one hand, the demand increased by 10.4%, and on the other hand, due to the shortage of supply, the overall price of carbon fiber rose by about 20%.

Among them, the demand in the aerospace field ranked first for a long time, with sales of US$1.188 billion in 2021, accounting for 34.9% of the global carbon fiber sales. The price of carbon fiber in this field is about 3 times the average price of other fields. The second and third largest amounts are wind turbine blades and sports and leisure fields, respectively.

In 2021, due to the shortage of the entire carbon fiber market, the price continued to rise on the basis of 2020, and the average price rose by about 20% overall. In terms of subdivision, except for the aerospace field, the unit price of carbon fiber is not much different, basically fluctuating around US$25,000/ton.

The price in the aerospace field is as high as US$72,000/ton, which is related to the overall high technical barriers and vigorous growth in demand in the aerospace field.

 

2.2 The Demand in the Chinese Market has Accelerated in Recent Years

 

From 2006 to 2011, the demand for carbon fiber in my country fluctuated. The main reason was that the United States and Japan imposed export restrictions on China under the condition of insufficient global carbon fiber supply, which led to the long-term suppression of China’s carbon fiber demand.

Especially in 2008 and 2010, the demand in the domestic carbon fiber market even showed negative growth. Since 2011, the domestic demand for carbon fiber has grown rapidly, and has maintained a growth rate of more than 25% since 2018. The CAGR of domestic demand for carbon fiber from 2015 to 2021 reached 23.2%.

 

 

In 2021, my country’s demand for carbon fiber was 62,400 tons, an increase of 27.7% over 2020, far exceeding the 10.4% increase in the global market during the same period. On the one hand, due to the substantial increase in global demand for carbon fiber for wind turbine blades, the international wind turbine blade OEM shifted from Europe to China, resulting in a surge in domestic demand for carbon fiber in this field; on the other hand, the proportion of demand in the domestic civil aviation field is far smaller than that in the global civil aviation field, so it is relatively less negatively affected by the epidemic.

For a long time, the supply of imported carbon fiber in the domestic carbon fiber market has far exceeded that of domestic carbon fiber. In 2009, the domestic production rate was only 12.7%; however, with the upgrading of my country’s carbon fiber technology and the development of industrialization, domestic carbon fiber has gradually broken the long-term technological blockade and market monopoly of Japan and the United States against my country.

In 2021, the sales volume of domestic carbon fiber was 29,000 tons, an increase of 58.1% compared with 18,500 tons in 2020; the growth rate of more than 30% for many consecutive years shows the great progress of domestic carbon fiber. In 2021, the localization rate has reached 46.9%, an increase of 9.1 percentage points from 2020. Saio Carbon Fiber previously expected that domestic production would exceed imports in 2025, and now it can be basically confirmed that it will be completed ahead of schedule in 2022.

From the perspective of carbon fiber supply, Japan and South Korea are still the main carbon fiber import regions in my country. In 2021, my country’s carbon fiber imports from Japan, Taiwan, the United States, Mexico and other regions have decreased to varying degrees, especially Japan and South Korea, where the import share has dropped from 15% in 2020 to 11%; in addition to Japan’s export control of carbon fiber to China, the acceleration of the pace of carbon fiber localization is also a key factor.

Since the main suppliers of imported small tows in China are Japan’s Toray and South Korea’s Hyosung, Japan began to restrict exports in August 2020, and South Korea’s imports have increased significantly, accounting for 8.5% from 5% in 2020.

In 2021, due to the shortage of supply in the entire carbon fiber market, the price trend continued to rise on the basis of 2020; the quantity of imported carbon fiber and its products increased by only 9.2% year-on-year, while the amount increased by 26%. The same situation was also seen for domestic carbon fiber, with the quantity increasing by 58.1% year-on-year, but the amount increased by 105.5% year-on-year.

In terms of the unit price of carbon fiber, Japan’s carbon fiber import price is the highest, at US$34,000/ton, mainly because the carbon fiber imported from Japan is mainly high-end carbon fiber used in the aerospace field, and is mainly small-tow products; the United States, Mexico, and Hungary mainly provide large-tow products.

 

 

Unlike the international demand structure, domestic carbon fiber demand is mainly concentrated in wind turbine blades and sports and leisure fields, and its application in the aerospace field is relatively low, accounting for only 3.2% in 2021.

The demand for carbon/carbon composite materials increased by 5.1 percentage points compared with 2020. Carbon/carbon composite materials are mainly used in the photovoltaic field, and aerospace components are also important application scenarios, such as rocket engine nozzles and throat liners.

In the future, with the improvement of domestic carbon fiber technology and the development of my country’s aerospace, there is room for further growth in the demand for carbon fiber and its composite materials.

As international wind power main engine manufacturers shift carbon fiber pultrusion board OEM from Europe to China, wind turbine blades have become the largest carbon fiber application field in China.

In 2021, the demand for carbon fiber in the domestic wind turbine blade field was 22,500 tons, a year-on-year increase of 12.5%; but due to the large increase in overall domestic demand, the demand for wind turbine blades accounted for 36.1%, a decrease of 4.8 percentage points from 2020.

The market demand for wind turbine blades is mainly for foreign wind turbine mainframe applications, while the domestic mainframe usage is relatively small. The products used are mainly T300-grade 24K, 48K, 50K and other products at home and abroad. The rapid growth in the demand for carbon fiber in wind turbine blades in recent years has brought rapid development opportunities for domestic carbon fiber companies.

The sports and leisure products market maintains a high share. Nearly 90% of the global carbon fiber sports equipment processing is completed domestically. In 2021, the demand for carbon fiber in the domestic sports products field was 17,500 tons, accounting for 28.1% of the total domestic demand, a decrease of 1.9 percentage points from 2020.

The sports and leisure field has a wide range of product categories, and the demand for carbon fiber presents a situation of high-end and low-end coexistence, mainly T300-grade and T700-grade, including a small amount of T800-grade and high-modulus products, with specifications mainly 3K and 12K. (Report source: Future Think Tank)

 

3 High-end Demand Areas are Mainly Aerospace and Wind Power

 

Carbon fiber is rarely used directly, and most of it is processed into intermediate products or composite materials. Carbon fiber was first used in aerospace and defense fields due to its light weight, high strength, high modulus, high and low temperature resistance and corrosion resistance, such as large aircraft, military aircraft, drones, missiles, rockets, satellites and radar covers, and the performance level of carbon fiber used in the aerospace field is relatively the highest.

In recent years, with the rapid development of the wind power industry, the demand for carbon fiber for large-leaf wind turbine blades has surged, forming a dual-engine drive mode of aerospace drive and wind power drive.

 

 

3.1 Aerospace

 

The CAGR of carbon fiber demand in the global aerospace sector reached 10% from 2015 to 2019, and the demand has grown steadily. However, since the outbreak of the global COVID-19 pandemic in 2020, the aerospace market has suffered a severe setback, especially in civil aviation, business jets and other fields, where the use of carbon fiber has dropped sharply.

In 2020, the global demand for carbon fiber in the aerospace sector was only 16,500 tons, a sharp drop of 30% from 2019. In 2021, it remained sluggish compared with other fields, and demand remained flat.

Compared with the global market, China’s demand for carbon fiber in the aerospace sector has continued to grow steadily due to strong demand for military aircraft replacement and the development of the domestic commercial aviation market; the CAGR from 2015 to 2019 was as high as 29%, and in 2020, it still increased by 21% year-on-year compared with 2019 under the influence of the epidemic.

