At the start of 2020, composites industry pundits couldn’t have predicted the impact a global pandemic would have on the market. The U.S. composites industry showed signs of growth, but was soon derailed by plant closings, employee layoffs and postponed projects in response to COVID-19. However, composites professionals are resilient and by the end of last year, signs pointed to a steady recovery. In our 2021 State of the Industry Report, five experts share their expectations for key materials and markets.
The Glass Fiber Market
By Dr. Sanjay Mazumdar, CEO, Lucintel
2020 was a crisis management year for composites industry players due to COVID-19, which caused a cash flow and demand crisis, supply chain disruptions and worker safety issues. While last year was challenging, the outlook appears brighter for 2021.
At the beginning of 2020, the U.S. composites industry started fairly well and showed good signs of growth similar to 2019. By the end of March, new orders were delayed and sometimes canceled. During the second quarter, particularly in April and May, the impact of the pandemic was at its greatest, resulting in one of the sharpest and deepest economic contractions since the Great Depression. More than 20 million people lost jobs in the summer, and plants were shut down across sectors. Transportation, construction and marine were hit the hardest, which resulted in a 20% decrease in demand for U.S. glass fiber in Q2 2020 compared to Q1 2020. The impact of COVID-19 was reflected in the financial results of many composites industry players during the first half of 2020 in terms of poor sales and profit margins.
However, the second half of 2020 saw one of the fastest recoveries in the economy and the composites industry. Since July 2020, the U.S. composites industry has started to see an increase in demand from various end-use industries, including automotive, marine and construction, driven by stimulus packages and plant re-openings. As a result, the U.S. glass fiber market grew by approximately 23% in Q3 2020 compared to Q2 2020. In Q4 2020, the U.S. glass fiber market remained strong, and November saw approximately 5% growth compared to November 2019.
By the end of 2020, the glass fiber market could not recover fully from the dent of the pandemic and was expected to witness a decline of about 6%, with demand dropping to 2.44 billion pounds compared to 2.59 billion pounds in 2019. The impact of the coronavirus was irregular across value chains, with automotive, pipe and tank, aerospace and marine applications experiencing significant declines, while wind energy, electrical and electronics, and construction remained positive.
The wind industry provided a bright spot in 2020, witnessing double-digit growth despite a temporary slowdown in March and April due to supply chain bottlenecks, cross-border shipment issues and government restrictions. Overall, the market grew as wind farm developers were in a hurry to get construction started in time to qualify for the production tax credit before its expected expiration at the end of the year.
In terms of supply and demand dynamics in the glass fiber industry, the utilization rate decreased to 83% in 2020 from 91% in 2019. The global glass fiber capacity was 12.8 billion pounds in 2020. (See Figure 1.) Lucintel predicts that the fiberglass plant capacity utilization rate in 2021 will reach the same level as 2019.
COVID-19 is forcing executives to rethink the future of the composites industry. In some segments, there is a surplus capacity added to the slow recovery. For example, the aerospace industry will see a slow recovery. Boeing CEO Dave Calhoun estimates it will take two to three years for air travel to recover to pre-COVID levels.
There is also growing consumer awareness about sustainability, which has led industry players to explore green materials, renewable energy and recycling technologies in the production of materials and composite parts. In addition, the increased use of digital technologies in most sectors is transforming work and the workforce.
With the help of a new stimulus package approved in December and arrival of the coronavirus vaccine, Lucintel is hopeful that Q1 and Q2 2021 will see good recovery in the U.S. glass fiber industry. Favorable trends in automotive, housing, pipe and tank, electrical and electronics, consumer goods and marine post-COVID crises will lead the glass fiber market to grow at 8% to 10% in 2021 to reach or exceed 2019 level demand.
The Automotive Market
By Marc Benevento, President, Industrial Market Insight
Last year brought significant change and disruption to many industries and aspects of life. The automotive and composites industries were no exception, and both have been dramatically impacted by COVID-19, the effects of which will be felt for years to come. However, there is good news for composite manufacturers in that the expected automotive industry recovery, global regulatory environment and proliferation of electrified vehicles provide a promising outlook for composites and lightweight automotive materials.
