Market Outlook: Carbon fiber in sporting goods
For many people, sports are an expression of a youthful passion for organized play that continues to keep them playful as adults. But those playful passions are equipped and nurtured by serious businesses, many of them quite large and, for many years, large users of advanced composites — specifically those with carbon fiber reinforcement. In this, the first of a series of HPC market reports, technology advancements, product applications, end-user trends and other factors at work in the sporting goods sector will be examined to draw a better picture of supply and demand and identify application and manufacturing opportunities for carbon composites.
High-flying fiber demand
There has been considerable excitement surrounding advanced composites in the general media for the past few years as news outlets record the ongoing sagas of the Airbus A380 and Boeing 787 programs. But the acceleration of lightweight, fuel-saving technologies and the drive to go “green” has produced a tremendous upswing in demand for carbon fiber composites not only in aircraft but industrial applications as well. While the global carbon fiber supply is expanding rapidly to stay ahead of this “hockey stick” demand curve, the recent tight supply and resulting run-up in fiber prices has created some difficulties for sporting goods manufacturers. In some applications, potential delays in scheduled deliveries and the general decline of participation in most outdoor sports (as a percentage of the whole) have resulted in a 10 percent reduction in production of carbon fiber-reinforced polymer (CFRP) sports equipment during the past two years. The tight supply is one of a number of factors that have combined to force an overall downturn in the sporting goods market since 2004. But the sector’s performance should improve as this decade comes to a close.
According to the Sporting Goods Manufacturers Assn.’s (Washington, D.C.) most recent data on the U.S. market, sporting goods equipment sales in 2006 totaled about $25 billion (USD) — not including shoes and other apparel, motorized vehicles and weightlifting equipment. While these numbers are a small improvement over 2005, they do not provide an accurate picture of how this market is evolving at the manufacturing level. One of the best ways to assess the health of the sporting goods industry is to look at production volumes (see Fig. 1).
In terms of composite materials consumption, some of the largest volume users of carbon fiber composites are the manufacturers of golf shafts, racquets, skis, snowboards, hockey sticks, fishing rods and bicycles. In all, the companies that produce advanced composite products in these categories have provided more than 49 million lb (22,220 metric tonnes) of goods to the world market during 2006 and 2007. The strong global economy indicates that demand should increase slightly, driving annual production growth industry-wide at about 1.5 percent to 2.0 percent per year through the end of this decade. Looking out a bit further, many companies expect to see an increase in growth due to the “baby boomer effect” as more people enter retirement and, presumably, buy more golf clubs, tennis racquets and/or bicycles.
In these seven product categories, carbon fiber composites account for almost 51 percent of the total composites sporting goods manufactured. To produce all of this equipment, manufacturers of composite products consumed an estimated 14.8 million lb (about 6,710 metric tonnes) of carbon fiber in 2006. Accordingly, sporting goods manufacturing accounted for about 24 percent of global carbon fiber consumption in 2006. To put this in some historical context, in 2004, sporting goods accounted for approximately 31 percent of total carbon fiber output — down from more than 50 percent during the mid-1990s.
The total tonnage of carbon fiber and CFRP required by aerospace markets is expected to grow 80 percent over the next five years. At the same time, demand for CFRP in industrial markets is expected to increase by 70 percent. In sporting goods, by comparison, CFRP material consumption will grow at a rate of 21 percent in the global composites industry. Accordingly, sporting goods manufacturing is expected to make up 22 percent of total carbon fiber shipments in 2008 and only 15 percent by 2012 (see Fig. 2).
If the baby boomers and the expanding consumer markets across Asia are cited as reasons for future industry growth, why is it that growth in sporting goods is so anemic? An examination of some dynamics in each of these sports sheds light on what can be expected and why sporting goods and recreational markets should not be overlooked by the composites industry.
The rise of the composite golf shaft during the 1980s and 1990s powered a huge increase in the use of CFRP. “Graphite” shafts have, for a long time, dominated the market for drivers. Further, in recent years more irons have been equipped with composite shafts. However, annual production peaked for all CFRP shafts in 2005 due to rising material costs and limited availability of small-tow carbon fiber (i.e., carbon fiber used in commercial aircraft, for which production rates were escalating). During that year, approximately 44 million composite shafts were produced (including those for woods/drivers, hybrids and irons) — about 40 percent of the 105 million golf shafts produced from all materials — compared to about 24 million units in 2002. Output since 2005 has scaled back by more than 10 percent: Estimates of 2007 year-end results indicate the market delivered about 35.2 million shafts — representing about 5.7 million lb (2,585 metric tonnes) of carbon fiber.
There are a few dozen companies worldwide that produce composite golf shafts, but slightly more than half of the total market share is commanded by five companies: Aldila Inc. (Poway, Calif.), United Sports Technologies (Ft. Worth, Texas), Graphite Design International (San Diego, Calif.), True Temper (Memphis, Tenn.) and Fujikura Composites (Vista, Calif.). Although these giants are headquartered in the U.S., roughly 63 percent of all shaft production now occurs in China. Facilities in Japan produce the second highest total — a little less than 20 percent — followed by Bangladesh at 8 percent. North America (U.S. and Mexico combined) accounts for only 11 percent.
