Cost of carbon fiber - new era???

[GParkes]

So, given the fact that the near monopoly China/Asia has on the production of raw carbon fiber, what are your thoughts on potential material cost increases in raw fiber/fabric due to changes in trade policies? Domestic users of the material (Hed, Zipp, others) could likely see large increases in COGS. And those importing finished product will likely see import costs rise as well. May not bode well for us bike geeks. Economics 101 - let's here some thoughts.

[54ny77]

Short term, who knows. Longer term, I hope the winds of change bring production of many things onshore.

Who are the top supplies to bike industry? Toray is Japanese, and I doubt they (Japan) will get a lot of political heat. Or at least as much as China will. The market, however, is saying something (it's stock is down). Whether it's tied to the company issues or the President-elect, who knows.

[CaptStash]

Toray has two 0plants in the U.S., and I think Zoltek has four. I don't see an issue here since there is plenty manufactured here. What am I missing?

CaptStash....

[Louis]

Toray has two 0plants in the U.S., and I think Zoltek has four. I don't see an issue here since there is plenty manufactured here. What am I missing?

http://www.economicsonline.co.uk/How%20markets%20work%20graphs/S-shifts-to-L.png

[ultraman6970]

All depends, it depends a lot of how you see it, carbon is just another good and how the things are going, if the new gvmt gives tax relief to any american company willing to manufacture stuff here (carbon or not carbon related) no matter that much the % the raw material increases its value because they can get money back from taxes anyways.

Remember that theoretically people will have more money to spend, more jobs blah blah blah. The idea of those tax reliefs is to help generate jobs... more people working equals (almost all the time) to consuming goods and tad inflation.

In the case of china, well... if you look at it they arent in a super good position if their stuff cost more in here, no matter if its carbon cloth or underwear, they won't sell the same amount than before... they need to sell the 200 billions of socks they produce daily anyways... IMO they will be forced to lower their prices. But carbon is a really particular good, besides japan and china who else produce carbon for tons?

Either way... IMO probably we won't notice a big change due to the new policies, china can't lose this market and we will (should) have theoretically more money to spend anyways.

[CaptStash]

http://www.economicsonline.co.uk/How%20markets%20work%20graphs/S-shifts-to-L.png

Louis, you are suggesting that supply will go down domestically. There is every reason to believe that should tariffs be imposed, domestic production would increase. Toray currently has a little bit of excess capacity as it is and is expanding to meet expected higher demand from Boeing.

CaptStash....

[Louis]

Louis, you are suggesting that supply will go down domestically. There is every reason to believe that should tariffs be imposed, domestic production would increase. Toray currently has a little bit of excess capacity as it is and is expanding to meet expected higher demand from Boeing.

CaptStash....

That wasn't really the right graph to show the impact of a new tariff, just something I could find easily, and the net result will be sort of the same - higher prices for consumers.

Domestic production may increase, but they won't be able to make it as cheaply as the foreign manufacturers, so what we pay will surely go up.

And if we (the small-fry cycling market) are competing for raw materials with a behemoth like Boeing, I think I know who's going to win that battle.

[Louis]

OK, this is a better representation of the situation:

http://thismatter.com/economics/images/economic-effects-of-tariffs.gif

[froze]

I predict the prices of foreign goods to go up roughly 35% sometime in 2018.

[Louis]

I predict the prices of foreign goods to go up roughly 35% sometime in 2018.

House has already said that they oppose that plan.

This will be interesting (and messy).

[Clancy]

Isn't the new project Greg LeMond launched in Arkansas suppose to dramatically bring down the cost of carbon fiber?

[adub]

I predict the prices of foreign goods to go up roughly 35% sometime in 2018.

You mean I will have to pay more than $4.99 for a 3-pack of sweat pants from the Wal-Mart?

[FlashUNC]

Isn't most of the carbon made in Taiwan?

[Willy]

Isn't most of the carbon made in Taiwan?

So that must be why Trump made the phone calll - is he going to make bikes here in the USA?

Sorry, couldn't resist.

(Mods - delete this post if inappropriate)

[54ny77]

Have a pal in the marine biz, he said boating universe is starting to use carbon more in hulls, in a carbon/kevlar mix. Right now it's still quite rare. Carbon found more in the pricey segment, but still.... More demand = good for domestic production.

