The hydrothermal base-catalysed treatment of industrial Kraft lignin (KL) is investigated as a basis for production of a sustainable carbon fibre precursor, with a focus on the time-dependent evolution and impact on precursor properties. Hydrothermal treatment was performed at T = 300 °C and p = 180 bar, with the retention time (tret) varied between 8, 12, 16, 20, and 24 mins. Molecular weight distribution and thermal stability of the processed lignin were close to maximum after 8 min, and 12–16 min respectively. Chemical modification was found to continue (e.g. demethoxylation) over the entire tret range (24 min). Analysis of the recovered oily phase indicated catechol derivatives were stable end-products with, e.g., vanillin and guaiacol as intermediates. A techno-economic analysis indicated a price of ca. 1600 €/t at a production capacity of 10 kt/a is achievable, with main cost-drivers being lignin (60%), fixed costs (20%), and energy (10%).