The main problems currently faced by China's fiberglass and products industry
(1) Concerns of uncontrolled capacity expansion weigh on industry confidence
Since June 2022, the industry has entered a downward cycle. Amidst sluggish demand in key market segments such as real estate and infrastructure, wind power, and electronics, the glass fiber and products industry has experienced significant overcapacity and a supply-demand imbalance. The industry began actively implementing capacity control measures in 2023, and it took two and a half years for a new upward cycle to emerge.
However, we must remain clear-headed: First, a significant amount of unreleased capacity, resulting from earlier capacity controls, is being rapidly released amidst improving market conditions, triggering localized price wars in some traditional markets, such as direct yarn. Second, driven by economic performance data and the resurgence in performance of key enterprises, cross-industry investment from other sectors and targeted investment projects in new glass fiber materials led by some local governments are emerging. In addition to the 10 tank kiln production lines currently undergoing renovation and expansion, nine new tank kiln projects are under construction, bringing their combined production capacity to 1.1 million tons. Third, the growth rate of the external demand market has declined significantly. The domestic wind power and home appliance markets, influenced by favorable policies, have already preempted some future market demand. The automotive industry, meanwhile, is experiencing significant internal competition and price wars. Consequently, uncertainty about future growth in the glass fiber market is becoming increasingly pronounced. Under the dual influence of supply and demand, a new round of supply and demand imbalances in the glass fiber and product industry may arrive prematurely.
(II) The industry's "involutionary" competition continues under the "extensive follow-up" development mindset and model.
my country's glass fiber industry started late and, for a long time, lagged behind the West in overall technological and equipment levels. This has led to a long-standing, extensive follow-up development model within the Chinese glass fiber industry, accustomed to learning from and copying Western practices, focusing on expanding production capacity and reducing costs, and measuring a company's success by production capacity and market share. Under the extensive follow-up development model, both traditional and mid-to-high-end products will ultimately lead to the duplication of homogeneous production capacity and low-cost "involution" competition. Although the overall industry is currently returning to an upward cycle driven by demand in niche markets such as wind power, electronics, and home appliances, we must also clearly recognize that "involution" competition is still taking place in niche markets such as the mid-to-low-end market for general reinforcement glass fiber yarn and the glass fiber mesh market.