According to the data of Sai Ao Carbon Fiber, the recovery period of civil aviation is expected to be delayed until 2025, which will cause the demand for carbon fiber in this field to continue to be sluggish. The military aircraft, drone and aerospace markets will continue to grow, and the global demand for carbon fiber in the aerospace field is expected to reach 20.64 thousand tons by 2025.

In terms of the global aerospace field, commercial aircraft carbon fiber demand accounts for the largest proportion, accounting for 69.1% in 2019; but due to the impact of the epidemic since 2020, demand in this field has continued to be sluggish, accounting for only 35% of the global aerospace field in 2021.

In contrast, demand in the drone field has increased sharply, with demand of only 750 tons in 2020 and 3,450 tons in 2021, and demand share has also increased from 4.6% to 21%, becoming the second largest application field in aerospace. The demand in the aerospace field is basically flat, at around 300 tons in 2020 and 2021.

 

3.1.1 Increased Use Of Carbon Fiber In Advanced Fighters

 

In the aviation field, carbon fiber composite materials are mainly used in aircraft structural materials (accounting for about 30% of the aircraft weight). The use of carbon fiber can reduce the weight of aircraft structural materials by 20% to 40%, and reduce the overall weight of the aircraft by 6% to 12%.

Reducing the weight of structural materials can bring many benefits. For military aircraft, weight reduction saves fuel while expanding the combat radius, improving battlefield survivability and combat effectiveness; for passenger aircraft, weight reduction saves fuel, increases range and payload capacity, and has significant economic benefits.

 

 

Due to the irreplaceable material properties of carbon fiber composites in structural lightweighting, they have been widely used and rapidly developed in the field of military aviation. Since the 1970s, foreign military aircraft have used composite materials for the manufacture of tail-level components, and now use them for wings, covers, front fuselages, mid-fuselages, fairings, etc. Since 1969, the use of carbon fiber composite materials in the US F14A fighter was only 1%, and the use of carbon fiber composite materials in the fourth-generation fighters represented by the US F-22 and F35 reached 24% and 36%, and in the US B-2 stealth strategic bomber, the proportion of carbon fiber composite materials exceeded 50%. The application of composite materials in my country’s military aircraft has also shown an increasing trend year by year. The J-8II is the first time that my country has used carbon fiber composite materials in the fuselage of a fighter jet. The use of carbon fiber in the J-11B and J-10B has reached about 10%, while the most advanced fourth-generation fighter J-20 uses 27% of carbon fiber; the Z-10 and Z-19 armed helicopters also use a large number of fuselage frame structures, helicopter rotors, wing skins and helicopter tail parts made of carbon fiber materials.

The use of advanced composite materials not only meets the various special requirements of military aircraft for materials, but also reduces manufacturing costs and improves the comprehensive combat performance of military aircraft.

Compared with the United States, there is a large gap in the number and generation of my country’s military aircraft, and there is a strong demand for structural upgrades. And with the replacement and upgrading of my country’s new fighters, the proportion of military carbon fiber usage has also increased. At present, the proportion of carbon fiber used in my country’s fourth-generation fighter J-20 is 27%, compared with only 6% and 10% for the third-generation fighters J-10 and J-11.

According to FlightGlobal statistics, in terms of the number of active military aircraft in various countries, the United States has a total of 13,246 military aircraft and China has 3,285, with the number of US military aircraft being about four times that of China. According to WorldAirForces2021 data, the second-generation fighters of the US Air Force have basically retired. At present, the third-generation aircraft such as F-15 and F-16 are the main ones, and the fourth-generation aircraft such as F-22 and F-35 are the auxiliary ones. The third-generation aircraft and the fourth-generation aircraft account for 84% and 16% respectively; while my country’s fighters are mainly represented by the second-generation aircraft represented by the J-7 and J-8, which still account for 43%, and the third-generation aircraft represented by the J-10, J-11 and J-15 account for 56%, and the fourth-generation aircraft represented by the J-20 and J-31 have not yet been put into use on a large scale. The “14th Five-Year Plan” period will be an important period for the structural upgrade of my country’s military aircraft, and the third- and fourth-generation aircraft will basically complete the replacement of the second-generation aircraft. The introduction of new aircraft models will drive the growth of military carbon fiber.

 

 

According to the forecast in “Military aircraft + aerospace + wind power, let carbon fiber be put to good use”, according to the calculation that the number of military aircraft will reach 70% of that of the United States in the next 15 years, my country’s new fighters, transport aircraft, special aircraft, tankers, trainers and helicopters are expected to reach 6,500 in the next 15 years, and the number of various types of military aircraft will be comparable to that of the United States.

According to the calculation of the empty weight of various types of military aircraft and the proportion of carbon fiber composite materials and carbon fiber proportion (carbon fiber accounts for about 60% of carbon fiber composite materials), the demand for carbon fiber for military aircraft will reach 14,154 tons in the future, with an average annual demand of 944 tons.

With the increase in the proportion of carbon fiber composite materials in the military aviation field and the increase in the number of military aircraft replacement and renewal needs, my country’s demand for carbon fiber for military aircraft will continue to show an increasing trend.

 

3.1.2 Domestic Large Aircraft Bring Huge Market for Commercial Aviation

 

The structure of civil aircraft is also gradually moving towards material composites, and carbon fiber composite materials have reached more than 50% in aircraft structures. The use of composite materials in large passenger aircraft has been continuously expanded from secondary load-bearing structures such as the tail to main load-bearing structures such as the fuselage and wings.

In the early A310, B757 and B767, the proportion of carbon fiber composite materials was only 5%-6%. With the development of technology, carbon fiber composite materials have gradually been used as secondary load-bearing components and main load-bearing components in passenger aircraft, and their mass proportion has also begun to gradually increase, reaching 23% in the A380, creating a precedent for the large-scale application of advanced composite materials in large passenger aircraft.

The latest B787 and A350 have more parts using carbon fiber composite materials, such as the nose, tail, wing skin, etc., with a usage of more than 50%.

The domestically produced large aircraft C919 and the Sino-Russian wide-body aircraft project CR929 both use a large amount of composite materials. C919 is the first large civil aircraft to use carbon fiber materials on a large scale. Nearly 15% of the fuselage is resin-based carbon fiber materials, while ARJ21 uses only 2% carbon fiber composite materials during the construction process. The fuselage, wings and tail of CR929 are all planned to use carbon fiber composite materials, and the usage is expected to account for about 50%.

The development of domestic civil aircraft will bring major development opportunities for aviation carbon fiber. On the one hand, models such as C919 and CR929 are heavier and use more composite materials. With the delivery of C919 in 2022, the demand for carbon fiber in the field of domestic civil aircraft will increase exponentially; on the other hand, orders for domestic civil aircraft represented by C919 and ARJ21 will continue to grow in the future, further boosting the downstream demand for carbon fiber.

 

 

The ratio will be increased to 25%, and the use of composite materials in the C929 model jointly developed with Russia will exceed 50%.

It is expected that 2,500 C919s and 500 C929s will be produced in the next 20 years. According to the empty weight of C919 of 42 tons and C929 of 110 tons, the demand for carbon fiber for my country’s domestic large aircraft will reach 28,950 tons, with an average annual demand of 1,612.5 tons.

