Carbon fiber, due to its excellent mechanical properties, is lighter than aluminum but stronger than iron, and has excellent characteristics such as high elastic modulus, high and low temperature resistance, corrosion resistance, and fatigue resistance. It is widely used in various industries and has become the "king of new materials" in the 21st century. Since 2017, the expansion of domestic carbon fiber production capacity has accelerated. In 2022, the supply of domestic carbon fiber reached 45000 tons, exceeding the import volume for the first time. Multiple carbon fiber manufacturing companies have announced production expansion. The carbon fiber industry chain is long with high barriers. The upstream polyacrylonitrile based material has superior performance and has become the mainstream of the carbon fiber market, occupying 90% of the global market. Compared with small fiber bundles, midstream large fiber bundles can significantly increase the single line production capacity of carbon fibers under the same production conditions, achieve low-cost production, broaden the enthusiasm of downstream enterprises to apply carbon fibers, and initiate industrialization of domestic enterprise layout.
01 | Industry Background: The military materials industry chain has been preliminarily improved. Composite fiber materials: Key strategic materials. Definition of composite materials: A new type of material composed of different materials (including metal, inorganic non-metal, and organic polymer materials) that serve as a matrix or reinforcement, and are compounded at the macro scale using physical and chemical methods. Fiber reinforced composite materials are currently an important structure for high-performance composite materials. The reinforcing materials of this composite material are mainly high-performance fibers. Composite material classification: Currently, the three major high-performance fibers are carbon fiber, aramid fiber, and ultra-high molecular weight polyethylene fiber. The application depth and breadth of the three types of fibers and their composites in the field of national defense and military industry are constantly increasing due to their excellent performance. In addition to these three types of fibers, composite materials related to quartz fibers and ceramic fibers also have corresponding military application scenarios. From the perspective of the status of the three high-performance fibers, the emergence of carbon fiber and ultra-high molecular weight polyethylene fiber has to some extent compressed the application of aramid fiber. However, due to the differences in fiber properties, the three also have irreplaceable positions in different application scenarios, and sometimes even used together. Material characteristics: Black gold carbon fiber with excellent physical and chemical properties (Carbon)
Fiber, abbreviated as CF, is a special inorganic fiber with a carbon main chain structure formed by the cracking and carbonization of organic fibers (such as viscose based, asphalt based, polyacrylonitrile based fibers, etc.) in a high-temperature environment. It has a carbon mass fraction of over 95% and is known as the "black gold" due to its excellent physical and chemical properties. Carbon fiber is generally not directly used and is usually used as a reinforcing material, combined with resins, metals, ceramics, and other matrices to form carbon fiber composite materials. Classification: According to the type of precursor, carbon fibers mainly consist of polyacrylonitrile (PAN) precursor, asphalt fiber, and viscose fiber. The carbon fibers produced from these three major types of precursor are called polyacrylonitrile (PAN) based carbon fibers, asphalt based carbon fibers, and viscose based carbon fibers, respectively.
02 | Carbon fiber industry chain: The core carbon fiber preparation technology has high barriers. The production and manufacturing process of the carbon fiber industry is long, with multiple and complex processes, and high barriers to funding, technology, and production. The production of polyacrylonitrile based carbon fibers mainly involves two steps: the first step is to polymerize and spin the basic petrochemical product polyacrylonitrile to form carbon fiber precursor; The second step is to prepare pre oxidized fibers (commonly known as pre oxidized fibers) by organizing the raw fibers and sending them into an oxidation furnace. The pre oxidized fibers are then fed into a carbonization furnace to produce carbon fibers, which are then surface treated and sized to obtain carbon fiber products. For polyacrylonitrile (PAN) based carbon fibers, upstream precursor preparation technology is the core of their preparation. The strength of carbon fibers significantly depends on the microstructure and density of the precursor fibers. High quality raw silk is a prerequisite for industrialization and the foundation for stable production. Carbon fiber can be made into carbon fiber fabrics and carbon fiber prepregs; Carbon fiber can be combined with materials such as resin and ceramics to form carbon fiber composite materials. Finally, various molding processes are used to obtain the final product required for downstream applications. Process: Preparation of precursor fibers The production of precursor fibers mainly includes the polymerization and spinning processes of acrylonitrile. In the polymerization process, acrylonitrile monomers, co monomers, initiators, and solvents are added to the polymerization kettle to obtain the polyacrylonitrile stock solution. In the spinning process, the polyacrylonitrile solution is sprayed through spinning nozzles with different pore sizes (3000/6000/12000, etc.) to