Key Numbers and Opportunities in 2014

[dropcap size=small]T[/dropcap]he U.S. composites industry is highly fragmented, comprising approximately 3,000 companies. These include suppliers of fiberglass, resin, core, adhesive and other materials to fabricators making bathtubs, utility poles, pipes, tanks, automotive parts, aerospace parts, sporting goods and more. Fiberglass and polyester resin are the dominant materials and represent approximately 58 percent of all materials sold (in terms of dollar value) in the composites industry. Cost of materials typically ranges from 25 to 50 percent of total composites product cost based on the type of application and process used. In 2013, the composite materials market grew by 1.7 percent to reach $7 billion in value and 4.7 billion pounds in terms of annual shipment. The U.S. gross domestic product (GDP) grew by 2.4 percent in 2013, which will help the U.S. composites market restore confidence again amongst composites part fabricators. In 2014, the key economic indicators and market dynamics suggest a growth of 5.8 percent. Demand in the U.S. composites market is expected to reach $10.3 billion by 2019, at a compound annual growth rate (CAGR) of 6.6 percent. Strong recovery in the transportation, aerospace and construction sectors is expected to drive this trend through 2019 and beyond as shown in Figure 1.   [caption id="attachment_218" align="aligncenter" width="660"] Figure 1: The U.S. Composite Materials Growth Opportunities by Industry (Source: Lucintel)[/caption]

 

Now let’s take a closer look at some industry segments and innovations on the horizon. Automotive Auto sales were projected to reach 15.6 million vehicles in 2013, from 14.7 million vehicles in 2012. Growth in automotive demand is mainly driven by low interest rates, increasing consumer confidence and the increasing trend of replacing older cars. Composite materials are used in interior headliners, underbody systems, bumper beams and instrumental panels. The demand for composites in the U.S. automotive market grew by 8.8 percent in 2013. Increase in the use of composite materials in racing and high-performance vehicle components, such as chassis, hoods, wheels and roofs, is one of the driving factors for the increase in composites penetration in the automotive industry. The Obama Administration’s Corporate Average Fuel Efficiency (CAFE) standards of 36.6 mpg by 2017 and 54.5 mpg by 2025 are likely to provide impetus to the usage of lightweight materials such as composites. To meet the CAFE standards, major OEMs have optimistic plans of reducing gross vehicle weight drastically in their future models. For instance, Daimler had set a target to reduce the gross vehicle weight by 10 percent in all of its new models by 2013. Similarly, GM and Ford set targets of weight reductions of 15 percent by 2016 and 250 to 750 pounds by 2020, respectively. OEMs are turning to carbon fiber and other lightweight materials to reduce vehicle weight. Demand for carbon composites will significantly grow as major OEMs have entered into joint ventures with carbon fiber suppliers to have a secured raw material supply. Zoltek (now Toray) entered into strategic alliance with Magna International for the development of low-cost carbon fiber sheet molding compounds. Plasan Composites worked with Globe Machine Manufacturing Co. and Weber Manufacturing to develop a manufacturing process called “pressure press” to fabricate automotive composite parts in 17 minutes. The company is developing a resin transfer molding (RTM) process to fabricate parts in 10 minutes. Another area in the automotive industry which recently attracted a lot of attention is the increased usage of compressed natural gas (CNG) tanks. Rising shale gas exploration in the United States is expected to result in a significant increase in the gas supply, which would boost the need for CNG tanks in the coming years. Demand for natural gas vehicles also is increasing, which will drive the composites tank market higher. Major Type IV CNG tank manufacturer Hexagon Lincoln had plans to expand manufacturing capacity to 80,000 units in 2013 and 160,000 units in 2014, from the capacity of 40,000 units in 2012. [caption id="attachment_220" align="aligncenter" width="660"] Figure 2: Annual Growth Rate of U.S. Composites Consumption in Automotive with U.S. Lightweight Vehicle Sales 2008-2013 (Source: Lucintel)[/caption]

 

