A little background that I'm in the carbon fiber and composite fabrication business. This past month I couldn't find a supplier that had carbon fiber in stock in the quantities we use. And that is at more then 100% over early 2004 costs. One supplier laughed when I asked about quantity discounts and said, "Howard, don't you know there's a global shortage. I'm concerned about selling it to you at this price. I just don't know when we're going to get more in." It took at least 20 calls in to my main supplier to get a reply. And the reply was it is going to be at least a month before we have any stock greater then 15 yards. And we don't have the tow size you require anyway. All they had were seconds of the larger tow that is quicker to make. It took calls to 4 suppliers to find one that was willing to sell me half a roll. It HIT me: There is in fact a globlal carbon fiber shortage. It is caused by the rapid increase in use of composites in a variety of industries. Carbon fiber is used in products in commercial aircraft such as the new Boeing 787 which is over 50% carbon by weight and also the new Airbus A380 to motorsport which now has commonplace carbon fiber chassis to recreational sports such as golf on both the shafts and now heads on high end clubs such as the Calloway are made of CF and tennis and bicycling. Worldwide demand is growing and there is simply not enough capacity. And this is before Lockheed goes into full tilt with its projects. According to Toray Industries of Japan, the demand for PAN-based carbon fibre for 2004 was estimated to be about 22,000 tons and the demand is forecast to grow at an annual rate of more than 10 percent in the future and is expected to exceed 30 000 tons in 2007. (source: http://www.bicycleranch.com/carbonfibershortage.shtml) Manufacturers . . . developed products when the supply of small-tow carbon was plentiful, but now face the real prospect of fiber shortages. In fact, some small- and mid-size fabricators already are finding it almost impossible to obtain the quantity that they need for application development and part production.(source: http://www.compositesworld.com/hpc/issues/2005/January/689) "Our fifth prepreg line is installed and operational and provides the additional capacity for continued growth in our prepreg material sales. Our joint venture carbon fiber plant, CFT, is running at full capacity. Globally, the carbon fiber shortage is showing no signs of changing in the foreseeable future. Major commercialization successes for carbon fiber have been announced such as the Airbus A-380 super jumbo and Boeing 7E7 airplanes, wind energy programs and armor programs for our troops in Iraq. We believe carbon fiber capacity additions will lag the increasing global demand for the foreseeable future." (source: http://www.aldila.com/corp040070.htm) Yesterday and today I bought ALDA CYT and HXL stock, while getting out of 80% of my AAPL. I believe things are going to get worse (MUCH WORSE) before they get better. Additional production doesn't go online until 2008 and people are starting to hoard and stockpile the stuff. I'm thinking about going into options to make larger bets. Anyone have any advice for me?
I think you're on to something. I follow TIE and RTI (titanium) and I find it interesting because their demand also is driven by Boeing, Airbus, Japanese industrials and the defense industry (rocketry). Seem like similiar trends for these high end commodities. Thanks for posting, ALDA, CYT, HXL look interesting. In regards to options, look into leaps as investments but I don't find these stocks high volume enough to have good options activity. It's really too bad that's the case cause if the options market was more advanced I would have been loaded on calls in TIE back when it was 25 bucks instead of falling prey to the speciallist relentless and ruthless hunt for stop losses.
I'm tempted to also go into ZOLT, but I don't have the balls. Their ballance sheet and income statements scare me too much. SGL in europe (SGLFF here) also scares me. I could see that thing doubling in no time if they get their act together. If anyone has any PURE (we're looking for the producers here) carbon plays that I haven't listed, let me know.
Man the global carbon fiber shortage is very interesting. Back in 1995 a small San Diego Nasdaq company (now defunct) developed a plan to take over carbon fiber manufacturing. When they XXsys began to realize their carbon fiber bridge retrofitting application was a flop they tried to change course. Their former President devised a plan to buy carbon fiber manufactures and take over the industry. He knew there were only a few players they were undervalued and he predicted huge world wide demand. They had a boston law firm create a rock solid non-compete contract. Then they contacted a very well known wall street firm to help them finance the acquistions. But first the firm had to sign the non-compete. It was alleged that this Wall Steet firm took their plan and executed upon it. XXSys technologies sued the investment banking firm for 80 million plus punis but they settled for a lot less. Within the first few years after the settlement the Investment banking firm made 200 million on the deals. ( I was told) I guess the plan was a good one. By the way Zolt was a scary company back in 1996.
I don't think you're going to see a mitsubishi, toho or a toray have anywhere near the kinds of moves that these guys will have and that really is everyone in this market.
Great post. I do triathlons and carbon fiber bikes are all the rage. I know this is going on in other industries. It is good to hear a buyer perspective on supply, thanks for sharing.