produce different types of precursor fibers (3K/6K/12K, etc.). Multiple stages of water washing are carried out to reduce solvent residue in the precursor fibers, drying and densification are carried out, and the precursor fibers are wound into a shaft. Process: Carbonization and carbonization mainly includes steps such as pre oxidation, carbonization, sizing, and graphitization of the precursor wire; The finished raw silk is first subjected to a multi-stage oxidation furnace and reacted in an air atmosphere to obtain pre oxidized silk; Subsequently, under the protection of nitrogen gas, the pre oxygenated wire undergoes low-temperature carbonization and high-temperature carbonization respectively to obtain carbon wire; Finally, the surface is treated and starched, and the carbon fiber product is obtained by drying; During the pre oxidation and carbonization process, creating a long-term high-temperature environment will generate a large amount of energy consumption, and temperature and time control are key factors affecting the quality of carbon fiber products. Cost splitting: Energy, raw materials, and equipment account for the majority of the production process. The cost of precursor, pre oxidation, and carbonization treatment is relatively high. The precursor mainly includes the cost of raw materials such as acrylonitrile and the manufacturing cost of raw silk, with the highest cost proportion. Pre oxidation and carbonization treatment require high temperature and energy consumption, so the cost is also high. Split by cost composition type: Energy, raw materials, and equipment costs are relatively high, accounting for approximately 34.0%, 19.2%, and 18.2%, respectively. A large amount of raw material acrylonitrile is used in the production of carbon fiber. According to the annual report of Jilin Carbon Valley, approximately 0.95-1.0 tons of acrylonitrile are needed per ton of raw silk; At the same time, production line equipment has high value and energy consumption, resulting in high equipment and energy costs. Cost Reduction Path and Investment Opportunity Point 03 | Downstream Application of Carbon Fiber Global: Demand is steadily increasing, with wind power, sports and leisure, and aerospace being the main components. The global carbon fiber market is steadily expanding. According to the "Global Carbon Fiber Composite Material Market Report" by SAIO Carbon Fiber, the global carbon fiber market demand in 2022 is 135000 tons, a year-on-year increase of 14.4%, with a market size of 4.386 billion US dollars, a year-on-year increase of 29.0%, With the continuous expansion of application areas, the demand for carbon fiber has steadily increased, with a CAGR of 9.8% between 2008 and 2022. Wind turbine blades are the largest application field, accounting for 26%; Sports and leisure account for 18%, aerospace accounts for 15%, and the applications in these three major fields exceed half. China: the world's largest consumer market, with a growth rate exceeding the global average. China ranks first in the world in terms of carbon fiber demand, with a domestic demand growth rate higher than the global average. According to the "Global Carbon Fiber Composite Material Market Report" by SAIO Carbon Fiber, the domestic carbon fiber demand in 2022 is about 74400 tons, a year-on-year increase of 19.3%. From 2008 to 2022, the demand CAGR reached 17.1%, significantly higher than the overseas compound growth rate of 9.8%. In 2022, the domestic demand for carbon fiber accounted for about 55.1% of the global market, a significant increase from the early 20%, and has become the world's largest carbon fiber consumption market. Supply and demand relationship: The world's largest producer, with weakened import dependence. As of March 2023, the annual domestic carbon fiber production capacity reached 103200 tons, an increase of about 65% from 62700 tons at the end of 2021. According to the operating capacity, the operating capacity of Chinese Mainland in 2022 will be 112000 tons, accounting for about 43.3% of the global operating capacity, far exceeding the 48000 tons of the United States. 22H2 inventory pressure surged and continued until 23Q1, dragging down price performance: the high production costs and unit prices of carbon fiber limit its expansion into downstream application areas, especially in the cost sensitive civilian industrial sector. As the largest market for carbon fiber, wind power's installed capacity in 2022 did not meet expectations, and bidding prices significantly decreased. The demand for cost reduction from whole machine manufacturers increased, severely limiting the increase in carbon fiber penetration rate. The contraction of market demand, coupled with the concentrated release of new production capacity, has made it more difficult to digest production capacity. The inventory in the 22H2 industry has rapidly increased, and the inventory level in the 23Q1 is still relatively high. Carbon carbon composite materials: Multi field applications drive demand growth, with photovoltaic as the core driving force. Carbon carbon composite materials have excellent performance and are mainly used in brake discs
