15 April 2004
15 April 2004
JEC recently conducted a market survey called “Structure and Dynamics of the Composites Industry”, focusing on the main trends and future prospects of the composites industry.
“This market survey was conducted on an international level, as JEC’s scope now stretches across the world,"" said Frédérique Mutel, JEC General Manager. Our media sources – website, magazine, forums and show – have become international platforms enabling composite industrialists to showcase their products and innovations. The survey therefore had to be global and cover the main trends, while illustrating the market dynamics of each continent”.
The composites industry, employing 400,000 to 450,000 people worldwide and representing 41.5 billion euros in volume, is characterised by its great heterogeneity. Five main segments have been identified: end users (57%), raw material producers (21%), processors (9%), equipment manufacturers (8%) and distributors (5%). Four industrial application groups represent 70% of the total market value: automotive (23%), building and public works (21%), aeronautics (17%) and sports (11%).
The composites industry is now considered a mature market: the industry’s growth – linked to GDP growth – has been estimated at 4% to 5% per year in volume for the 2003-2008 period and at 2% to 3% per year in terms of value. Wind energy (+20% per year), aerospace (+9% per year), automotive (+7% per year), and shipbuilding (+7% per year) are currently the most dynamic sectors in terms of volume. Several market segments in the value chain such as thermoplastic resin production, wood fibres, carbon fibres and automatic injection processes should experience stronger worldwide growth than the industry’s average growth in the medium term (6% to 15% per year in value). The fall in prices – due to the construction of new production sites in cost-competitive countries, as well as overall improvements in productivity – puts great pressure on profit margins and leads to the consolidation of the value chain at various different stages: upstream, where raw material manufacturers (resins and fibres) are already consolidated on an international level, and downstream, where the consolidation process is underway.
North America represents 40% of the composites industry’s total market value, with 35% for Europe, 22% for the Asia-Pacific region and 3% for the rest of the world.
Emerging countries: the increasing weight of emerging countries upon world production is due to 1) increasingly competitive factor costs and 2) downstream suppliers under the obligation to follow their customers expanding in fast-growing regions. Downstream in the value chain for example, the annual volume growth expected for the production of composite parts used in end-markets between 2003 and 2008 is higher in China (+9,5%) and India (+15%) than it is in Europe and North America (+4%).
North America, Europe and Japan: these regions account for 58% of the industry’s market value and are characterised by a high degree of technicality and/or geographical barriers (product transportation from one continent to another hindered by exorbitant costs or safety restrictions). These countries are rarely affected by price drops or relocation of production in emerging countries. Consequently, many European, North American and Japanese players such as raw material producers, intermediate product manufacturers and final processors (integrated or not) experience strong growth and profitability. Their annual average cumulated growth rate over the past 5 or 7 years was estimated at 10% to 30%, generating an average return on capital employed of 10% to 40% over the same period.
Even though environmental regulations restrict the expansion of composites in Europe and North America, this at least gives Western composite players the opportunity to improve their manufacturing processes, which can then be used as a sales argument.
Key factors behind the success of competitive companies
Innovation (high quality pitch- or PAN-based carbon fibres for example): innovation-based strategies are generally backed by North American and European public organisations and involve constantly renewing product ranges, which generates hefty R&D budgets.
Close proximity to customers: this can encourage a complex process of daily co-operation. R&D centres shared between customers and suppliers create entry barriers.
Leading global position (high market share) in a market subject to strong scale effects: leading fibre producers greatly reduce unit production costs and generate solid profitability.
World-renowned brands: particularly valuable for finished product manufacturers who have integrated composite processing into their business activities. On market segments where a brand is particularly reputed and when the company’s location is not the only key factor of success, certain Western players have created strong entry barriers by heavily investing in communication strategies.
As Frédérique Mutel pointed out, “this market survey underlines the fact that – irrespective of geographical region and product segment – the future prospects of the composites industry on the whole are looking positive in the short and long term thanks to the industry’s great potential and various new applications for composite materials”.
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