With severe overcapacity in the carbon fibre sector, how can small and medium-sized enterprises break the deadlock?

The Age of Surplus

On the one hand, the price of general-purpose carbon fibre has fallen below the cost line; on the other, there is a shortage of high-end carbon fibre for the aerospace sector. With small and medium-sized enterprises caught in the middle, where does the way forward lie?

‘Black gold’ no longer shines as brightly.

In 2025, China’s operational carbon fibre production capacity stood at approximately 171,000 metric tonnes, accounting for 52.5 per cent of global total capacity and firmly maintaining its position as the world’s leading producer. However, the reality behind these figures is that there is severe overcapacity in general-purpose T300 and T400 carbon fibre, with fierce competition due to product homogeneity and slim profit margins for companies.

In 2024, leading companies in the sector reported losses for the first time, whilst several long-established manufacturers saw their performance decline for the first time after years of sustained growth. Many small and medium-sized enterprises have become mired in price wars, with operational pressures becoming increasingly acute.

In stark contrast, the unit price of carbon fibre in the aerospace sector is approximately US$80 per kilogram, whilst in the wind power sector it is merely US$12 per kilogram. The high-end market offers substantial profits, but the barriers to entry are extremely high.

It is precisely this structural contradiction that presents an opportunity for small and medium-sized enterprises to break through.

Moving beyond the ‘fibre carrier’ to expand into application-oriented solutions

The most profitable segments of the carbon fibre industry chain are not raw fibre production or carbonisation, but rather composite material design, moulding processes and the development of application scenarios.

Small and medium-sized enterprises (SMEs) are small in scale and have limited capital; if they focus solely on raw fibre production, they stand no chance of competing with the economies of scale enjoyed by industry giants. The way forward lies in ‘moving downstream’—getting closer to end-user scenarios and developing application solutions.

A small composites enterprise in southern China has independently developed high-temperature curing and moulding equipment to process carbon fibre into drone propellers. Compared with traditional processes, this halves the number of production steps and reduces labour requirements by 60 per cent; 60 per cent of its products are exported overseas, with annual sales exceeding 10 million yuan.

Another company, which has branched out from metal processing into the carbon fibre composites sector, specialises in automotive lightweighting. It supplies carbon fibre components to several off-road vehicle and commercial vehicle brands, with an annual supply volume exceeding 400,000 units and revenue growth of over 40 per cent.

The core logic is this: rather than selling raw materials, it is better to sell components. When you become a supplier to downstream original equipment manufacturers (OEMs), both your bargaining power and customer loyalty will increase significantly.

Focusing on niche markets: becoming a big fish in a small pond

Do not attempt to compete head-on with the giants in general markets such as wind power and sports and leisure. Small and medium-sized enterprises should seek out emerging niche markets that the giants either overlook or are unable to enter.

One SME, which originally manufactured high-pressure gas cylinders for domestic use, faced a ceiling in its industry and decisively pivoted towards the commercial space sector. Leveraging its existing expertise in composite filament winding technology, it successfully entered the aerospace supply chain, producing ultra-light carbon-fibre gas cylinders and rocket fuel tanks. Today, revenue from aerospace products accounts for more than a third of the company’s total revenue, with an annual output value approaching 100 million yuan and orders booked up to two years in advance.

A fishing tackle manufacturer in the North-East has extended its carbon-fibre fishing rod production process to ski poles and hockey sticks, and has even secured new orders for structural components for humanoid robots, doubling its revenue year-on-year.

‘Specialised, Refined, Distinctive and Innovative’ is not merely a slogan, but a strategy for establishing a foothold in uncharted territory beyond the gaze of the industry giants.

Embracing industrial clusters to ride on others’ coattails

The era of going it alone is over. The carbon fibre industry is developing a complete value chain encompassing ‘equipment manufacturing, precursor production, fibre preparation, composite materials and applications’; integration into industrial clusters is an effective way for small and medium-sized enterprises to reduce supply chain costs and improve response times.

After a new materials company from the eastern coastal region set up operations in a carbon fibre industrial park, it found that it could ‘source all auxiliary materials without leaving the park’—market access for specialised resins and prepregs can all be arranged within the park. This deep integration and synergy within the industrial chain has enabled them to achieve an annual order volume of nearly 50 million yuan.

Carbon fibre industrial clusters have already taken shape in places such as Changzhou in Jiangsu, Weihai in Shandong and Keqiao in Zhejiang, with local governments providing support through industrial funds and targeted policies. By proactively integrating into these ecosystems, SMEs gain not only orders but also technological collaboration and talent support.

Seeking profits through ‘upmarket positioning’, even if it means taking just a small step forward

The consensus within the industry is that there is an oversupply at the low end and a shortage at the high end. When it comes to high-performance carbon fibre of T700 grade and above, there are very few domestic companies capable of stable mass production, and prices remain at a relatively high level.

Whilst small and medium-sized enterprises certainly lack the capacity to tackle T800 in one go, they can carve out a niche by specialising in specific technical parameters.

For example, some companies specialise in high-modulus carbon fibre cloth designed specifically for high-end fishing tackle, with mechanical and physical properties 15 to 20 times those of steel. Another example is companies focusing on thermoplastic composites—compared to thermosetting materials, thermoplastic carbon fibre is recyclable and represents a future trend, yet few domestic firms are capable of producing it. Establishing technical barriers in the ‘long-tail market’ can similarly help avoid the price war.

The carbon fibre industry is currently undergoing a period of transition from merely ‘being able to produce’ to ‘producing well’. A consolidation of production capacity for general-purpose products is inevitable, but for small and medium-sized enterprises, there are three ways to survive amidst this crisis: expanding into downstream applications, specialising in niche segments, and aligning with industrial clusters.

There is no need to be overly self-deprecating. As one industry insider put it: ‘Those in the manufacturing sector must embody the indomitable spirit of a fighter and stay in step with the industry’s development.’

The value of ‘black gold’ will ultimately be realised through hard work.