Recently, the British Commodity Research Institute (CRU), an independent research organization in the optical fiber and cable industry, released the recent trend and future outlook of bare optical fiber prices.
CRU begins by reviewing historical trends tracking bare fiber prices over the past 20+ years. As shown in the figure below, since 2002, the price of bare optical fiber has dropped significantly from US$28/core-km to the current US$4-6/core-km.
CRU noted that the decline in prices can largely be attributed to improved technology and the development of economies of scale, as both preform and fiber plants have experienced rapid expansion. According to the data, in 2006, there were only 5 manufacturers with a production capacity of more than 10 million core kilometers of preforms. By 2014, this number had increased to 16.
CRU said that as efficiency and output continued to soar and raw material prices fell, production costs dropped significantly, with fiber prices not far behind.
However, this situation began to change in 2016/2017, when China rapidly promoted the construction of FTTH and 4G networks, which pushed the global market into a situation of short supply for a period of time. Subsequently, G652.D bare fiber prices peaked at around $12/core-km in March 2018.
In response to this demand, starting in 2019, a large number of new production capacity and new factories began to be put into operation. However, as China’s FTTH construction is basically completed and 4G construction is coming to an end, the demand in China’s domestic market has declined sharply. CRU pointed out that during the period of 2019-2021, the market fell into the dilemma of overcapacity, high inventory and weak demand, and the price of optical fiber plummeted accordingly.
CRU said the situation was initially evident in China and then spread to Europe as Chinese manufacturers ramped up exports. This has put heavy pressure on the international market, resulting in historically low bare fiber prices in the Chinese and European markets in the March and May 2021 assessments.
The new crown epidemic has promoted the migration of production and life to online, global demand and market sentiment have begun to improve, and the price of G652.D bare optical fiber has begun to rebound strongly. Bare fiber prices have seen strong gains since March 2021.
According to CRU’s assessment in July this year, the price of G652.D bare fiber in China and Europe has reached US$4.50 and US$6.30 per core kilometer, respectively, compared with the record low in the first quarter of 2021, an increase of 67% and 70% respectively. %, in September, the spot price of G652.D bare optical fiber has started to show a downward trend.
In fact, domestic spot prices in China have stopped growing, while spot prices in India have retreated by Rs 5 per core-km, CRU noted. Taking into account exchange rate fluctuations, once converted into U.S. dollars, the two price series in China and India will subtract another $0.10 per core kilometer, resulting in the first decline in the CRU fiber optic price index (CRUofpi) since March 2021 — Although the decline was only 0.1%. From initial assessments, the bare fiber price rally that has dominated the market for the past 18 months appears to be losing steam.
The trend in the European market is slightly different. Compared with July this year, the spot price of G652.D bare optical fiber in Europe has actually increased by US$0.20 per core kilometer. However, considering exchange rate fluctuations, the price calculated in euros remains unchanged. Higher energy prices and ongoing fiber shortages in Q4 2022 could support European prices to remain high for longer, although weaker demand will act as a drag.
Overall, CRU expects that as the end of the year approaches, European prices will stabilize; Indian optical fiber prices have room to fall further; while in China, the spot market is waiting for the news of China Mobile’s bidding, and preliminary signs indicate that the bidding price may increase. It is 10% higher than the last centralized purchase, which means that the price of converted bare fiber is about 4.30-4.40 USD/core-km, which is comparable to the current spot price level.
Facing 2023, CRU expects that global bare fiber prices will begin to fall. At the same time, with the easing of raw material supply constraints, the cost pressure of optical fiber production will begin to ease in the second half of the year and continue into next year. Other input costs such as energy should also normalize from 2023 onwards, although it may take longer in Europe. Corning’s new fiber optic plant in Poland will bring new capacity and is expected to further dampen the underlying price environment in the European market next year and beyond.