[buddybikes]

Remember that the raw fiber in highest end Trek back in 2008 was export controlled from the US as it is was same fiber used in military use.

Not sure if decontrolled was done. Was interesting to me as that is my job, export trade compiance (but in computers/encryption not textiles)

This is certainly an industry that should have infrastructure for higher end development and production, as this the new steel of the 21st century. We need as a country, US, to be able to ultimately take care of ourselves in case of major trade issues or worse wars.

[soulspinner]

You mean I will have to pay more than $4.99 for a 3-pack of sweat pants from the Wal-Mart?

hehe...and maybe they will last?

[froze]

You mean I will have to pay more than $4.99 for a 3-pack of sweat pants from the Wal-Mart?

I'm sorry, but that maybe the case...unless that $4.99 3 pack is made in America which if I know Chinamart, err I mean Walmart, that would probably be extremely rare.

[froze]

Remember that the raw fiber in highest end Trek back in 2008 was export controlled from the US as it is was same fiber used in military use.

Not sure if decontrolled was done. Was interesting to me as that is my job, export trade compiance (but in computers/encryption not textiles)

This is certainly an industry that should have infrastructure for higher end development and production, as this the new steel of the 21st century. We need as a country, US, to be able to ultimately take care of ourselves in case of major trade issues or worse wars.

The whole idea of a global economy was to prevent war because a nation, say China for example, was to start a war that they would suffer economically too much to make them want to do that, unfortunately not all societies think the same as we do, and China has the thinking process that since it took thousands of years to get where they're at today having a war with the US would only set them back maybe 20 years at the max, which is nothing compared to thousands of years they already waited!

But the US does need to bring back enough industrial type of jobs back to our shores so our industry infrastructure can be large enough to supply the demands of the population that needs good paying jobs, and to supply the needs of a major war should that ever occur.

I just don't understand that after thousands of years of humanity and war on this earth that humans by now should be able to control their babish attitudes and not want to kill each other, but we are very much a self centered evil race. I can't imagine how far we could be in space exploration if all the money countries have spent on war over the last 50 years was spent instead on space exploration which I believe is what humans are designed to do, explore and to reach out, instead we reach out with weapons and explore ways on how to kill more people with less effort.

[froze]

House has already said that they oppose that plan.

This will be interesting (and messy).

What most Americans don't realize is that goods made and shipped from America to other countries are either heavily tariffed or limited or both, for example in China for every $1 the US bought from China the Chinese government only allows it's citizens to spend no more than 28 cents of American products, in addition to that China manipulates it's currency so that the cost of American goods are raised between 25 to 40%, in addition to all of that China imposes a 30 to 35% tariff.

So when I hear people cry that it isn't fair that their purchases of products might go up 35% I laugh because that's nothing compared to what China does to prevent their people from buying American made products. And besides, we need that income flow to help the country out financially, and since China is America's largest importer this would be a huge help to our economy one way or another.

[drewskey]

Isn't the new project Greg LeMond launched in Arkansas suppose to dramatically bring down the cost of carbon fiber?

LeMond's business is in Oak Ridge, TN. HIA Velo is in Arkansas.

[mcteague]

The carbon tubes on my Seven Cycles 622 SLX (http://www.sevencycles.com/bikes/622-slx.php) were made in Utah (https://www.rockwestcomposites.com/). They were not as clear as to who makes their 5E (http://sevencycles.com/store/en/components/19-5e-carbon-road-fork-700c.html) forks though.



Tim

[KJMUNC]

I can't imagine carbon fiber for bicycles is much more than a blip when it comes to total global demand.

Just Boeing alone cranks out dozens of new commercial jets a month.....takes a lot of 1000gr frames to equal out the carbon used in one 787 (they're making 12/mo right now). Not to mention Airbus and all the other aerospace and defense uses for carbon fiber.

Aerospace and defense and the automotive industry account for roughly half of the global demand and that is forecast to grow by 10%+ CAGR through 2022, so they're going to have plenty to stay busy without affecting prices.

That won't prevent bicycle companies from using that as an excuse if there's so much of a whiff of increased COGS though, regardless of whether that translates to real increases for them or not.

