Last night’s bad economic news out of Japan means this one goes on our watch list. As a Japanese company, Toray Industries (TRYIY.PK), moves with Japan’s stock market. But much of its business and most of its growth are from outside Japan. (For more on the bad economic news out of Japan see my post https://jubakpicks.com/2010/07/30/for-surprises-this-a-m-forget-us-gdp-and-look-to-japan/ )
Toray Industries was founded in 1926 as Japan’s first maker of synthetic textiles. Today the company is still weaving and knitting exotic textiles—including for two of the global growth stories of the next decade,
First, reverse osmosis membranes for water desalination. Global installed desalination capacity will grow at a compound annual growth rate of better than 9%, according to projections from Pike Research. Total desalination sales will approach $90 billion n 2010 through 2016, Pike Research forecasts. Although the desalination industry as a whole remains strikingly unconcentrated with the top five suppliers together controlling only 25% of the market, the market for reverse osmosis membranes is strikingly concentrated. The companies, Dow Chemical (DOW), Nitto Denko (NDEKY.PK), and Toray Industries control 65% of the market.
Second, carbon fiber in cars. The use of carbon fiber, stronger and 50% lighter than steel, in aircraft has been growing as airplane manufacturers such as Boeing (BA) strive to increase the fuel efficiency of their planes by making them lighter. Toray won a 15-year contract to supply Airbus with carbon fiber in May.
The big prize though is carbon fiber in cars—and there the rate of adoption has been slower than expected. That looks like it’s about to change, though, as car makers face intensifying pressure to make their products more fuel efficient without sacrificing safety.
But maybe the biggest market is the one resulting from the need of manufacturers of hybrid and electric car to offset the added weight of batteries.
 BMW (Bayerische Motoren Werke), for example, will use a carbon fiber safety cell to protect passengers in its new electric cars. That will offset as much as 772 pounds of weight added by the car’s battery and other electronic components. SGL Carbon (SGL.F) will supply the carbon fiber from a new factory the company is building near Seattle with BMW.
BMW competitor Daimler plans to introduce carbon fiber in its Mercedes-Benz line by 2013. The company signed a development agreement with Toray Industries in April.
Toray’s ADRs (American Depositary Receipts) trade at nearer the low end of the stock’s 52-week range from $48 to $61. The ADR plunged from near $60 to near $50 in May on news that the company would sell 230 million shares to raise $1.2 billion to repay debt and for capital investments.
Full disclosure: I don’t own shares of Toray Industries in my personal or professional accounts.
I like Neomaterials better than Lynas. A canadian company that trades in the pink sheets in the US. They’ve done a great job of commercializing the rare earths. Have a MOU with the only US source. The presentation is on this link.
http://www.neomaterials.com/
bracr2000,
That is why I own Lynas Corp. (LYSDY).
Jim and posters – what do you think of the continuing statements about China buying up producers and supplies of rare earth metals (and copper and other metals too)? A typical perspective is provided here: http://www.raremetalblog.com/2010/07/media–2.html
It would help explain some of China’s moves in the last couple of years but it also seems to be something the world would see through soon and not tolerate too well. How ’bout that scarcity feeling?
Shameus,
Zolt has been the only carbon fiber company that I knew about prior to this article. My old stock broker as been talking about zoltek for years. I guess the company founder is some type of genius or something. I was actually thinking about picking up a few share of old zolt, but wouldn’t mind hearing some comparisons between Toray and Zolt.
Does anyone think of Zoltek (ZOLT) for this fiber diet? They supply carbon fiber to Vestas and Gamesa for larger wind blades, and have opened up some kind of R&D automotive unit too. They seem to be on one side or the other of profitability, and took a big revenue hit in the recession. But they too are anticipating the automotive contracts (had worked with BMW, so far as I know, before losing out to SGL). But it often seems like this is a company that people have been saying is going to be big, but it hasn’t quite happened. I own zolt on its prospects and the improved selling of Vestas in the US (and elsewhere). WOuld it be wise to jump ship to Toray?
astonished
that would be the second line after “put…fiber in your portfolio”. No nitpicking on the weekend.
have worked with this stuff with models. dulls tools quickly, drills kind of funky, bending and twisting limited…apparently needs to be shaped during processing…BMW has the idea…be close to supplier. If we are talking frame or shell it would be in house carbon fiber production.. It will take 10 yrs for UAW to accept retooling so look for offshore manfs with no Obama strings to take the lead in this fascinating new product. Korea, India, China.
Charltonlegal,
You could use thermoplastics instead of thermosetting resins (resins that cure) to make the parts. With sufficient heat, thermoplastic impregnated carbon fabric can be stamped. There are automated advances too where machines are used to lay up parts.
Typically though, composites are too expense for mass production. Only high end cars that only a few will be made offset the costs of making the massive metal stamping tools.
If the weight must come out, then carbon composites just might buy their way onto these vehicles.
SOJ
@ ineed
Read 1st sentence again: “goes on our watch list”
interesting analysis re: the use of carbon fiber in cars and planes but the substance has been used in specialty cars for some time. What has inhibited its use in commercially produced autos has been the difficulty in developing the technology that allows carbon fiber to be shaped in a mass production assembly line. Its current use requires hand shaping. Is there any sense from what you seen or read that the mass production hurdles have been overcome?
Jim,
I`m sorry but is this in a BUY indicator for Toray industries i didnt understand.