Hemp Fiber Market Set for Growth, but End Markets Remain Uncertain
New Frontier Data projects the U.S. hemp fiber market to grow at a compound annual growth rate (CAGR) of 10.5% over the next five years, to reach $77.7 million USD by 2025. Despite such bullishness, the segment’s end markets remain uncertain, as several different end applications strive for market acceptance.
As described in an excerpt from the newly released U.S. Hemp Market Landscape: Cannabinoids, Grain & Fiber:
“The European hemp fiber industry has been growing uninterrupted for more than 20 years, and is much further developed than its North American counterparts. In the mid-1990s, hemp fiber – the popularity of which had been waning in Europe – underwent a revitalization. Large, vertically integrated processors such as HempFlax and DunAgro emerged, finding various niches for hemp fiber in industries such as automotive components, insulation, and industrial textiles. Investment in research & development (R&D) and the modernization of farming methods completely changed the dynamics within Europe’s hemp fiber market. What had once been characterized by small, independent farmers selling their crops directly to specialty papermaking operations became dominated by a few large, vertically integrated conglomerates developing broad product lines as they exerted control over large parts of the supply chain.”
While Europe is not perfectly analogous to North America, the development and evolution of hemp fiber product lines on that continent can serve as a useful guide: In Europe, the lowest-hanging fruit – i.e., applications requiring the least amount of processing and R&D – took earliest hold with products like paper and pulp, animal bedding, and mulch still representing most of today’s industry revenue. While those markets offered the expanding fiber industry some steady revenue streams, innovations in processing technology and R&D eventually allowed for higher-tech, higher-margin products such as bio-composites and insulation to gain footholds in their respective markets.
As seen in Europe, it is likely that products requiring the least amount of processing and calibration will prove to be the first to achieve market viability in the U.S. and Canada. High-volume, low-margin products include mulch, animal bedding, and animal litter, along with pulp and paper. As the industry matures, ever more lucrative fiber applications should become viable. A New Frontier Data poll of fiber processors found them anticipating the best five-year growth potential among segments to include construction materials, automotive parts, bioplastics, and nonwoven textiles, respectively.
Construction materials, particularly, have attracted significant attention from hemp stakeholders. Companies such as Hempitecture – which designs and builds homes using hemp construction materials – and HempWood – manufacturer of a hemp-based wood alternative – have taken early leads in popularizing the use of hemp in construction, but face uphill regulatory battles against notoriously cautious international standards organizations, and toward expanding municipal building codes.
Hemp-based automotive components offer auto manufacturers a means to simultaneously reduce their vehicles’ weights and their carbon footprints. Yet, while the stability of the European hemp market has enabled automakers to integrate its materials into their manufacturing processes, the immaturity of North American markets has slowed progress toward similar integration among U.S. automakers. As the U.S. market evolves, knowledge transfer within companies having both European and North American operations will help to streamline deployment of hemp in North American-made vehicles as the materials become widely available.