Edit: quick Googling came up with some interesting stats and a pretty decisive quote supported by the data

A single Boeing 787 contains 20 tons of carbon fiber. Annual production consumes ~3,250 tons of carbon fiber. Therefore a single plane is equal to around 13,500 bikes (assuming avg of 1500gr), or ~2M bikes worth of material for their annual production. And that's just one plane from one manufacturer.

And from a Bicycling mag article in 2014: "the total amount of carbon used by all bike makers in a year is less than in three Boeing 787 Dreamliners"
http://www.bicycling.com/bikes-and-gear-features/how-its-made/carbon-fiber-peeling-back-layers

[54ny77]

That's an interesting statistic. Wonder if that's for the entire industry (parts, components & accessories, not just frames).



And from a Bicycling mag article in 2014: "the total amount of carbon used by all bike makers in a year is less than in three Boeing 787 Dreamliners"
http://www.bicycling.com/bikes-and-gear-features/how-its-made/carbon-fiber-peeling-back-layers

[FlashUNC]

That's an interesting statistic. Wonder if that's for the entire industry (parts, components & accessories, not just frames).

There's a reason True Temper stopped doing steel tubing runs for bikes to focus on other industries.

[ultraman6970]

Theres no money in bicycles?

There's a reason True Temper stopped doing steel tubing runs for bikes to focus on other industries.

[froze]

Theres no money in bicycles?

This amazes me too. Cycling industry is leaping forward while the golfing industry is falling off a cliff, not sure why True Temper thinks golfing is going to be their savior.

I had heard months ago that someone was in talks with True Temper to buy their steel tube making equipment, but I couldn't find it on the internet tonight, not sure if that deal fell through or I simply couldn't find it.

[RedRider]

The raw materials, carbon fiber in this case, make up a small percentage of the total cost of goods. Labor and tooling are the biggest.

[torquer]

The whole idea of a global economy was to prevent war because a nation, say China for example, was to start a war that they would suffer economically too much to make them want to do that...
[Thread drift alert]
I wouldn't say that was the idea behind globalization, especially since it mainly followed forced market integration under European colonial expansion (aka "gunboat diplomacy.") But that was certainly an eventual benefit, particularly as the trading terms became more equal.
Anyone else recall when, early during the Bush 2 presidency, the Chinese forced down an American recon plane and held the crew captive? When folks started threatening to boycott Walmart unless the PRC relented, they released both crew and aircraft PDQ.

[GParkes]

The raw materials, carbon fiber in this case, make up a small percentage of the total cost of goods. Labor and tooling are the biggest.

Tooling is a capital expense and depreciated, not booked to COGS. Labor expense is much greater in USA, which will always be a challenge. Many question marks - domestic carbon more expensive?? We'll see. Imported carbon taxed/tariffed?? We'll see. Labor costs - see above. It will be interesting. If we exit TPP, and individual trade deals are brokered with each country, raw fiber from Japan (Toray) may/may not be cheaper. Finished carbon products from China - more likely than not, much more expensive than in the past.

[William]

What we are working against in bringing proaction of goods back on shore. I know first hand that not all factories in China are like this...The work area is claimed to be the size of Monaco:

Nat Geo Special - One of the biggest factories in the world.
https://www.youtube.com/watch?v=e7fPsw5ubI8







William

[froze]

What we are working against in bringing proaction of goods back on shore. I know first hand that not all factories in China are like this...The work area is claimed to be the size of Monaco:

Nat Geo Special - One of the biggest factories in the world.
https://www.youtube.com/watch?v=e7fPsw5ubI8







William

Don't forget, anything news wise, or something like what you show on that video is very closely monitored by the Chinese government, they only show what they want to show us and tell us what they want to tell us.

As far as jobs coming back to the US, it's impossible to bring them all back to the US because we don't have the population to staff all those jobs, so only a select few (probably industries that don't damage the environment or have a very small damage footprint) would return, just enough to get people who are currently unemployed, as well as some that are disabled, and those looking for better jobs, to come back.

China keeps the cost of labor low so factories like the one you mentioned can hire people to work cheaper than the cost of robotics to do the job, but if China goes the way that all countries eventually go, their labor rates will rise, when this happens robotics will eventually take over most of what is currently being done by humans, which means a lot of those robotic factories will pop up in the US since the cost of manufacturing something by robots in China vs here would be about the same, thus better quality control measures would occur if stuff is made in the US.