 

3.1.3 Rapid Development Of Unmanned Aerial Vehicles

 

In recent years, unmanned aerial vehicles (UAVs), including unmanned combat aircraft (UCAVs), have developed rapidly. Due to their technical characteristics of low cost, light structure, high maneuverability, high overload, high stealth, and long range, reducing mass has become one of the research hotspots of UAV technology workers in various countries. Only by reducing the mass of the body structure can more mass space be saved to increase fuel and payload, and extend flight distance and endurance.

With the widespread application of carbon fiber composite materials in large civil aircraft, it is also considered the best choice for solving the problem of reducing weight in drones. At present, countries around the world are using advanced composite materials mainly composed of carbon fiber composite materials on drones, accounting for 60%~80% of the total mass fraction of the structure, reducing the weight of the fuselage by more than 25%. For example, the composite material of the US “Global Hawk” unmanned reconnaissance aircraft reaches 65%, the wings are made of lightweight and high-strength carbon fiber composite materials, and the wing beams and wing boxes are made of high-modulus carbon fiber epoxy prepreg; X-45C and X-47B use 90% composite materials; in 2013, China’s first “Thunderbird” drone using carbon fiber composite materials and fuel cell power debuted, and its fuselage and wings are made of all carbon fiber composite materials. In addition to being widely used for military purposes, drones are increasingly used in civil fields such as disaster patrols, environmental monitoring, geodetic aerial photography and meteorological observation. As these aircraft gradually form mass production, the use of composite materials in drones will continue to increase.

 

 

Exceeding 100 Billion Yuan.

 

As the most important advanced composite material for UAVs, the usage and demand of carbon fiber composite materials will also show a high-speed growth trend.

 

3.1.4 Growth in Missile and Aerospace Applications

 

As a structural and functional integrated component, carbon fiber composite materials also play an irreplaceable role in missiles, launch vehicles and satellite vehicles. The application level and scale of carbon fiber composite materials have been related to the leapfrog improvement of weapons and equipment and the success or failure of model development.

The use of advanced composite materials in missile launch tubes can conservatively reduce weight by 30%, which is crucial to improving ground survivability. At the same time, the advantages of composite materials such as environmental corrosion resistance and fatigue resistance can significantly increase the repeated use life of the launch tube and reduce the launch cost. For example, the United States’ strategic missile MX intercontinental missile and the Russian strategic missile “Topol” M missile both use advanced carbon fiber composite launch tubes.

In terms of launch vehicles, the solid rocket engine shells of the United States, Japan and France are mainly made of carbon fiber composite materials. For example, the engine casings of the US Trident-2 missile, Tomahawk cruise missile, Hercules-4 rocket, the French Ariane-2 rocket modification, and the Japanese M-5 rocket, among which the largest amount is the IM-7 carbon fiber with a tensile strength of 5.3GPa produced by the US Hershey Company, and the highest performance is the Toray T-800 fiber.

In 2021, my country carried out a total of 55 launch missions throughout the year, setting a new record, including the Long March series of rockets and the Kuaizhou series of rockets, which sent hundreds of spacecraft into space. According to the plan of the China Aerospace Science and Technology Corporation, there will be more than 40 space launch missions in 2022. In the future, after the space station enters the operational stage, the Long March 2F and Long March 7 carrier rockets will maintain a frequency of 2 launches per year. As the main material for rocket engine casings, carbon fiber will also have broader application prospects in the future.

In terms of satellite and space station applications, high modulus carbon fiber has low mass, high rigidity, good dimensional stability and thermal conductivity, and has been used in artificial satellite structures, solar panels and antennas for a long time. Today, the deployable solar panels on artificial satellites, space stations and some key components of the earth-to-space transportation system also often use carbon fiber composite materials as the main material.

 

Since the 18th National Congress of the Communist Party of my country, the state has issued a mobilization order to “develop the aerospace industry and build an aerospace power”. China’s aerospace industry has entered a period of rapid development. As an important pillar in the aerospace field, the performance requirements and application needs of carbon fiber will also be further improved.

In June 2020, the global network of Beidou-3 was completed, and the construction of low-orbit satellites was rapidly promoted. In 2020, the scale of my country’s satellite navigation and positioning service industry reached 403.3 billion yuan, with a CAGR of 28% from 2006 to 2020. The further growth of the satellite industry will also drive the growth of carbon fiber demand.

 

3.2 Wind Power Field: China’s Demand Accounts for More Than 60% Of The World’s Total

 

In wind power generation, large-sized wind turbine blades can increase the number of hours of wind energy utilization, but for every 1 doubling of power generation, the diameter increases by 1.4 times and the weight increases by 2.8 times, so the performance requirements of the material are stringent.

Carbon fiber composite materials have the following advantages as manufacturing materials for wind turbine blades: improving the overall stiffness of blades and reducing the mass of blades. Compared with glass fiber, its elastic modulus is 2 to 3 times higher, and its weight is reduced by about 70% to 80% compared with glass fiber; improving the fatigue resistance of blades; making the output of wind turbines more stable and balanced, and improving efficiency.

The high-quality mechanical properties of carbon fiber composite materials have good application prospects in the field of wind turbine blade manufacturing.

According to data from GWEC (Global Wind Energy Council), blades with a diameter of 111 to 130 meters currently account for a large proportion, reaching 57%, replacing blades with a diameter of 91 to 110 meters. The continuous advancement of large-scale blades has increased the demand for carbon fiber, but the corresponding blade cost has also increased significantly. Therefore, a mixed use of carbon fiber and glass fiber is currently adopted. Carbon fiber is mainly used in key components of blades, such as carbon beam caps.

China is the world’s largest wind power market, especially the rapid development of offshore wind power, which provides a premise for the widespread application of carbon fiber and its composite materials in the field of wind power blades.

According to GWEC data, the world’s installed wind power capacity increased by 93.6 GW in 2021, of which China’s new onshore wind power installed capacity was 30.7 GW and its offshore wind power increase was 16.9 GW, accounting for 80% of the world’s total. China’s wind power market accounts for about half of the world’s total.

 

 

According to the data of Sai Ao Carbon Fiber, the demand for carbon fiber in China’s wind power sector in 2020 and 2021 will be 20,000 tons and 22,500 tons respectively, accounting for 65% and 68% of the global demand in this field. With the global restrictions on carbon emissions and the active promotion of clean energy, wind power installed capacity will continue to grow, and its demand for carbon fiber and composite materials will continue to increase.

According to the data of Sai Ao Carbon Fiber, it is estimated that the global demand for carbon fiber in the wind power sector will reach 81,000 tons by 2025. Based on the calculation that China accounts for 60% of the global share, China’s demand in this field will reach about 48,000 tons.

 

4 High-performance Carbon Fiber Market Supply Pattern

 

According to the data of Sai Ao Carbon Fiber, from 2015 to 2021, the global carbon fiber operating capacity has been increasing year by year. In 2021, the global carbon fiber operating capacity is 207,000 tons, a year-on-year increase of 20.7%, and the CAGR from 2015 to 2021 is 7.4%.

From the perspective of enterprises, global carbon fiber enterprises can be roughly divided into three echelons: the first echelon is enterprises with both scale and technological advantages, with Japan’s Toray and Japan’s Toho as typical representatives; the second echelon is enterprises with strong competitiveness in specific fields, such as Germany’s SGL Group, which has strong competitiveness in the automotive field; the third echelon is enterprises with cost advantages, such as Taiwan’s Formosa Plastics, Turkey’s Aksa, and South Korea’s Hyosung.

