Fiberglass | Why We Are Bullish on the Fiberglass Industry Right Now

Since late March 2024, the fiberglass industry has entered an upcycle driven by price restorations implemented by leading producers. However, both profitability and valuations of companies remain near cyclical lows. Looking ahead to 2025, we believe the industry will maintain a dynamic supply-demand balance, with high-end segments—such as wind turbine yarn and thermoplastic short-cut fibers—offering strong demand visibility, elasticity, and upside pricing potential. In 2026, new capacity additions are expected to decline significantly, raising the likelihood of temporary supply tightness and further room for price increases. Overall, the industry’s upcycle is poised to continue, creating substantial upside potential for both earnings recovery and valuation re-rating among major fiberglass producers. We view the current juncture as a strategic opportunity for allocation and maintain an “Outperform” rating.

The Industry Is Currently in an Upward Phase of the Cycle

Historically, previous fiberglass upcycles lasted approximately 18 months. The current cycle began in late March 2024, when major producers restored prices amid rising costs and improving supply-demand fundamentals. Downstream acceptance of these price adjustments has been favorable, gradually restoring industry sentiment. We expect long-term contract repricing for premium products—such as wind turbine yarn and thermoplastic short-cut fibers—to be finalized in early 2025.

Despite weak domestic real estate demand in 2024, fiberglass demand has shown resilience due to its substitution advantages over alternative materials. We estimate that apparent consumption of E-glass roving grew by more than 10% year-to-date in the first three quarters of 2024, with wind energy demand accelerating notably in the second half. Full-year demand growth for roving is projected to exceed 6%.

Looking forward, downstream demand in 2025 is expected to improve further. Under our base-case scenario, domestic roving demand could grow by around 6%. Although net new capacity is set to increase slightly, producers are likely to offset this through cold repairs of aging lines, enabling reasonable supply management and maintaining a balanced market throughout 2025.

In 2026, demand is expected to continue growing, while announced new capacity additions may shrink substantially. Coupled with high cold-repair needs for older production lines, the risk of temporary supply shortages is elevated—creating significant upside potential for roving prices and supporting a sustained upcycle.

Profitability Remains at Cyclical Lows

Although recent price restorations have lifted average roving prices, improvements have been product- and customer-specific, resulting in structural disparities. Since Q2 2024, quarterly net profits of leading producers have shown clear improvement. However, due to the lag in price implementation across different product categories and client contracts, Q3 2024 financials likely reflect a more accurate picture of post-repricing profitability.

Our analysis indicates that per-ton profitability for top-tier players in Q3 remains near historical trough levels, and many industry participants are still operating at a loss. Going forward, if downstream demand continues to strengthen, producers retain strong incentives to further raise prices to restore margins—making earnings recovery highly anticipated.

Valuations Are at Historical Lows

From a valuation perspective, after two years of downcycle pressure, the price-to-book (PB) ratios of listed major fiberglass companies have fallen to historically low levels. As the current upcycle progresses, we expect robust earnings recovery, offering significant room for valuation expansion.

Notably, amid depressed valuations, Changhai Shares and Shandong Fiberglass have already initiated share buyback programs in 2024. On November 22, China Jushi announced that its second-largest shareholder, Zhen Shi Group, plans to acquire RMB 5–10 billion worth of company shares using a combination of special-purpose loans and internal funds. These buybacks and增持 (share purchases) strongly signal confidence in both the company and the broader industry outlook, potentially catalyzing a positive re-rating of sector valuations.

Key Risks

• Significant macroeconomic volatility
• Rising costs of raw materials and energy
• Irrational overcapacity expansion
• Weakening overseas demand
• Domestic downstream demand (e.g., wind power, real estate) falling short of expectations

Investment Strategy

We anticipate sustained improvement in fiberglass downstream demand over the next two years. In 2025, the industry is likely to maintain a healthy supply-demand balance, with high-end segments like wind turbine yarn and thermoplastic short-cut fibers offering both certainty and elasticity in demand growth. In 2026, a sharp reduction in new capacity could lead to periodic supply tightness, supporting further price upside and prolonging the upcycle.

Currently, major fiberglass producers’ earnings remain near cyclical bottoms, and their valuations are at historic lows. As the upcycle unfolds, both earnings and valuations possess significant room for improvement.

In summary, we believe the fiberglass industry is at a pivotal moment of strategic opportunity for investors.