In-depth analysis of the glass fiber industry: cherish the present and lay out the future

Glass fiber belongs to the heavy asset industry, the midstream looks at the cost, the downstream looks at the new products

The pool kiln drawing method is the main production process of glass fiber, the front process determines the cost, and the back process determines the performance. From the cost point of view, the control of upstream raw materials and energy can reduce the cost of raw materials, the degree of automation of the production line can improve efficiency and reduce labor costs, and the scale of production capacity can reduce unit depreciation expenses. The middle and lower reaches of the products and composite materials industry belongs to the asset-light industry, with a wide variety of products and the emergence of new uses, and enterprises need to increase investment in research and development to maintain high profit margins by continuously introducing new products.

There are barriers to entry in the industry, and the growth rate of new capacity has slowed down

The glass fiber industry has a high entry threshold and high industry concentration, with the production capacity of the world’s top five enterprises accounting for 64%, and the production capacity of China’s top six enterprises accounting for 80%. 2018 is the year when glass fiber production capacity is concentrated, and the domestic glass fiber production growth rate of 15%/13% in 2018-2019 has led to oversupply. In the future, the growth rate of glass fiber production capacity will decline, and the production capacity growth rate is expected to be 2020-2021
7.5％/3.3％。

The proportion of exports is high, waiting for the recovery of demand after the overseas epidemic situation improves

Glass fiber applications are widely used, mainly in the field of construction and transportation, greatly affected by the macroeconomy, the global demand growth rate of glass fiber is about 1.6 times the GDP growth rate. In 2020, affected by the overseas epidemic and the obstruction of domestic glass fiber exports, it is expected that the global glass fiber demand growth rate will be -8.3%/6.7% in 2020-2021, and the growth rate of China’s glass fiber demand will be 1.6%/11%, and the demand for glass fiber is expected to be in
2021 is improving.

The supply elasticity is weak, and prices have fallen to near cost

After the glass fiber production line opens the kiln, it needs to be continuously produced for 8-10 years, and it is difficult to reduce the load to adjust the output in the middle, so the supply elasticity of the glass fiber is weak. When demand improves, due to supply rigidity, the price elasticity is large; when demand declines, the kiln cannot stop production, resulting in an increase in inventory, and when the inventory increases to a certain extent, there will be a price reduction to inventory. At present, the price of coarse sand has fallen to the cost line of some enterprises, and the further decline in prices will lead to the closure of some enterprises to stop production and achieve supply contraction.

The price is at the bottom of the cycle, and the elastic release after the layout demand improves

As the overseas epidemic situation has not yet ended, some new production lines will be put into operation in the 3-4 quarters of 2020, and it is difficult for the supply and demand situation of the industry to change significantly, and the price of roving yarn will still hover at the bottom. We expect that in 2021, the supply growth rate of the domestic glass fiber industry will be 3.3%, the demand growth rate will be 11%, the industry fundamentals are expected to improve, and the price of glass fiber may rise. Due to the high entry threshold of the industry and the high concentration of the industry, the cooperation expectations of leading enterprises in the rising demand are strong, and the price elasticity of glass fiber is enhanced, which is optimistic about the price trend of glass fiber after the epidemic improves.