The number of golfers in the primary markets — North America and Europe — has remained flat or fallen slightly since 2000, and sales figures for many of the golf companies and their suppliers reflect this. Nevertheless, there is cause for optimism. While golf appears to be a saturated market in the Western world, China’s growing consumer class is taking to the sport in a big way. If participation continues to climb at current rates, there soon could be millions more potential golfers visiting pro shops. Other factors also are at play: The golf business is not only notoriously seasonal but also cyclical, conforming to a regular up/down pattern, year by year. Although shaft sales and deliveries, overall, have been down over the past 18 months, historic patterns indicate that the fortunes of shaft manufacturers should soon take an upward turn.
Further bolstering long-term potential growth, especially with the rising number of comfortably retired U.S. seniors, is a recent change in U.S. Golf Assn. (Far Hills, N.J.) rules, which now permit “quick connect” golf heads. While the extent to which the rule change will be exploited by golf club OEMs is not fully known, conceptually, the rule change allows a golfer to purchase multiple, interchangeable shafts for a single club, enabling an easy, on-course change to a shaft design that offers a particular ball trajectory or other desirable characteristic. Indeed, most OEMs are developing new products to exploit the rule change, but acceptance of the quick-connect concept in the custom club niche is uncertain, and any volume gains are likely to be gradual.
Tennis, racquetball, squash and badminton racquets, collectively, make up the second largest sporting category for CFRP consumption. Like some outdoor activities over the past two decades, racquet sports have suffered a relatively steady decline in participation rates and equipment sales. During 2006, racquet manufacturers used about 3.9 million lb (1,770 metric tonnes) of composites to produce an estimated 8.4 million units — 71 percent of the 11.8 million total. The good news is that declines in the number of players and racquet sales have hit bottom and are expected to show some improvement over the remainder of this decade.
According to the Tennis Industry Assn. (TIA, Hilton Head Island, S.C.), the number of people in the U.S. who played tennis over the past five years has actually gone up about 10 percent. Predictably, equipment sales to this sector are on the rise — although they have lagged behind participation rates. Badminton, particularly popular in Asia, is the world’s fastest growing racquet sport, despite losing some following in the U.S. While the near-term outlook for tennis and badminton racquets is mildly upbeat, participation in racquetball (down almost 10 percent, year on year, in terms of equipment sales) and squash continues to slide. In fact, current racquetball equipment sales are only slightly better than half that posted in 2001 (see Fig. 3).
Tennis racquets make up 81 percent of the category’s total unit deliveries and almost 93 percent of its total composites demand. Increasing popularity and media coverage of tennis in North America has helped drive demand for racquets in the U.S. from 3.6 million units in 2004 to roughly 4.1 million units in 2006. Estimates put the final 2007 tally at almost 4.2 million units. The U.S. market now represents an estimated 43 percent of the global market as the number of participants has returned to levels last reported in the early 1990s. One of the keys to this resurgence has been the successful promotion of the sport among minorities, who account for one-third of all new players.
Globally there are at least 40 racquet manufacturers worldwide, of which 20 manufacture tennis racquets. More than half of these manufacturers produce and market equipment and apparel specific to multiple racquet sports. Companies such as Wilson Sporting Goods Co. (Chicago, Ill.), Völkl (Straubing, Germany), Head/Penn Racquet Sports (Kennelbach, Austria) and Prokennex (Carlsbad, Calif.) produce racquets for all four sports and dominate market share.
Wilson, part of the Amer Sports (Helsinki, Finland) brand, is the undisputed brand leader, holding a 36 percent global market share. During 2006, Wilson produced more than 3.4 million racquets worldwide, representing $151 million in sales. Following Wilson is Head, which produced about 2.4 million racquets, valued at roughly $110 million, giving the company a 25 percent share in the global market. Rounding out the top five tennis companies are Prince Sports Group (Cumbria, U.K.), Prokennex, and Dunlop Sports Group (Surrey, U.K.). Combined, the five companies generate about 85 percent of total world output. Wilson and Head, by themselves, account for 61 percent of the total.
Although production numbers for tennis racquets are creeping upward, competition is driving costs down. As a result, nearly all tennis racquets (exceptions are the few smaller specialty brands) now are manufactured in China. This trend is well established. The last major holdout, Head, closed its production facilities in Kennelbach and Ceské Budejovice, Czech Republic in late 2005 in favor of low-cost Chinese labor.
Skis and snowboards
An unseasonably warm winter and spring at the European resorts last year have driven expectations for 2006-2007 winter sports down by as much as 20 percent. Ski sales for the season that ended in 2006 are estimated at 4.7 million pairs, compared to 4.2 million pairs during the 2004-2005 season. At wholesale prices, this is valued at $724 million (about €550 million), or about $1.97 billion (about €1.38 billion) at retail. The market for alpine (downhill) skis is about 6.5 times larger than that for Nordic (cross-country) models.