In terms of production capacity, Japan’s Toray had an operating capacity of 29,000 tons in 2021. It is currently the only company in the world with a carbon fiber production capacity of more than 20,000 tons, accounting for 14% of the global production capacity. Japan, China and the United States ranked in the top three in terms of operating capacity, and the three together accounted for more than 60% of the global production capacity.

At present, there are nearly 30 carbon fiber production enterprises in my country. In 2021, it surpassed the United States for the first time and became the world’s largest production capacity country, with an operating capacity of 62,750 tons and sales of 29,250 tons. Through the technological development in recent years, China has crossed the historical stage of low production rate, and the production rate has approached the international level.

 

 

4.1 Japan and the United States are Leading in Technology

 

Carbon fiber preparation technology originated in Japan. After a long period of technological improvement and market cultivation, Japan and the United States have achieved a monopoly on the core technology and industry of carbon fiber.

In the 1980s and 1990s, Boeing’s demand for carbon fiber led to the great development of Japan’s Toray Company; in the 1990s, the US defense development’s requirement for the localization of key materials carbon fiber promoted the development of the US Hexcel Company.

Japan’s Toray, Toho and Mitsubishi Rayon have carbon fibers ranging from standard modulus, medium modulus to high modulus. The mechanical properties of the products are complete, the varieties and specifications are rich, and the product design is closely centered on the application field, becoming the “three horses” leading the development of carbon fiber in the world.

At present, the mainstream production technology of carbon fiber in the world is mastered by a few countries such as Japan and the United States. The main representative manufacturers are Japan’s Toray, Toho and Mitsubishi (MitsubishiRayon), the United States Hexcel, Zoltek (acquired by Japan’s Toray) and Germany’s SGL and other companies. The main products include large tow carbon fiber represented by the United States and small tow carbon fiber represented by Japan.

Japan is the main producer of carbon fiber and the global supplier of high-quality PAN-based carbon fiber. Japan’s Toray is the world’s “leader” in the research and production of high-performance carbon fiber. The industry generally conducts research and development based on Japan’s Toray product standards.

In the small tow carbon fiber market, Japanese companies account for 49% of the global market share; in the large tow carbon fiber market, American companies account for 59% of the global production capacity. Japan and the United States are in a clear dominant position in terms of market share.

In terms of raw fiber technology, the dry-jet wet spinning process has obvious advantages over the wet process and is an advanced carbon fiber raw fiber technology route. However, due to the high difficulty of dry-jet wet spinning technology, there are few companies with dry-jet wet spinning carbon fiber production technology at home and abroad.

Before 2010, only Japan’s Toray and the United States’ Hexel had mature dry-jet wet spinning carbon fiber products on the market. Their products are mainstream industrial and aerospace carbon fibers in the international market, while the mainstream in my country is still wet spinning technology.

 

 

In terms of technology research and development, Japan’s Toray has developed TORAYCA®T1100G high tensile strength and high elastic modulus carbon fiber in 2014, while Chinese enterprises have gradually realized mass production and supply of T700-grade carbon fiber in recent years.

And because the technical parameters of T1000-grade and T1100-grade carbon fiber are comprehensively superior to those of T700-grade and T800-grade carbon fiber, currently only Japan’s Toray and the United States’ Hexel have achieved industrial production of T1000-grade and T1100-grade high-performance carbon fiber in the world, almost monopolizing the aerospace high-performance carbon fiber market.

With the gradual expansion of the application of T700-grade carbon fiber produced by Zhongjian Technology and T300-grade carbon fiber produced by domestic enterprises represented by Guangwei Composites and Hengshen Co., Ltd. in the aerospace field, the monopoly of Japan, Europe and the United States in the field of high-performance carbon fiber has been weakened to a certain extent.

 

4.2 Chinese Enterprises Catch Up and Break Through

 

Carbon fiber and its composite materials are important national defense materials, and their strategic position is irreplaceable. China began to develop carbon fiber technology in the late 1960s, almost in sync with Japan and the United States; but Western countries have imposed technology blockades and product embargoes on China since the 1970s, and China has been developing carbon fiber in the harsh environment of international blockade.

In the late 1960s, PetroChina Jilin Chemical, Shanxi Coal Chemical Research Institute of the Chinese Academy of Sciences, Beijing University of Chemical Technology and other units carried out research and development of PAN-based carbon fiber localization technology, and established a variety of raw fiber preparation processes such as nitric acid method, sodium thiocyanate method, and dimethyl sulfoxide method.

However, due to weak process foundation and backward equipment technology, the product quality is low and the performance is poor. The localization technology of PAN-based carbon fiber has long been at a low level and cannot meet the needs of high-end fields such as major national equipment.

Since 2005, through the joint efforts of relevant government departments and enterprises, my country’s carbon fiber industry has gone through multiple stages, including ton-level small-scale test lines, 100-ton pilot lines, and 1,000-ton industrialization lines, and has achieved remarkable achievements in industrial scale, core technology, product quality, application expansion, and economic benefits, effectively alleviating the urgent demand for domestic carbon fiber in the national economy and national defense construction.

In terms of regions, a carbon fiber industry cluster with strong innovation capabilities, distinctive characteristics, and a complete industrial chain has been formed, mainly in Jiangsu, Shandong, and Jilin, and several large carbon fiber enterprise groups with international competitiveness have also emerged.

 

 

Especially in recent years, my country’s carbon fiber industry has entered a period of great explosion, and has successively broken through the thousand-ton industrialization of high-performance carbon fibers such as T700 and T800. The products can cover high-strength, high-strength medium-modulus, high-modulus, and high-strength high-modulus carbon fibers (the main varieties are equivalent to T300, T700, T800, T1000, M40, M40J, M55J, etc.), and the production capacity ranks second in the world.

In 2019, Zhongfu Shenying realized the engineering of dry-jet wet-spinning T1000-level ultra-high-strength carbon fiber, marking that my country’s carbon fiber production technology has reached a new level.

 

After catching up in recent years, the tensile strength and modulus of the multifilament of domestic T700S-12K small-tow carbon fiber have reached the same level of Toray carbon fiber performance, and the gap with the world’s advanced carbon fiber technology level is gradually narrowing.

 

4.2.1 Policy Guidance And The Road to Localization of Carbon Fiber

 

As a new dual-use material for military and civilian use, carbon fiber is a key material that is technology-intensive and politically sensitive. In particular, carbon fiber above T700 grade has important applications in the field of national defense and military industry, and foreign countries have adopted strict military embargo management on China. Therefore, the domestic production of high-performance carbon fiber is the only way.

 

In recent years, relevant state departments have successively issued policy documents such as “Made in China 2025”, “Guiding Opinions on Accelerating the Innovation and Development of the New Materials Industry”, and “Guidelines for the Development of the New Materials Industry”, repeatedly emphasizing the strategic position of the new materials industry.

Among them, carbon fiber, as one of the development priorities of the country’s strategic emerging industries during the “13th Five-Year Plan”, is the material basis for the development of many key areas proposed in “Made in China 2025”. Vigorously carrying out carbon fiber material technology research and industrial application is a major project to enhance my country’s comprehensive national strength and an important support for promoting the strategy of manufacturing power during the transition period.