Aerospace Composite materials continue to gain market traction, and OEMs show strong confidence in composites technology. Demand for composite materials in the U.S. aerospace market grew by 10.2 percent in 2013. New aircraft programs such as Boeing’s 787, Airbus’ A380 and A350, Bombardier’s C Series and general aviation aircrafts such as Cirrus and Diamond are utilizing a significantly higher amount of composites than previous aircraft and thus driving composite materials’ growth. Boeing 787 had a huge order backlog – 884 aircraft – as of October 2013. To fulfill orders, Boeing planned to escalate production capacity of 787s to 10 aircraft per month by the end of 2013, 12 aircraft per month by 2016 and 14 aircraft per month by 2020. Airbus’ A350 XWB had an order backlog of 682 aircraft as of August 2013. A350 XWB is expected to launch in 2015 and have a production rate of 10 aircraft per month by late 2018. Wind Energy The Production Tax Credit has remained a key driver for wind energy development in the United States, but the uncertainty of extension led to a “boom and bust” cycle. In 2012, the market grew as renewable energy developers rushed to complete construction in time to qualify for the credit before its expected expiration at the end of the year. This huge increase affected the new wind energy capacity installation in 2013, as most of the planned projects had been completed in 2012. Approximately 3,000 MW of new wind energy capacity was installed by the end of 2013, a 77 percent decrease from 2012. Advanced materials are making headway in the wind market. GE started using carbon fiber in its two wind turbine models, GE 1.6-100 and GE 4.1-113. Major Brazilian blade manufacturer, Tecsis, is manufacturing wind blades for GE energy using large tow carbon fiber prepreg supplied by Gurit. Pipe and Tank Oil and gas and chemical segments together accounted for more than 55 percent of the FRP pipe market in the United States, followed by retail fuel, marine/offshore, waste/wastewater, sewage, power and pulp/paper. In the last five years, the power segment grew at a faster rate with a major focus on large-diameter pipes. There also is a trend toward using large-diameter pipes in sewage applications. In 2013, FRP pipes in municipal water systems and pipe rehabilitation grew slightly. In the last several years, major players established strategic alliances. The largest FRP manufacturer, NOV Fiberglass, acquired two major U.S. FRP pipe manufacturers – Ameron and Fiberspar. Future Pipe Industries acquired ITT Exelis. Ershigs established a joint venture with Hanwei Energy Service to establish Hanwei Ershigs. Last year, Ershigs acquired Fibra S.A. FRP tanks had a mixed performance. Underground petroleum-based tanks grew at a faster pace among all segments due to increasing demand of FRP tanks from independent service stations, whereas underground water-based tanks grew marginally. Other Markets In the construction industry, composites demand registered 8.3 percent growth in 2013. Construction continues to be the second largest market (after transportation) for composite materials. The main drivers for composites usage are new housing and remodeling, both of which have grown significantly thanks to the economic recovery. The government also is allocating funds for the retrofitting of old infrastructures, especially bridges and roads, which further drives composites demand in the construction sector. In the marine industry, composite materials grew 3.4 percent in 2013 due to the improving economy, increased consumer spending and the rise in employment rates. In the United States, boat production grew more than 5 percent. Such growth benefits the composites industry since approximately 70 percent of boats are made with composite materials. The U.S. consumer goods market grew 3 percent in 2013. Composites are used in seven out of 10 products in the most popular outdoor sports and recreational activities. For example, carbon fiber is the predominant material in golf shafts, fishing rods and tennis rackets. Innovation Potential in Composites Innovation Potential in Composites There will be significant innovations in the composites market in the next 50 years. In aerospace, automotive, construction, pipe and tank, consumer goods and other industries, composites are underrepresented. Some of the future innovation areas for composites are:

• Lightweighting of automotive, aerospace and industrial parts
• Cost reduction in various composite parts
• Smart structures for quality control and damage monitoring
• Reduction in number of part counts in many applications
• Advanced composite parts for mass produced cars
• Faster and predictable infusion
• Reduction in the price of composite materials, including carbon, aramid and resins
• Environmentally-friendly resin and fiber systems
• Enhanced mechanical, chemical and conductive properties of fiber and resin systems

Lightweighting and cost reduction are two mega trends across industries. There’s been a shift to carbon fiber driven by its low density, high strength and stiffness compared to traditional materials. The key factor limiting the penetration of carbon fiber is its high cost, which will gradually decrease. Figure 3 compares relative part weight and part cost of various competing materials, such as steel, high-strength steel, aluminum, carbon composites, etc. Carbon composites have the highest weight reduction potential (up to 60 percent lighter than steel), but is by far the most expensive alternative (~500 percent costlier than steel).   [caption id="attachment_221" align="aligncenter" width="660"] Figure 3: Relative Part Weight and Part Cost (Source: Lucintel)[/caption]

 

In automotive, the current usage of carbon composites is limited to sports, electric and high-performance cars with annual production of less than 10,000 units. However, OEMs are targeting the use of carbon composites in high-volume cars with annual production of 20,000 to 40,000 vehicles. High fuel efficiency (54.5 mpg target by 2025), emission concerns and government policies are generating pressure on OEMs to manufacture lightweight vehicles. Here, carbon composites have a large role to play and can prove to be the game changer. However, price of carbon fiber is a big concern to automakers. Since the introduction of the Kyoto Protocol, an international agreement that sets binding emissions reduction targets, the use of lightweight materials has offered a monetary benefit. This justifies increased use of lightweight materials in the future. There is a potential of approximately 40 to 60 percent cost reduction in carbon composite parts, with improvement in precursors and advancements in carbon fiber manufacturing processes as shown in Figure 4.   [caption id="attachment_222" align="aligncenter" width="660"] Figure 4: Major Players across Value Chain Nodes Working on Development of Low-Cost Carbon Fiber and Improvements in Manufacturing Processes (Source: Lucintel)[/caption]

 

