It always helps to look at past responses as a way to understand how industries respond to change. You also have to be on the lookout for fundamentals that alter the industry key characteristics. In the case of carbon fibers there are three examples of industry change. First, the defense buildup under President Reagan in the 1980's caused a significant expansion in demand. The volumes of fiber needed for the SICBM, stealth bomber, stealth fighter(s), etc. were in excess of what the industry could produce. There were discussions about where to produce the precursor fibers. The industry responded with few firm purchase guarantees in hand. Hundreds of millions of dollars were invested in new capacity by 1990. However with the fall of the Berlin Wall and the collapse of the Soviet threat, the defense programs were slowed or dropped. Carbon fiber demand dropped sharply and by 1992 producers were shutting down facilities or quitting the industry (Asahi Chemical, BASF) due to the lack of profitability. Prices for fiber dropped sharply. The levy prices did stimulate growth in sporting goods and industrial end-uses. But the pricing was too low to justify new carbon fiber capacity construction.
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