The “13th Five-Year Plan” Special Plan for Science and Technology Innovation in the Materials Field proposes to strengthen the construction of a material system with high-performance carbon fiber and composite materials as the core, meet the material needs of my country’s major projects and national defense construction, and strive to achieve a self-sufficiency rate of more than 80% for key materials.

 

 

Special funds from the state and local governments support the industrialization production and application of carbon fiber and composite materials. More than 100 industrialization projects of carbon fiber and composite materials have been supported, covering the entire industrial chain of carbon fiber, carbon fiber composite materials and product applications; laying the foundation for the development of my country’s carbon fiber industry from scratch and from weak to strong, ensuring the independent supply of domestic carbon fiber in the fields of national defense, military industry and civilian use, and providing important support for the development and growth of my country’s carbon fiber industry and the improvement of the independent guarantee capability of key materials.

High-performance carbon fiber and its composite materials are the material basis for the construction of major national projects such as satellite platforms, launch vehicles, large aircraft, weapons and ships. With the continuous evolution of competition among major powers, the blockade of raw materials, equipment and technology of high-performance carbon fiber and its composite materials will be further intensified. Independent research and development is the key to breaking through the problem of “being controlled by others” and is also the only way to achieve the development plan of “Made in China 2025”.

 

4.2.2 Breakthroughs In Research And Development In High-end Fields

 

After nearly 50 years of development, domestic carbon fiber has achieved gratifying results in performance, engineering and application research. We have solved the engineering and application problems of domestic T300-grade carbon fiber and domestic T700-grade carbon fiber, meeting the urgent needs of weapons and equipment such as aerospace and civilian applications; we have made breakthroughs in the key preparation technology of domestic T800-grade carbon fiber and domestic M40J graphite fiber. M40-grade carbon fiber has been applied in the aerospace field, and M40J-grade carbon fiber has entered the ground assessment and verification stage; we have made breakthroughs in the laboratory preparation technology of domestic T1000-grade carbon fiber and M50J, M55J, and M60J graphite fibers, laying the foundation for the development of the next generation of fibers.

Lanzhou Bluestar’s “Research on Key Technologies and Equipment for the Industrialization of 1,000-ton NaSCN-based 50K Large-tow Carbon Fiber” passed the technical achievement appraisal, filling the market gap of domestic 50K carbon fiber products;

The Ningbo Institute of Materials, Chinese Academy of Sciences, successfully developed QM65 (M65J-grade) high-strength and high-modulus carbon fiber;

Hengshen Co., Ltd.’s high-performance carbon fiber passed the certification of international authoritative organizations;

The carbon fiber composite materials independently developed by Guangwei Composites have been applied to drones;

Zhongjian Technology has achieved stable batch supply of high-performance carbon fiber products in key national aerospace equipment;

Zhongfu Shenying took the lead in breaking through the high-performance carbon fiber dry-jet wet spinning technology in China.

The numerous achievements have enabled the overall technical level of my country’s carbon fiber industry to enter the ranks of international advanced countries, shortening the gap of more than 30 years with developed countries in about 15 years.

 

 

4.3 Actively Expand Production to Accelerate Import Substitution

 

For a long time, domestic carbon fiber and composite materials have been highly dependent on overseas suppliers. Before 2017, the proportion of imported carbon fiber has remained above 80%. China’s total demand for carbon fiber in 2021 is 62,000 tons, compared with 49,000 tons in 2020, a year-on-year increase of 27.7%. Among them, the import volume is 33,000 tons, accounting for 53.1% of the total demand, and the domestic carbon fiber supply is 29,000 tons, accounting for 46.9% of the total demand. The overall situation in the Chinese market is still in short supply.

With the continuous breakthroughs in my country’s high-end carbon fiber technology and the development of production towards scale and stability, enterprises are gradually extending to high-value-added downstream application fields. Many manufacturers are actively deploying low-cost, high-performance carbon fiber research and development and expansion projects, and are expected to achieve import substitution as soon as possible. According to the “2021 Global Carbon Fiber Composite Materials Report”, it is estimated that my country’s domestic carbon fiber production capacity will reach 70,000 tons in 2022.

Among the expansion projects, Shanghai Petrochemical will invest in the construction of a 12,000-ton 48K large-tow carbon fiber project in 2021, and plans to complete the construction in 2024 to meet the urgent demand for large-tow carbon fiber in my country’s rail transit, lightweight automobiles, drones, large aircraft and other fields.

With the release of the demand for carbon fiber from the domestic large aircraft C919 and the advancement of CR929 research and development, the demand for high-performance carbon fiber in the domestic aerospace market will grow by leaps and bounds. Zhongfu Shenying raised funds to build aerospace high-performance carbon fiber and raw fiber test line project, mainly to develop the next generation of T1100-grade carbon fiber to meet the downstream market’s demand for high-performance carbon fiber.

 

5 Major Listed Companies

 

5.1 AVIC High-Tech: The Leader in Aviation Composites

 

AVIC High-Tech is an A-share listed company under the Aviation Industry Corporation of China. It is a comprehensive large-scale state-owned holding listed company mainly engaged in the research and development and production of new aviation materials and the research and development and manufacturing of high-end intelligent equipment. It is currently the leading company in the domestic aviation new materials industry.

 

 

5.1.1 Asset Restructuring to Enter the Aviation New Materials Track

 

The company was formerly the Nantong Machine Tool Factory established in 1956 and listed on the Shanghai Stock Exchange in May 1994. In 2015, the company carried out a major asset restructuring and purchased 100% equity of AVIC Composites, Youcai Jinghang and Youcai Bermuda through a non-public offering of shares. Since then, the main business has extended to the aviation new materials field.

The original company’s headquarters machine tool business was transformed and upgraded to high-end intelligent manufacturing business, and with the new materials business injected by the restructuring, the company has become a listed company with considerable scale and industry competitive advantages in the field of new materials and equipment manufacturing.

In 2019, the real estate business was divested to form a business development pattern with aviation new materials and high-end intelligent equipment manufacturing as the main business, and it is committed to becoming “an internationally competitive aviation new materials and high-end intelligent equipment manufacturing enterprise.”

The company’s various business areas are developed in the form of subsidiaries. Currently, there are 5 subsidiaries. The main business is divided into two major sectors: aviation new materials and high-end intelligent equipment, covering aviation new materials, high-end intelligent equipment, rail transit parts, automotive parts, medical devices and other application fields.

The company has a leading advantage in high-performance resin and prepreg technology, resin-based composite material manufacturing technology, advanced non-destructive testing technology, etc. The company has advanced composite material manufacturing equipment and rich experience, and has the ability to undertake the manufacturing of large main load-bearing structures and complex structural parts. With the development of civil aircraft, commercial aviation engines and other fields, the company’s composite material related technology production capacity will continue to increase.

 

5.1.2 Focusing On The Main Business, AVIC Composites’ Profitability Continues To Improve

 

In 2019, in order to focus on the development of the main business of aviation new materials and aviation special equipment, the company fulfilled its commitment to orderly exit the real estate business within five years during the major asset reorganization in 2015, and divested 100% of the equity and business of Jiangsu Zhihao. From 2019 to 2021, the company’s revenue increased from 2.47 billion yuan to 3.81 billion yuan, with a CAGR of 11.4%; net profit attributable to the parent company increased from 430 million yuan to 590 million yuan. In 2022Q1, the company’s revenue was 1.16 billion yuan, a year-on-year increase of 16.6%, and net profit attributable to the parent company was 290 million yuan, a year-on-year increase of 22.7%.

