Kolon's early bets on para-aramid recovery pays off amid AI boom

The artificial intelligence boom is spilling over into the industrial fiber market, driving demand for para-aramid, a so-called super fiber essential to fiber optic cables powering AI and next-generation communications.

With the US and China ramping up AI and 5G infrastructure, the para-aramid market is recovering from a prolonged downturn. Kolon Industries Inc., the world’s third-largest para-aramid supplier, stands out as a clear winner.

With an estimated 11% share of the global para-aramid market, the South Korean company's early bet on the sector recovery appears to be paying off.

Industry watchers say the market is in the early stages of a super-cycle, with supply expected to remain tight.

In 2024, Kolon completed a 300 billion won ($221 million) facility expansion, doubling its annual production capacity to 15,310 tons from 7,500 tons.

But for others, the turnaround has arrived too soon.

Its local rival Taekwang Industrial Co. postponed an expansion from 1,500 tons to 5,000 tons planned for late 2024 to the end of 2025 due to concerns over weak demand and rising raw material prices.

Japan’s Teijin Ltd., which along with DuPont controls 60% of the world’s para-aramid market, shuttered its Dutch para-aramid facility in January amid a bearish segment outlook.

“The companies that moved early like Kolon Industries are clearly ahead of the curve,” said one industry executive. “If the market enters a full-blown super-cycle, companies are very likely to play a waiting game on expansion, wary of moving ahead of rivals.”

HS Hyosung Advanced Materials, another Korean para-aramid supplier with a 3,700- ton capacity, has yet to plan any facility expansion.

Para-aramid is a high-strength, heat-resistant synthetic fiber with five times the tensile strength of steel but only one-fifth the weight.

Widely used in fiber optic cables, the material supports the transmission of massive datasets and real-time processing at data centers.

Kolon Industries’ para-aramid factory is running at 80%, up from below 50% in the second half of 2024, according to industry sources on Wednesday.

The factory is expected to reach full capacity by the fourth quarter of this year, with prices likely to extend their upward streak.

Prices of para-aramid have risen to $15,400 per ton in May, versus 14,000 in January amid tightening supply.

Exports of para-aramid have surged 31% in the first five months of this year from a year before, driven by China's push to expand 5G networks nationwide by 2030. 

5G, or fifth-generation mobile network, is the most advanced wireless standard to date, offering faster speeds and greater network capacity than previous generations.

A chemical industry official forecast Kolon seeing sharp gains in operating profit and revenue this year.

Write to Sang-Hoon Sung at uphoon@hankyung.com
 

Yeonhee Kim edited this article.