The price increase cycle in the copper-clad laminate industry is coming, and profitability is expected to gradually improve.

The copper-clad laminate industry is expected to迎来 a round of涨价周期, which may drive profit recovery. Since the beginning of the year, copper prices have risen by more than 20%, and the copper-clad laminate industry has recently started to gradually adjust prices. The increase in upstream material prices, coupled with downstream replenishment demand, is expected to enhance the capacity utilization of copper-clad laminate manufacturers and promote price transmission, thereby improving the scale and profitability of manufacturers.

The copper-clad laminate is the main raw material for printed circuit boards ( PCB ), which has a significant impact on the performance, quality, manufacturing process, cost, and reliability of the PCB. The main materials of copper-clad laminates include copper foil, resin, and fiberglass cloth, all of which have experienced varying degrees of price rise this year. Leading companies in the industry have recently announced price increases.

The copper clad laminate industry is expected to further pass the rise in raw material prices downstream, and profit levels are expected to gradually improve. The main reasons are as follows:

First, the supply pattern of the copper-clad laminate industry is concentrated. Data shows that in 2020, the market share of the top ten manufacturers of copper-clad laminates reached 75%, while the market share of the top ten manufacturers in the PCB industry was only 36%. The high market concentration gives copper-clad laminate manufacturers strong bargaining power over downstream companies, making it easier to pass on the pressure of rising costs.

Secondly, under the expectation of price rises, downstream may extend the stocking cycle. In 2024, PCB manufacturers are seeing a recovery in demand from sectors such as servers, switches, home appliances, and automobiles. Coupled with PCB manufacturers' inventory being at a relatively low level, as well as the expectation of price rises for copper-clad laminates due to rising commodity prices, PCB manufacturers may gradually extend the stocking cycle for copper-clad laminates.

In addition, the prices of upstream materials still have the momentum to rise. Copper prices are currently still in an upward channel, and at the same time, due to factors such as production capacity, materials like fiberglass cloth are also showing a trend of price increase. As the prices of raw materials continue to rise, copper-clad laminate manufacturers are expected to continue adjusting prices, further transmitting cost pressure.

The current capacity utilization rate of major copper-clad laminate manufacturers is gradually increasing, reflecting the recovery of downstream demand and providing support for price increases. After the price increase, it is expected not only to cover the rising raw material costs but also to achieve certain excess profits.

In terms of investment advice, the copper-clad laminate industry is expected to enter a price rise cycle against the backdrop of rising upstream prices and recovering downstream demand. Benefiting from a favorable competitive landscape and extended stocking cycles downstream, the industry's profitability is expected to gradually improve. Investors may pay attention to leading companies in the industry and related A-share listed companies.

Risks to be aware of include downstream PCB demand not meeting expectations, as well as factors such as intensified industry competition.