 

 

The demand and delivery volume of aviation composite products have increased year by year, improving the overall profitability. From 2019 to 2021, the gross profit margin increased from 30.0% to 37.4%, an increase of 7.4 percentage points; the net profit margin increased from 14.8% to 25.2%, an increase of 10.4 percentage points. The period expense rate showed a downward trend, and R&D investment continued to grow. Since 2017, the company’s management expenses have dropped significantly. The company has continued to optimize product production management, strengthen full-chain quality control, improve production efficiency and reduce costs.

With the goal of creating leading innovation, the company continues to increase R&D investment, promote the expansion and transformation and upgrading of core businesses, and enhance core competitiveness. In 2018, R&D investment was only 63 million yuan, and it reached 151 million yuan in 2021. In the field of aviation composites, the company signed the “Advanced Aviation Composite Material Series Prepreg Technology Implementation License Agreement” with the Manufacturing Institute, creating conditions for the industrial development of domestic T800-grade prepregs; it was successfully selected as the only supplier of the front fuselage work package of COMAC CR929, and jointly carried out civil aircraft projects such as C919 and AG600; Youcai Bermuda is also continuously promoting the domestic substitution of civil aircraft brake discs and the application and promotion of high-speed train brake components, and completing the verification of multiple series of high-speed rail brake pads.

AVIC Composites contributes to the company’s main performance, with steady growth in revenue and profitability. In recent years, AVIC Composites has continuously optimized the production process of prepregs and honeycomb products. In 2021, the production and delivery volume of prepreg products reached a record high, and the completion rate of honeycomb product production plan reached 100%. It achieved revenue of 3.55 billion yuan, a year-on-year increase of 33.1%, and the revenue CAGR from 2017 to 2021 was as high as 28.3%.

AVIC Composites continues to work hard on supply chain and production management to continuously improve the company’s profitability. From 2017 to 2021, AVIC Composites’ net profit increased from 170 million yuan to 680 million yuan, with a CAGR of 41.4%, and its net profit margin also increased from 12.8% to 19.3%, an increase of 6.5 percentage points. AVIC Composites is the company’s main performance source, with revenue accounting for 93% of the company’s total revenue in 2021, and its profit level basically determines the company’s overall profitability.

Each subsidiary of AVIC High-Tech has a relatively advantageous position in its field. Aviation Composites is at the leading domestic level in raw material technology and industrial scale, Youcai Bermuda has a long history in the localization of brake devices and friction materials for civil aircraft, and Beijing Aviation Bio has a number of technologies that have reached the leading level in China. The company’s machine tool-related business also has decades of research and development and production history, and has a comparative advantage in the development of related machine tools in the subdivided field.

Focusing on the cultivation of new aviation materials and aviation-specific equipment, we will form new driving forces, rely on the background of Aviation Industry Corporation of China and the leading positions of our subsidiaries, and continue the trend of high-quality development.

 

 

5.2 Guangwei Composites: The Enterprise With The Most Complete Domestic Carbon Fiber Industry Chain

 

Guangwei Composites is the first private enterprise in China to implement the localization of carbon fiber, and is also a successful practitioner of the localization of carbon fiber in my country. The company broke the monopoly and blockade of carbon fiber in my country by Western countries, and thus formed its position as the main supplier of carbon fiber in my country’s aerospace field.

With the gradual maturity of low-cost and high-efficiency production technology, the company actively develops civilian carbon fiber and its composite materials products, and its business continues to extend downstream, forming the current military-civilian integration development pattern of military products priority, military-civilian sharing, civilian support for the military, and interactive development of military and civilian products.

Guangwei Composites was established in 1992 and listed on the Growth Enterprise Market in 2017. Supported by high-end equipment design and manufacturing technology, it has formed a complete industrial chain layout of carbon fiber, fabric, resin, high-performance prepreg materials, and composite materials products starting from raw silk. It is currently one of the leading enterprises in the domestic carbon fiber industry with the most complete product varieties, the most advanced production technology, and the most complete industrial chain.

 

5.2.1 Serialized Products, Dual-Wheel Drive Of Military And Civilian Products

 

The company started the research and development of carbon fiber in 2002. In the past two decades, it has been committed to the localization of carbon fiber and the upgrading and serialized research and development of carbon fiber products. It has made many breakthroughs in new projects, new products and new technologies, and formed a series of high-strength, high-strength medium-modulus, high-modulus, and high-strength high-modulus carbon fiber products, and accumulated a series of process manufacturing technologies with independent intellectual property rights.

In 2005, the company achieved breakthroughs in the key technology of T300-grade carbon fiber engineering, and the various indicators of the GQ3522 carbon fiber it produced reached the T300-grade level, making it the first domestic company to achieve carbon fiber engineering. In 2007, the performance indicators of the GQ4522 carbon fiber it produced through the “863 Program” reached the T700-grade level. In 2013, it mastered the key equipment and technology for the engineering production of M40J-grade carbon fiber. At the end of 2016, the dry-jet wet-spinning process for T700S-grade carbon fiber had been put into trial production in small batches, forming trial operation capacity.

 

 

The mass production and delivery of the M55J grade developed by the company in 2021 marks the successful localization of key models of high-strength and high-modulus carbon fiber products in my country, making 2021 the first year of domestic high-strength and high-modulus carbon fiber; the task of carbon fiber development for the T800H-grade aviation application project verification work has also been basically completed; at the same time, the key technological breakthroughs of the latest models T1100G-grade and M40X-grade products benchmarked against the world’s advanced level have been achieved.

The company adheres to the “two highs and one low” strategy, and includes world-leading carbon fiber products and technologies such as high-modulus and high-strength carbon fiber and low-cost production of dry and wet spinning technology as the next scientific research target.

The company’s development and overall layout implement the “521” development strategy, that is, adhere to the development strategy of five major industries, two platforms and one park.

Relying on the full industrial chain layout in the field of carbon fiber, the company has become a system solution provider for composite materials business. The current business mainly has five sectors, covering upstream and downstream such as carbon fiber and fabrics, prepregs, carbon beams, composite materials and equipment design and manufacturing.

The main customers of carbon fiber and fabrics are military enterprises, including aerospace, electronic communications, weapons and equipment, etc. Among them, GQ3522 (T300 grade) has been stably supplied to the military for more than ten years.

The company’s wind power carbon beam business mainly cooperates with Vestas Wind Technology (Vestas), a global wind power giant. Since the cooperation in 2016, the carbon beam business has become an important business support for the company. The business is large in scale, the scale effect is obvious, and the application prospects of carbon fiber in wind power blades are good. This business has effectively promoted the rapid expansion of the company’s civilian business.

As of 2021, the company’s carbon fiber and fabric production capacity is 2,655 tons, prepreg is 13.75 million square meters, and carbon beam is 10.2 million meters. At the same time, the company has a number of expansion and upgrading projects underway.

Among them, the Inner Mongolia Guangwei low-cost carbon fiber project has a planned production capacity of 10,000 tons, with a capacity of 4,000 tons under construction in the first phase, and is expected to be completed and put into production in 2022; the high-performance carbon fiber industrialization project has an under-construction M55J-grade fiber production capacity of 30 tons; the “Military-Civilian Integration High-Strength Carbon Fiber Efficient Preparation Technology Industrialization Project” will produce T700G/T800H-grade high-performance carbon fiber products.

