Large firms eye carbon fiber

By Kim Yoo-chul

Business diversification is the key for most Korean companies during tough economic times. To compete in the difficult climate, top local firms are expanding into biosimilars, solar cells, wind power, rechargeable batteries and advanced monitor displays.

Like these emerging industries, the global carbon fiber market is expected to grow. Market analysts predict it would become a $5 billion industry by 2020, a significant climb from this year’s estimated value of $2 billion. According to market officials, demand for carbon will increase as green initiatives become more widespread.

It’s still uncertain whether new Korean players will challenge longtime carbon fiber producers in the short term, but a few have already started to do so. Among these businesses are Hyosung, a textile-focused conglomerate, GS Caltex, Taekwang Industrial and Toray Advanced Materials. Carbon fiber products by Taekwang and Hyosung could be used for sports gear, while those of Toray and GS Caltex could be used for car parts and semiconductors.

“This is the right time to diversify our business. Adding a new business within Hyosung would significantly enhance the company’s ability to grow rapidly. The most basic rationale for business diversification is survival. Diversification into the carbon fiber field is essential to the long-term viability of Hyosung,” said an official at Hyosung who declined to be named.

Hyosung Vice President Cho Hyun-sang recently said the carbon fiber business could spark external corporate growth. Cho says the company has already created an action plan to diversify its businesses.

Hyosung plans to open its first commercial carbon fiber plant in the southwestern city of Jeonju later this month. The plant will initially produce 2,000 tons of carbon fiber annually, with plans to expand to 17,000 tons by 2020. “We will invest a total of 1.2 trillion won in the carbon fiber business,” the company said in a statement.

Meanwhile, Toray Advanced Materials Korea, a local unit of Japanese chemical firm Toray Industries, has already started commercial production of high-end carbon fiber at its plant in the southern industrial city of Gumi.

Toray, which holds 40 percent of the global market of carbon fiber car parts and wind turbine blades, plans to produce 2,200 tons of carbon fiber annually. It also plans to open another plant that will produce 2,500 tons of carbon fiber annually by March 2014, which will make Toray the largest carbon fiber manufacturer in Korea.

Taekwang Industrial, a local chemical fiber company, is also opening a carbon fiber plant in Ulsan, about 414 kilometers southeast of Seoul. It will produce 1,500 tons of carbon fiber annually.

The nation’s second-largest oil refinery, GS Caltex, is the latest to finalize plans to jump into the carbon fiber business. The company plans to sell the material for industrial purposes, including for the production of memory chips.

GS officials are using “Pitch Technology” at the plant, which is the most advanced technology in the field. Officials said this is the first time the company will produce commercialized products ahead of its rivals, which include POSCO and OCI.

GS is set to start production sometime next year. “It’s possible that competition in the carbon fiber market will become increasingly fiercer, but this is the right market to be in at present,” said a GS official.

Growth and risk factors

Many market forces currently drive the supply and demand for carbon fiber, according to Red Market Research. Nevertheless, these factors will help the carbon fiber market grow and be sustainable for years to come.

The automotive market tops the list of key factors as experts predict carbon fiber will be increasingly used in car parts. Next on the list is wind energy. As the number of offshore wind farms increase, so will the need for carbon fiber used in wind blades.

However, the rush to produce carbon fiber could exceed market needs, creating a problem for Korean producers. “New carbon fiber suppliers have entered the market. Suppliers overall have increased the efficiency of their carbon fiber production, and there are signs of contraction in some markets,” said Cho Young-jin, a fund manager at Taurus Investment and Securities. “Some markets are expected to consume less carbon fiber than initially anticipated.”

This oversupply can potentially adversely affect fiber pricing, according to the analyst. “The confluence of new players and tempered demand will lead to a surplus that will inevitably affect fiber pricing. Unless the market grows significantly faster than expected, this excess capacity will keep overall pricing very competitive and shake down the supply chain,” said Cho.

“Wind energy obviously is a big contributor to near-term economic issues, and the current subsidy policies are creating artificial booms and busts in economic systems, both in the United States and China,” Cho said.