Sinopec Shanghai Petrochemical Company Limited (SPC) has announced a significant investment of approximately RMB 3.196 billion (approximately $450 million) to expand its large-tow carbon fiber production capacity. It will target the wind turbine blade sector, while also addressing applications in rail transit, civil reinforcement, and the burgeoning low-altitude aviation industry.

The project will be executed in two phases. The precursor production, a crucial component in carbon fiber manufacturing, will be expanded at SPC's existing facility in Jinshan District, Shanghai. This expansion will add 60,000 tons per year of large-tow precursor production capacity.

Second phase - the carbon fiber production will be in the Sulige Economic Development Zone in Ordos City, Inner Mongolia. This new facility will boast a capacity of 30,000 tons per year of large-tow carbon fiber. SPC plans to establish a new wholly-owned subsidiary, Inner Mongolia New Jinshan Carbon Fiber Co., Ltd., with a registered capital of RMB 20 million, to manage the Inner Mongolia operations.

This integrated approach, with precursor production in Shanghai and carbon fiber manufacturing in Inner Mongolia, is a key element of SPC's strategy. Locating the precursor production in Shanghai allows SPC to leverage its existing infrastructure, technological expertise, and human resources. Furthermore, it secures access to a stable supply of acrylonitrile, a key raw material, from nearby East China production centers. The downstream carbon fiber facility in Inner Mongolia benefits from the region's abundant energy resources, supportive local policies, comprehensive industrial infrastructure, and competitive energy and labor costs. The precursor produced in Shanghai will be directly supplied to the Inner Mongolia facility, ensuring a consistent and controlled supply chain.

SPC's investment aligns with national and local industrial policies promoting the development of advanced materials. It also supports SPC's broader strategy of transitioning from oil refining to chemicals, then to materials, and finally to high-end products.

SPC has identified the wind turbine blade market as the primary target for its large-tow carbon fiber products but also sees strong potential in rail transit and civil reinforcement. SPC is actively pursuing opportunities in the low-altitude aviation sector, recognizing the growing demand for lightweight, high-performance materials in this emerging industry.

The potential risks in this venture include potential delays due to supplier issues, engineering challenges, force majeure events, and the possibility of difficulties in obtaining necessary administrative approvals. SPC states that it is actively engaging with suppliers, service providers, and government agencies to mitigate these risks and has contingency plans in place should delays or other issues arise. The project is expected to be completed within three years.