 

 

5.2.2 Application Field Expansion, Three Major Sectors Jointly Promoted

 

In recent years, benefiting from the growth of downstream demand in the fields of aerospace and wind power, the company’s revenue and net profit have steadily increased. From 2017 to 2021, the company’s revenue increased from 950 million yuan to 2.61 billion yuan, with a CAGR of 28.7%; net profit attributable to the parent increased from 240 million yuan to 760 million yuan, with a CAGR of 33.4%. In 2022Q1, affected by the price reduction of shaped carbon fiber products, the suspension of work and production due to the epidemic, and logistics interruptions, the company achieved revenue of 590 million yuan, a year-on-year decrease of 5.5%, and realized a net profit attributable to the parent of 210 million yuan, a year-on-year decrease of 5.0%.

In 2021, the company’s overall gross profit margin was 44.4%, a decrease of 5.4 percentage points from 2020; the net profit margin was 29%, a decrease of 1.3 percentage points from 2020. Mainly affected by the decline in the price of mass-produced finalized carbon fiber and the increase in the contribution ratio of civilian products business.

In 2022Q1, the gross profit margin was 54.9% and the net profit margin was 34.7%, which were 10.5 and 5.7 percentage points higher than the end of 2021 respectively; mainly because product prices have stabilized, and the increase in the contribution of new products has basically made up for the adverse effects of price cuts.

In recent years, the company has good cost control and period expenses have continued to decline. While actively organizing production and operation and product delivery around orders, the company continues to invest in high R&D expenditures, and carries out new product R&D and application development or application verification work for various application fields.

In recent years, it has mainly carried out R&D and certification of high-end carbon fiber products or projects of T800, T1000, M40J, M55J and above. In 2021, R&D investment has declined due to the basic completion of the previous T800H and M40J R&D projects.

In 2021, the gross profit margin of the company’s carbon fiber business was 70%, a decrease of 5.2 percentage points from 2020. Among them, the gross profit contribution of mass-produced shaped carbon fiber was basically stable due to the price drop and volume increase, while the contribution of other non-shaped carbon fiber products represented by T700 grade, T800 grade and high-strength and high-modulus MJ series fibers increased.

The carbon beam business was affected by the rapid increase in costs and insufficient order delivery caused by the shortage of raw materials, with a gross profit margin of 15.1%, a decrease of 6.6 percentage points from 2020. In terms of prepregs, in 2021, the company adjusted its product structure, and the proportion of high value-added products continued to increase, achieving a significant increase in sales revenue and profit contribution.

 

 

Guangwei Composites has a full industrial chain layout of carbon fiber, a series of resin systems, and comprehensive technical capabilities in digestion and absorption of core technologies, application development of new products, mature and stable processes, tracking and feedback of product quality, and equipment assurance.

The company has also established long-term and stable customer relationships with domestic aerospace companies and foreign wind power companies. In the future, with the acceleration of the construction of my country’s aerospace industry and the rapid development of the new energy field under the background of “dual carbon”, the company will continue to benefit as a supplier of the entire industrial chain of carbon fiber.

 

5.3 Zhongjian Technology: Focusing On Aerospace, the main Supplier of High-Performance Carbon Fiber

 

Zhongjian Technology is a domestic high-performance carbon fiber and related product R&D manufacturer with completely independent intellectual property rights. It has the industrialization capabilities of high-strength ZT7 series (higher than T700 grade), ZT8 series (T800 grade), ZT9 series (T1000/T1100 grade) and high-model ZM40J (M40J grade) graphite fiber engineering. The high-performance carbon fiber produced by the company has passed the aerospace model verification and has become the main supplier of large domestic aerospace enterprise groups.

 

5.3.1 Originated From and Deeply Rooted in the Aerospace Field

 

On April 28, 2008, the company was established to undertake the key project of “863 Polyacrylonitrile-based Carbon Fiber Engineering” of the Ministry of Science and Technology. Since its establishment, the company has always insisted on the research and development and production of high-performance carbon fibers. The company’s main products are constantly upgraded and improved with the company’s continuous investment in research and development and the steady improvement of production technology.

The company’s main products are high-performance carbon fibers and carbon fiber fabrics, which are currently mainly used in the aerospace field. The main customers are large domestic aerospace enterprise groups, and the end users of the products are the military. The high-strength ZT7 series (higher than T700 grade) carbon fibers and carbon fiber fabrics produced by the company have surpassed the advanced level of similar foreign products in terms of quality and performance, and are stably used in major aerospace models in batches.

 

 

Specifically, the company has a 150 tons/year (12K) or 50 tons/year (3K) high-performance carbon fiber production line, which is a flexible production line that can produce polyacrylonitrile (PAN)-based carbon fibers of different specifications and grades in the same production line. At present, it can produce high-strength ZT7 series (higher than T700 grade), ZT8 series (T800 grade), ZT9 series (T1000/T1100 grade) and high-model ZM40J (M40J grade) graphite fibers, among which the products that have been mass-produced are ZT7 series (higher than T700 grade) high-strength carbon fibers; carbon fiber fabrics are mainly carbon fiber fabrics corresponding to ZT7 series carbon fibers.

 

5.3.2 High Technical Barriers Bring High Profitability

 

The production and sales volume and sales revenue of the company’s carbon fiber products are at a relatively stable growth level. From 2017 to 2020, the company’s operating income increased from 170 million yuan to 390 million yuan, with a CAGR of 31.9%, and its net profit attributable to the parent company increased from 110 million yuan to 230 million yuan, with a CAGR of 27.9%. In 2021, the company’s revenue was 410 million yuan, a year-on-year increase of 5.7%, and its net profit attributable to the parent company was 200 million yuan, a year-on-year decrease of 13.4% due to the decline in product prices.

The rapid growth of revenue and net profit attributable to the parent company is mainly due to the continuous expansion and rapid development of aerospace applications, especially since August 2020, Japan has restricted the sales of carbon fiber to my country, and high-end carbon fiber has been in short supply; in 2021, the company’s carbon fiber production was 146 tons and sales reached 156 tons.

In 2022Q1, due to increased customer demand and shipments, revenue increased by 183.8% year-on-year, and net profit attributable to the parent company increased by 135.9% year-on-year.

High gross profit is a reflection of the high technological barriers of the company’s products. The company’s gross profit margin has increased year by year, reaching 83.9% in 2020, and its net profit margin was 59.7%, which is much higher than the industry average. This is mainly because the company’s ZT7 series products are different from general civilian products in terms of basic research and development, technical requirements, and process specifications. High barriers determine high added value.

In 2021, the company’s gross profit margin fell by 6.8 percentage points to 77.1%, and its net profit margin fell by 10.8 percentage points to 48.9%, mainly due to the company’s negotiation with major customers to reduce product prices.

 

 

On the basis of ensuring the stable supply of existing products, the company continues to increase its R&D investment, cultivate application fields with high technical barriers, and develop products with high technical thresholds and sustainable competitiveness. From 2019 to 2021, the company’s R&D expenses were RMB 16.68 million, RMB 30.68 million and RMB 44.49 million, respectively, and the R&D expense rate increased from 7.1% to 10.8%.

The company is the leader in the R&D and stable production of high-performance carbon fiber technology and engineering industrialization in my country. It is the first in my country to achieve stable mass production of ZT7 series carbon fiber and apply it to the high-end field of aerospace. Due to the large R&D investment and long certification cycle of military products, the company is in an absolute leading position in the mass supply of T700-grade carbon fiber.