Thermal field system for aerospace components and monocrystalline silicon wafer drawing furnaces for photovoltaics. Assuming that the demand for carbon carbon composite materials in photovoltaic thermal fields accounts for about 83% of the total demand for carbon carbon composite materials, it is predicted that with the high increase in photovoltaic installation and the continuous increase in carbon based thermal field penetration rate, the demand for carbon fiber in the domestic carbon carbon composite field will be about 16000 tons in 2025. Pressure vessels: Hydrogen storage cylinders have vast imagination space in the future. Currently, commercialized high-pressure hydrogen storage cylinders mainly include four types: Type I, II, III, and IV. Hydrogen refueling stations usually use pure steel made Type I and II cylinders (steel inner liner, fiber circumferential winding), with a working pressure of 17.5-30MPa and a large volume; Vehicle mounted hydrogen storage cylinders are mainly divided into Type III and Type IV cylinders, both of which are based on carbon fiber reinforced plastic materials. The inner liner of Type III cylinders is made of metal and is currently the main gas cylinder equipped in hydrogen fuel cell vehicles in China. The inner liner of Type IV cylinders is made of plastic, and the outer part is processed by wrapping carbon fiber reinforced plastic. They have been applied in practice both domestically and internationally, but have not yet been approved domestically. Aerospace: In the high value-added field, the current core focus is on carbon fiber, which is an ideal material for lightweight aerospace vehicles. The penetration rate of composite materials for military and civilian aircraft continues to increase. The application of carbon fiber in the aerospace field mainly includes secondary and main load-bearing components. The use of carbon fiber can reduce the weight of aircraft structural materials by 20% to 40% while ensuring strength, thereby reducing the overall weight of the aircraft by 6% to 12%, Significantly reduce aircraft fuel costs, enhance aircraft performance and economic benefits. C919 carbon fiber composite material accounts for 12% of the total weight of the aircraft. In addition, carbon fiber composite materials are widely used in nozzles, throat liners, nose cones, brake discs, and other fields in the aerospace industry. Transportation construction: The application of carbon fiber in the field of transportation construction mainly includes building reinforcement, automobiles, ships, and rail transit. Building reinforcement is an early downstream application field of carbon fiber, mainly including bridge reinforcement, pipeline repair, and house reinforcement. The main intermediate products used include carbon fiber woven fabric (unidirectional fabric), extruded carbon board, etc. In 2022, the amount of carbon fiber used in the domestic construction industry is about 3000 tons, accounting for only 4.2%. However, the current usage of carbon fiber in ships and rail transit is relatively small, accounting for less than 1%. It is mainly used in competition ships, ultra luxury yachts, high-speed passenger ships, and military vessels.
04 | Competition pattern of carbon fiber market: The concentration of domestic and international industries is high, with high global/domestic industry concentration. In 2021, the CR5 reached 57%/79% respectively. The top five companies in the world are Japan's Dongli (acquired by Dongli), Jilin Chemical Fiber, American Heshi, Dongbang/Teijin, and Mitsubishi. In 2021, the total operating and M&A capacity was 118300 tons, with a total market share of 57%. According to the Global Carbon Fiber Composite Market Report, there are fewer domestic players and a higher concentration compared to overseas players. In 2021, the production capacity of China's carbon fiber industry was 79%, with the top manufacturers being Jilin Chemical Fiber, Zhongfu Shenying, Baojing, Xinchuang Carbon Valley, and Jiangsu Hengshen. Competitive landscape: low-end homogenization, high-end dependence on imports. There are already multiple listed carbon fiber companies in China, covering the entire industry chain from raw silk to application. In terms of performance, most carbon fiber listed companies have extremely strong profitability, with a net profit margin of around 30% in 2022; The net profit margin of Zhongjian Technology has even reached a terrifying 75%.
05 | Investment advice from Jingtai [Investment logic] 1) High end domestic substitution: Insufficient supply of high-end carbon fiber production capacity for aerospace; 2) Expanding the application scope through parity: Clear cost reduction paths such as economies of scale, domestic equipment substitution, and process optimization can further open up the application scope through the reduction of carbon fiber prices. [Investment Strategy] 1) Lack of primary investment opportunities in the main chain: from raw silk production to carbon fiber and prepreg, on the one hand, economies of scale can significantly reduce costs, and the industrial chain is also beginning to vertically integrate; On the other hand, the accumulation of technology requires profound experience, and the first mover advantage is significant. Several leading companies that have already gone public have absolute advantages, and there is a lack of primary investment opportunities. Only the top unlisted companies have the opportunity to go public, but from a valuation perspective, the investment value is not significant. 2) As an industry operation with significant advantages: 1) Strong profitability, Zhongjian Technology specializes in aerospace carbon fiber with a net profit margin of up to 75%, while other companies generally have a net profit margin of around 30%; 2) Strong business stability, high industrial concentration after forming economies of scale, and high entry barriers in terms of technology barriers, process barriers, and customer barriers; 3) Continuous growth potential: looking at wind power, photovoltaics, and aerospace in the short to medium term; In the long run, hydrogen energy, automotive lightweighting, and other applications have a wide range of fields.