During the 2005-2006 season, the winter sports industry also delivered approximately 1.36 million snowboards valued at $525 million (about €359 million). This volume is about 1 percent ahead of 2004-2005 unit volume figures. Major ski manufacturers are expecting 2006-2007 sales volumes to drop between 10 and 20 percent compared to the past season. Accordingly, unit volumes are expected to total about 4 million. Snowboard volumes also are expected to drop to about 1.25 million units. Under pressure to maintain volume and/or acquire market share, independent snowboard fabricators will continue to dwindle in number.
Because demand for skis and snowboards is heavily dependent on favorable weather, it is hard to mark with certainty the future buying trends. If global warming predictions prove accurate, participation and sales will continue to drop. Despite these negative long-term indicators, the Beijing-based China Skiing Assn. reports that the number of Chinese who went skiing last year increased to 3 million from 300,000 in 2000. These figures give grounds for hope, although only 10,000 pairs of new skis reportedly were sold in China during the 2005-2006 skiing season (to date, China’s skiers rely heavily on rentals and used equipment).
Market conditions have favored consolidation. Eighteen of the top 26 ski/snowboard brands are owned by four “multibrand” companies. Amer Sports Group purchased the high-end Salomon brand in 2005, which joined Amer’s industry-leading Atomic brand. Not long afterward, apparel and surfboard manufacturer Quicksilver (Huntington Beach, Calif.) purchased Rossignol. The Tecnica Group recently acquired the Blizzard brand. Not surprisingly, Amer Sports, K2 Inc. (Seattle, Wash.), Rossignol, and Tecnica Group together account for slightly less than 75 percent of unit volume and approximately 82 percent of sales.
Large, discount retailers, such as Wal-Mart (Bentonville, Ark.) and The Sports Authority (Englewood, Colo.) now account for about 20 percent of total sales in the U.S., according to the McLean, Va.-based SnowSports Industries America (SIA) with as much as 15 percent of equipment sales now occurring online. As sales of major brands through low-margin retail outlets grow, and as competition between manufacturers heats up in an otherwise stagnant market, consolidation and relocation of manufacturing operations to low-cost labor countries will continue and, notably, innovation will increasingly become the province of the remaining eight independent brands.
Amer Sports, through its two main ski and snowboard brands, holds the leading market position. In 2006, Amer’s ski and snowboard sales totaled approximately $661 million (€502 million) — accounting for 30 percent of unit deliveries. The Atomic brand, by itself, produced a reported 820,000 pairs of skis — contributing about $260 million to corporate revenues. Atomic also supplies about 3 percent of all snowboards, or about 40,000 units. The Salomon acquisition made Amer the industry unit and dollar sales leader. More importantly, the two previously competing brands are being “synergistically” woven together to take advantage of joint R&D, manufacturing and logistics. By the end of 2008, codevelopment and coproduction of the lines is expected to yield $52.6 million (€40 million) in savings — improving the company’s competitive advantage in a slow market. Reportedly, nearly all of the company’s “bread-and-butter” products are produced in China.
Based on the anticipated outcome for 2007-2008, roughly 4 million pairs of skis and about 1.3 million snowboards will be produced globally. This will result in the production of nearly 13.8 million lb (6,260 metric tonnes) of composite sports equipment (fiber, resin and core). A considerable portion of this volume will consist of a variety of thermoplastics in combination with traditional glass-reinforced composite laminates. Among these materials, polypropylene is the most common, accounting currently for almost 40 percent of total resin volume. Core materials, primarily wood but limited quantities of honeycomb and other core materials as well, represent about half of this total volume. Carbon fiber represents a fairly small portion of total materials consumption. For 2007, the volume of carbon fiber used in the ski/snowboard market has been estimated at approximately 338,000 lb (153 metric tonnes).
Carbon losing its edge?
While this article is not a comprehensive survey of the composite sporting goods market, data from other segments indicate that most major and many minor sports (in terms of product volumes) have been exploiting the use of CFRP for almost 20 years — during which time CFRP has steadily displaced traditional materials. But the pace of advancement, in percentage of product and performance gains, has slowed. Without significant innovation in reinforcement materials, resins and/or manufacturing techniques, only incremental improvement is likely in the foreseeable future.
The impact these trends will have on the volume of carbon fiber needed to manufacture goods in the markets is the subject of perennially great interest, not only because carbon fiber is the preferred reinforcement, but also because it accounts for a large portion of fabrication cost. Based on a conservative analysis of current product volumes, mixes and construction methods, and seen in light of the economic forces discussed here, demand for carbon fiber in sporting goods is expected to total nearly 14.8 million lb (6,700 metric tonnes), roughly 20 percent of global demand during 2008. Annual growth in volume, even without significant innovation, is expected to average 4.3 percent over the next five years, indicating that production volumes will likely surpass record industry levels in 2009 or 2010.
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