With the further development of the aerospace field, the demand for high-performance carbon fiber will further increase, and high-performance carbon fiber will have huge room for future development. The application of the company’s ZT7 series and above carbon fiber in the aerospace field is expected to expand further. As the company’s higher-performance carbon fiber gradually realizes industrialization, the company’s product spectrum will be more complete, which is conducive to the company’s further expansion in the high-performance carbon fiber market.

 

5.4 Zhongfu Shenying: Domestic Leader in Dry-Jet Wet Spinning Technology

 

Zhongfu Shenying is a national high-tech enterprise integrating R&D, production and sales of carbon fiber and composite materials. The company has established Lianyungang and Xining production bases and Shanghai R&D bases, with a production capacity of over 10,000 tons, ranking among the top in China. The company has independently built a full-process carbon fiber production system, with complete independent intellectual property rights in key technologies and core equipment, and has taken the lead in breaking through the advanced dry-jet wet spinning process and realizing industrialization.

SYT49S and above high-end products have accounted for more than 50% of the domestic carbon fiber market for many years, with more than 500 downstream customers, becoming one of the most influential carbon fiber suppliers at home and abroad.

 

 

5.4.1 Full Coverage Of High-Performance Products, Significant Production Capacity Advantages

 

The company was established in 2006 and listed on April 6, 2022. Since its establishment, the company has focused on the research and development, production and sales of carbon fiber products. The company’s carbon fiber research and development has mainly gone through two stages: wet spinning process and dry-jet wet spinning process. From its establishment to 2012, it was mainly engaged in the research and development of wet-method T300 carbon fiber.

Since 2009, it has carried out independent research and development of dry-jet wet spinning technology, and in 2013, it took the lead in breaking through the industrial manufacturing technology of 1,000-ton carbon fiber precursor dry-jet wet spinning in China, and built the first 1,000-ton dry-jet wet spinning carbon fiber industrial production line in China.

After that, the company continued to develop independently, and gradually formed high-performance carbon fibers with T700 and T800 dry-jet wet spinning products as the main products, covering high strength, high modulus medium strength, high modulus high strength and other categories.

After years of independent research and development and technology accumulation, the company has formed four core technology systems, namely, large-capacity polymerization and homogenization stock solution preparation technology, high-strength/medium-modulus carbon fiber precursor dry-jet wet spinning key technology, PAN fiber rapid homogenization pre-oxidation, carbonization integration technology and dry-jet wet spinning thousand-ton high-strength/hundred-ton medium-modulus carbon fiber industrial production system construction technology.

Zhongfu Shenying has made breakthroughs in core technologies such as ultra-large-capacity polymerization, dry-jet wet spinning, rapid homogenization pre-oxidation and carbonization, and has systematically mastered the T700, T800, M30, and M35 thousand-ton technologies and the T1000 and M40 hundred-ton technologies, achieving full coverage of high-strength type, high-strength medium-modulus, and high-strength high-modulus categories.

The company’s main products are carbon fibers, including SYT45, SYT45S, SYT49S, SYT55S, SYT65 and SYM40, which are widely used in aerospace, wind turbine blades, sports and leisure, pressure vessels, carbon/carbon composite materials, transportation construction and other fields.

The company’s production capacity and sales volume are both among the top domestic carbon fiber companies. The headquarters’ production base in Lianyungang has an annual production capacity of 3,500 tons, and is currently building a 10,000-ton high-performance carbon fiber and supporting raw yarn project in Xining and a 14,000-ton high-performance carbon fiber and supporting raw yarn project. At the same time, it is also actively developing high-performance carbon fibers for aerospace.

 

 

5.4.2 Wide Range of Downstream Applications, Leapfrog Growth in Performance

 

The company’s carbon fiber product models are rich and can meet the market demand of different downstream fields. They are widely used in aerospace, wind turbine blades, sports and leisure, pressure vessels, carbon/carbon composite materials, transportation construction and other fields. In the first half of 2021, the company’s sales volume and revenue in the sports and leisure field accounted for the highest proportion, with sales of 496 tons, accounting for 25% of total sales, and revenue of 103 million yuan, accounting for 27% of total revenue.

In recent years, the company has actively expanded high-end application fields such as aerospace. In 2018, the revenue in the aerospace field was only 15.39 million yuan, accounting for 5.08%. In the first half of 2021, the revenue in this field was 53.03 million yuan, accounting for 14% of total revenue. The company’s SYT55S (T800 grade) carbon fiber has been mass-produced and is cooperating with COMAC.

At the same time, the company plans to set up a research and development center in Shanghai, mainly focusing on the application of aviation carbon fiber and downstream composite materials, and continuously improving the layout of the carbon fiber industry chain.

The increase in both quantity and price has brought about a rapid growth in the company’s performance. From 2018 to 2021, the company’s operating income increased from 310 million yuan to 1.17 billion yuan, with a CAGR of 55.7%, and net profit attributable to the parent company increased from -30 million yuan to 280 million yuan.

The main reason for the company’s rapid growth in performance is that in recent years, the demand for carbon fiber from domestic downstream customers has continued to grow, and the application areas of carbon fiber and its composite materials have expanded rapidly, driving the sales volume and sales unit price of the company’s related products to continue to increase.

At the same time, with the gradual commissioning of the Xining 10,000-ton carbon fiber project in 2021, the company’s carbon fiber product production and sales volume continued to increase year-on-year, driving further growth in sales revenue. In 2022Q1, the company achieved revenue of 460 million yuan, a growth rate of 229%, and net profit attributable to the parent company of 120 million yuan, a year-on-year increase of 200.8%.

From 2018 to 2020, the company’s gross profit margin increased rapidly, from 11.5% to 43%, an increase of 31.5 percentage points, benefiting from the increase in product sales price and the decrease in unit cost.

 

 

In terms of sales price, due to the wide application range of high-strength carbon fiber, with the rapid expansion of the application field of carbon fiber and its composite materials and the rapid growth of market demand from downstream customers, the sales share in the aerospace and wind power fields has increased, driving the company’s product sales unit price to continue to increase.

In terms of cost, the market price of acrylonitrile, the company’s main raw material, fell significantly from 2018 to 2020, and the scale effect brought about by the company’s increased production has reduced the unit cost of the company’s carbon fiber products.

In 2021, the sales unit price of the company’s carbon fiber products increased further, but the gross profit margin decreased slightly due to the increase in unit cost caused by the price increase of acrylonitrile.

With the expansion of the company’s business scale and the growth of operating income, the expense rate gradually decreased from 2018 to 2021. The management expense rate decreased from 12.9% in 2018 to 10.1% in 2021, a decrease of 2.8 percentage points, and the sales expense rate and financial expense rate also decreased by 1.4 and 5.3 percentage points respectively.

The company’s R&D expenses are relatively stable, mainly because the company has been focusing on the R&D of carbon fiber products since its establishment, and the main R&D investment and key technological breakthroughs occurred before 2018.

Zhongfu Shenying has become a domestic technology-leading carbon fiber company with four core technologies and 10,000-ton production capacity, relying on more than ten years of deep cultivation in the industry. Its product performance is in a leading position in the industry. In the future, the company will continue to rely on its advantages such as excellent product quality, sufficient production capacity and high-quality services, concentrate its superior resources on the basis of maintaining existing customers, and focus on mid-to-high-end markets such as aerospace to achieve high-quality business growth.