I know it is long, but this could effect us too.
High Demand Keeps Suppliers Struggling to Keep Up
The extensive use of carbon-fiber body panels on Cobb Tuning’s WRX helps lessen the car’s weight, keeping it a welterweight track fighter in the time-attack competition’s for which it was built.
Blame it on Boeing. In the last two years, the Seattle aviation giant—along with its European rival Airbus and partners at the Pentagon—has consumed most of the world’s carbon-fiber supply. The severe shortage has caused wholesale prices to triple in some cases, putting the squeeze on specialty-equipment companies that trade in the wonder composite.
Carbon fiber is considered as strong and stiff as steel but one-fifth the weight, making it ideal in structural applications that typically use steel or aluminum. The Pentagon uses carbon fiber for everything from the F-22 fighter to bombs designed to short-circuit electrical systems.
Half or more of the structural material for Boeing’s new 787 Dreamliner and Airbus’s A380 is carbon fiber, which reduces weight and increases fuel efficiency. Boeing said that the Dreamliner, for example, will fly nonstop from London to Sydney.
“It’s hard to be competitive now,” said Guillermo Cervantes, sales and marketing manager for Fiber Images, a Southern California company that makes carbon-fiber body panels. “It’s affected a lot of people. Businesses have gone under, and there’s no profit margin now.”
Fiber Images is not alone. Popular producers of body kits and aero parts, including Kaminari and Seibon—and even carbon race car body makers—are forced to deal with the shortage. It’s not just aerospace driving demand, either. Energy applications and high-pressure vessels for compressed-gas storage have fueled further growth, leaving companies that make hoods and trunk lids, as well as golf clubs, mountain bikes, and fishing rods fighting for the pricey scraps.
Cervantes said that his costs increased $5 per yard around June 2005. By February 2006, his costs had tripled to $15. A yard of carbon fiber ranges from $35 to $40—if and when you can get it.
There are only eight major carbon-fiber manufacturers and a few smaller Taiwanese and Korean players, and suppliers likewise feel the pinch. Cervantes said that his key supplier is limited to five 100-yard rolls a month, of which Cervantes receives one.
“[Department of Defense] contracts—that’s who gets first dibs on the carbon,” said Carbon Fiber Manufacturing’s Kenny Farrell. “There’s a huge demand in aerospace and military, way bigger than the automotive market.”
Seibon’s carbon-fiber hardtop for the Honda S2000 retails for more than $4,000 and includes all OEM components and brackets, as well as a Lexan rear window.
Farrell should know: He’s got a foot in both camps. His company, based in Rock Hill, South Carolina, not only does government contract work but also carbon-fiber and fiberglass ’69 Camaro bodies for drag racing and stock car teams. Only a third of Farrell’s business is automotive, but the government contracts allow him to get his hands on premium carbon fiber—3K and 6K in industry jargon. Despite that access, Farrell still pays handsomely for the material.
“We’ve had to adjust for it,” he said. “It’s double what it was two years ago.”
Chris Red, editor of industry monthly Composite Market Reports, noted that most carbon-fiber producers are already operating at capacity.
“There’s a whole slew of applications that will require as much carbon fiber as Airbus and Boeing put together within the next few years,” Red said, noting the demand for composite rotors on wind farms and high-pressure vessels to contain liquid gas, including hydrogen. If hydrogen fuel cells power even a slim percentage of road-going cars in the near future, Red said “…the carbon-fiber industry would have to double its current supply to produce enough material just for the hydrogen pressure vessels in the United States alone.”
“The image of carbon fiber being just an aerospace or Formula 1 material is what it used to be,” he added. “Carbon fiber is really entering this more industrial commodity material stage.”
In this context, it’s tempting for businesses that trade in carbon fiber to consider alternatives. Black fiberglass, woven and dyed to look like carbon fiber, is one option for cosmetic applications. Basalt fiber, made from dense volcanic rock, is considered another possible replacement. And structural engineers get good results with S2 fiberglass, an aerospace-grade material with a fine finish suitable for body panels and trim pieces.
Still, specialty-equipment manufacturers can only go so far with the alternatives. Cervantes explained that many young customers care more about price than the actual material, as long as it looks like carbon. The real margins come from savvy enthusiasts.
“The older guys, the speed freaks, the EVO and Porsche club guys, they don’t complain about the higher prices,” Cervantes said. “I haven’t sold a Honda hood in maybe six months. The EVO and Audi (B5) are the hot tickets right now.”
Kaminari president Peter Morley has seen the same shift. The Honda Civic market has almost dried up, he said, although the Scion tC is doing well. The Subaru WRX and EVO guys tend to be “engineering geeks,” he said with all deference. They will pay a premium for the real material. Morley is paying $30 more per yard compared to three years ago.
“We’ve sampled the black fiberglass, and it just doesn’t look the same,” Morley said. He pays $30 more per yard for carbon fiber now than he did three years ago. “You can’t get a bad name out there. It’s instantly broadcast around the world.”
Seibon Marketing Director Duy Le echoed the sentiments about the current alternatives. Le said Seibon uses only 3K and 6K carbon in its products, which lean near the higher end of the scale. Hoods start around $560 and go up to $1,000, depending on shape and design. Carbon door panels are popular, Le said, as is its $4,000 carbon hardtop for Honda’s S2000.
“We need to [use 3K and 6K] to maintain quality,” he explained. “Customers want that look and contrast. We have to produce what people expect from us.”
The good news? Red expects the carbon-fiber supply to grow 15% or more per year, which will be good enough to supply the growth in current applications for most things, he said. Japanese company Toho Tenax, for example, plans to double its production in 2008 after a new factory comes online. American company Zoltek has centered its business plan on high-volume, low-cost large-tow industrial carbon fiber.
The bad news is that aerospace, military and other big-capital enterprises already have dibs on it. Toray, the world’s largest carbon-fiber producer, has a deal with Boeing until 2018.
“Because of this huge surge, such as the 787 and A380, it’s going to be a little bit tricky for the automotive industry,” Red said. He recommended that manufacturers look at as many suppliers as possible.
“Eventually somebody will have a little bit extra they can sell,” he said. “But it’s going to be touch-and-go for everybody for quite awhile.”
A small ray of hope shines for the automotive market at the University of Tennessee, however. Researchers at the Department of Energy’s Oak Ridge National Laboratory are working with Ford, GM and DaimlerChrysler to develop high-volume renewable sources of carbon-fiber feedstocks. One goal of the program is to reduce the price of commercial-grade carbon fiber to $3 to $5 per pound—an attractive price point for automakers wanting to use more than a million tons of the material in road-going cars.
In the meantime, Cervantes said that a supplier has told him to brace for an early 2007 increase. Morley hopes for some breathing room, but he’s resigned to reality.
“My suppliers are saying we’ll get some relief in late 2007,” he said. “But I doubt whether we’ll see $18 carbon fiber again.”