Guotai Junan Securities: The bottom of the fiberglass industry is clear, and the "anti-involution" background drives the second and third-tier manufacturers to raise prices

According to the Zhitong Finance APP, Guojin Securities released a research report stating that on September 5th, companies such as Shandong Glass Fiber, Jinniu, and Sanlei issued price adjustment letters for glass fiber, increasing the price of related products such as direct yarn, lighting board yarn, and chopped mat yarn by 5-10% per ton. The observation of this round of price adjustments is that it is concentrated in the mid-to-low-end products of second and third-tier glass fiber manufacturers, with the main reason being a slight pressure on export prosperity since Q2. With the Federal Reserve's interest rate cut, glass fiber has global pricing attributes and is similar to resource products, showing optimism about the volume/price elasticity of glass fiber exports. The industry bottom is clear and ready to take off, with the "anti-involution" driving price adjustments among second and third-tier manufacturers. In terms of downstream demand, we are optimistic about the price elasticity of electronic fabric in Q4 2025, as well as the performance/valuation boost from AI electronic fabric business. Guojin Securities' main viewpoints are as follows: Event: On September 17th, the Federal Reserve lowered the target range for the federal funds rate by 25 basis points to between 4-4.25%. This is the first interest rate cut by the Federal Reserve in 2025, following three rate cuts in 2024. Glass fiber has global pricing attributes and is similar to resource products According to data from the China Glass Fiber Industry Association, the direct export volume of glass fiber and products in 2024 is 2.02 million tons, accounting for 26.7% of the total domestic production of 7.56 million tons. Additionally, some exports related to terminal products such as home appliances and automobiles are difficult to quantify. Based on the domestic production of 7.56 million tons and a global total of 12 million tons, a simple calculation suggests that the overseas exposure of glass fiber may exceed 50% (the calculation method for domestic exposure is [domestic production - exports + imports] / global demand). The glass fiber industry has already experienced domestic substitution and formed a pattern where China is the global supplier. Therefore, both external and internal demand are equally important. According to data from Zhuochuang Information, from January to July 2025, China's glass fiber exports were 1.223 million tons, down 5.5% year-on-year, indicating pressure on export prosperity, mainly due to tariff expectations between China and the U.S. since April, affecting the downstream supply chain's inventory. Against the backdrop of U.S. interest rate cuts, both the volume and price of exports have elasticity, for example, ① the prosperity of the U.S. real estate market drives inventory reduction, ② demand prosperity in emerging market countries is expected to exceed expectations, etc. The industry bottom is clear and ready to take off, with "anti-involution" driving price adjustments among second and third-tier manufacturers On September 5th, companies such as Shandong Glass Fiber, Jinniu, and Sanlei issued price adjustment letters for glass fiber, increasing the price of related products such as direct yarn, lighting board yarn, and chopped mat yarn by 5-10% per ton. Guojin Securities pointed out that the observation of this round of price adjustments is concentrated in the mid-to-low-end products of second and third-tier glass fiber manufacturers, with the main reason being a slight pressure on export prosperity since Q2. The prosperity direction of the glass fiber industry is concentrated in wind power (from January to July 2025, China's newly installed wind power capacity was 54.2 GW, up 86% year-on-year), and the concentration of domestic wind power yarn is high, with CR3 (Jushi, Taishan Glass Fiber, International Composites) around 90%. Therefore, there is a significant gap in operational quality between first-tier glass fiber manufacturers and second and third-tier manufacturers. This can be evidenced by inventory data, for example, Jushi's inventory at the end of Q2 2025 was 3.8 billion yuan, down 3% quarter-on-quarter, with a production and sales rate significantly better than the industry average (the industry inventory in Q2 2025 was 888,000 tons, up 11% quarter-on-quarter). The background of this price adjustment is the industry's spontaneous "anti-involution." Previously, first-tier manufacturers supported prices, but second and third-tier manufacturers faced price competition in low-end products. Second and third-tier manufacturers are adjusting prices to restore their price differences with first-tier manufacturers Therefore, this round of price recovery represents a clear industry bottom. The focus will be on observing the pricing strategies of first-tier manufacturers and changes in industry inventory. This round of the fiberglass cycle is poised for takeoff. In terms of downstream demand, we are optimistic about the price elasticity of electronic fabrics in Q4 2025, as well as the impact of AI electronic fabric business on performance/valuation. In February 2025, mainstream companies in electronic fabrics such as Jushi and Taibo issued price adjustment notices, raising the price of 7628 by 0.3 yuan/meter, which has been relatively fully implemented. Guojin Securities continues to be optimistic about the price elasticity of electronic fabrics, mainly due to: ① The supply of electronic fabrics has been relatively low in the past 2-3 years, and the industry landscape is better than that of yarn. In 2023, there were no new additions or shutdowns in the industry, and in 2024, there will be no new additions but some cold repairs/restoration of production capacity, resulting in a net increase of 30,000 tons of capacity in the industry. The total production of fiberglass electronic yarn in China in 2023 was 809,000 tons, with marginal increments accounting for only 3.7%, leading to a relatively small overall impact. ② The downstream CCL/PCB industry is experiencing a high level of prosperity, with new demand driven by industries such as AI. ③ Electronic fabrics follow the copper cycle, mainly because the downstream of electronic fabrics is CCL, and the main raw materials for CCL are copper foil, resin, and electronic fabrics. Due to the rise in copper prices, CCL manufacturers are simultaneously increasing their upstream raw material inventory, driving the replenishment of electronic fabrics. Additionally, the bargaining space for copper prices is small; during each round of copper price increases, CCL companies have strong pricing demands to offset costs, which simultaneously opens up the price increase space for electronic fabrics. Furthermore, in this round of the fiberglass cycle, we will continue to focus on the impact of AI electronic fabric business on the performance/valuation of leading companies. The high prosperity of AI and diverse scenarios are driving the iteration of AI electronic fabric varieties, with leading companies entering high-growth large markets and exploring important growth curves. For detailed content, please refer to our August commentary "China Jushi vs. Hengli Hydraulic, AI Electronic Fabric vs. Robotics." Risk Warning Risks of macroeconomic fluctuations; the pace of industry capacity release may fall short of expectations; deterioration of supply and demand in the AI electronic fabric business may exceed expectations; significant fluctuations in fuel prices