Industry strives to improve manufacturing processes and reach a low cycle time – one to two minutes. There have been numerous successful landmarks in minimizing the parts manufacturing cycle time. In 1981, McLaren introduced the F1 car with a chassis made of carbon composites using prepreg layup. The company took 3,000 hours and 100 employees to build the chassis. When the Mercedes SLR was introduced in 2003, that figure decreased to 400 hours. In 2011, the manufacturing time plummeted to 4 hours for the MP4 12C monocell using the RTM process. To contribute further, Plasan Composites joined with Globe Machine Manufacturing Co. to develop the pressure press process, which has a parts cycle time of 17 minutes. Lamborghini teamed with Callaway Golf on a forged composite process, which has a parts cycle time of 8.5 minutes. Various other machine manufacturers rely on High Pressure Resin Transfer Molding (HP RTM) for fabricating parts in three to four minutes.   [caption id="attachment_223" align="aligncenter" width="660"] Figure 5: Carbon Fiber Consumption in Global Automotive Industry with Reduction in Part Fabricating Cycle Time (Source: Lucintel)[/caption]

 

Advancements in the aerospace industry are tied to the need for improved fuel efficiency. Jet fuel prices almost doubled to $112/barrel in 2012 from $65/ barrel in 2006. Companies are working to reduce cost and improve material performance in airframes. For example, Lockheed Martin is evaluating carbon nano-reinforced polymers (CNRP) to replace approximately 100 components made with other composites or metals throughout the F-35's airframe. CNRP offers a 20 to 30 percent weight reduction at one tenth of the cost of carbon fiber reinforced plastics (CFRP) and several times higher strength. Recently, Hexcel came up with a carbon fiber/epoxy sheet molding compound that enables complex shapes to be manufactured in series production. The benefits of using composites in up to 50 percent of the structural parts of the 787 are shown in Figure 6.   [caption id="attachment_224" align="aligncenter" width="660"] Figure 6: Use of Composites in Boeing 787 Enables Significant Benefits over Traditional Platforms such as Boeing 767 (Source: Lucintel)[/caption]

 

The aerospace industry is moving toward automated tape laying (ATL) and automated fiber placement (AFP) to fabricate parts. Both ATL and AFP machines are very costly and complex to operate. Mikrosam AD has developed a new line of automated fiber placement machines that apply both technologies (ATL and AFP) on a single mandrel. From a single computer, producers can program both technologies. This has resulted in no downtime to change from one machine to another, low manpower and drastic savings in machine investment. Advancements in the wind energy industry focus on blade length, which has continuously increased in the last 10 years and is expected to increase at an even faster pace in the future. The average turbine size in the United States was 0.89 MW in 2000: This reached 1.94 MW in 2012. All major OEMs are working on large size turbines. For example, Vestas has launched an 8 MW wind turbine and Samsung Heavy Industries introduced a 7 MW turbine. Mitsubishi, Sinovel, Goldwind, Guodian United Power, Sway and Clipper have plans to develop 10 MW turbines, while GE energy will develop turbines ranging from 10 to 15 MW. In addition, Gamesa plans to make a 15 MW turbine. Increasing blade length requires the use of high-performance materials to increase stiffness and reduce weight. Vestas and Gamesa were early innovators and started using carbon fiber in spar sections. After seeing the benefits, other players followed suit, including GE Energy via Tecsis, Samsung Heavy industries via SSP Technology and ETI via Blade Dynamics. Figure 7 demonstrates the spar cap mass and spar-to-blade weight ratio at various blade lengths. [caption id="attachment_225" align="aligncenter" width="660"] Figure 7: Spar cap Mass and Spar to Blade Weight Ratio at Various Blade Length: Glass v/s Carbon Fiber (Source: Lucintel)[/caption] Material suppliers are stepping up to the plate to provide solutions to the wind market. Owens Corning, PPG and 3B introduced glass fiber with high strength and stiffness properties. Resin suppliers such as Huntsman, Dow Chemical, Ashland and DSM have launched toughened resin systems for wind applications. A new resin from DSM – ZW7844 – offers wind turbine blade manufacturers the mechanical performance of epoxy resin with the processing advantages of unsaturated polyester resin. Bayer Material Science recently introduced a new class of nano-enhanced Baydur polyurethane systems, which offer blade manufacturers low volatile organic compound emissions and faster infusion time. Another overall trend in composites is the use of environmentally-friendly materials for various applications. This has led to significant innovations in formulations of bio-based resins. New refinery technology that can produce plant-based bio-chemicals for key resin monomers are also driving this market. Many resin suppliers, including AOC, Ashland, Reichhold, Huntsman, DSM, Cereplast, Natureworks, Dixie Chemical and CTS, are developing resin systems which have less volatile content. There is still not much traction in the use of bio-resin in the composites industry, however its usage is increasing in other industries. Some of the applications for bio-resins and natural composites are in electronics and automotive industries. (For an in-depth look at bio-resins, read "Bio-Resin Market: Still Budding, But No Boom") In conclusion, there is both opportunity and risk in driving innovations. Approximately 95 percent of new product launches fail for various reasons, including insufficient market research, ineffective marketing and poor understanding of the competition. Sophisticated analytical tools and data-driven decisions can reduce risks. It is important to cautiously invest in opportunities that will bring long-term growth.