COVID-19-related shutdowns dramatically and negatively affected light vehicle supply and demand in 2020. Manufacturing shut-downs early in the year brought demand for materials to an abrupt halt, and the economic impacts of the pandemic reduced demand for new passenger vehicles globally. Although production resumed by summer and demand recovered more quickly than anticipated, global production in 2020 was 20% below that of the prior year. The volume of composites sold in automotive applications fell commensurately, to about 3.5 billion pounds.
Recovery of light vehicle production will be gradual and with notable regional differences. China, a large developing market where the effects of the coronavirus were felt first, is expected to fully recover to 2017 levels by 2022. Vehicle demand in mature markets, such as the European Union and North America, was softening before the pandemic and will not return to 2017 levels before 2025. The road to recovery will be long and slow for suppliers of automotive commodities that rise and fall with the market.
Fortunately, many composite materials are not commodities, but are gaining market share due to the value they offer versus competing materials in terms of cost, weight and performance. Demand for lightweight materials is outpacing market growth due to regulations on carbon dioxide emissions and fuel economy. Limits on carbon dioxide emissions in Europe are set to tighten over 60% between 2021 and 2030.
The United States is likely to revisit the pause placed on Obama-era fuel economy standards, which could require a 23% improvement in fleet fuel economy between 2020 and 2025. The use of lightweight materials, including composites, can assist OEMs in meeting regulations while retaining consumer appeal. Prior efficiency regulations helped composites gain 2% of vehicle mass each year from 2008 to 2018, a trend that is likely to continue in light of the current regulatory environment.
However, lightweight materials alone will not enable OEMs to meet lofty fuel economy requirements. As a result, automakers are planning to deploy a new mix of electrified vehicle powertrains in the next few years. This will include significant increases in hybrid, battery electric and fuel cell vehicles to complement internal combustion engines.
The rise of electrified vehicles creates opportunities for composites in battery enclosures, hydrogen fuel tanks and other components where low weight and corrosion resistance are required. In addition, part consolidation opportunities can be exploited as these new vehicles are designed. These factors may enable composites to capture additional share of vehicle mass in the next decade and will help drive the total volume of automotive composites sold above 2017 levels by 2023.
The growth potential of the composites industry is illustrated by indexing vehicle production and automotive composites volume to a base year of 2017 and projecting demand through 2025. (See Figure 2.) Should composites continue to grow 2% above the market each year, as they have for the past decade, automotive composites volume will eclipse the base year by 2023, while global automotive production is not expected to return to its 2017 level before 2025.
Although 2020 has been a difficult year for the automotive industry and composite manufacturers, the long-term outlook for automotive composites is bright. The industry will rise above 2017’s high water mark in the next few years based on the value offered in terms of cost, weight and performance.
The Carbon Fiber Market
By Daniel Pichler, Managing Director, CarbConsult GmbH
Since 2010, the market for carbon fiber has grown from less than 40,000 metric tons to more than 100,000 metric tons in 2019. Growth during this period was smooth and uninterrupted, with a 10 to 12% increase per year. But last year, the COVID-19 pandemic struck, and the carbon fiber world changed almost overnight.
In 2020, global demand for carbon fiber totaled approximately 105,000 metric tons – just 1% higher than in 2019. And in 2021, only 1% growth is to be expected. (See Figure 3.) To understand the flattening of the market, it’s important to take a closer look at how COVID-19 changed the carbon fiber world.
The market for carbon fiber is fueled by growth in a number of areas, such as aerospace, wind energy, sporting goods, marine, automotive, pressure vessels and others. Until 2020, growth in all of these market segments individually and in the industry as a whole was steadily rising.
With borders shut in early 2020, international air travel stopped, aircraft were grounded, aircraft manufacturers slashed production rates and, in an instant, the carbon fiber industry lost its motor. Carbon fiber use in aerospace applications made up 20% or more of industry volume and 40% of industry value. The slowdown in commercial aerospace severely impacted the carbon fiber industry, and it will likely take several years to recover to pre-COVID levels.