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Latin American regains growth: growth is estimated at 10%.

The Latin American market for nonwovens has finally recovered from two years of slow growth--if not losses--and is positioned to return to a regional expansion rate of 8-10%, industry officials and executives have reported. While world production has been growing at an estimated 7.4% rate, Latin America has grown at close to 10% a year during the past decade.

The nonwovens industry in Latin America lags the industrialized regions of the world in terms of per capita consumption. South America as a region consumes only about 0.4 kilograms of nonwovens per capita, compared with about 4.0 kilograms in the U.S., said Jorge Saito, the executive secretary of industry association, Associacao Brasileira das Industrias de Naotecides e Tecidos Tecnicos, or ABINT, in Sao Paulo.

This difference will be key to the growth of U.S. nonwovens companies in the region, others said. "The per capita consumption potential in Latin America is great; that's why North American manufacturers look at South America as an opportunity," said Rory Holmes, president of INDA, the Association of the Nonwoven Fabric Industry, in Cary, N.C.

Latin America represents just less than 10% of the world market for nonwovens which comprises 4.4 million metric tons globally, suggested Ian Butler, the director of market research and statistics at INDA. "South America produces about 206,000 metric tons, Mexico produces about 98,000 metric tons and the Caribbean produces about 9000 metric tons, for regional production of 313,000 metric tons," he said.

Within Latin America, a handful of countries are responsible for close to 90% of all production. Argentina, Brazil, Chile, Colombia, Mexico and Venezuela are the bulge bracket players. Among these, Brazil's production alone will amount to about 105,000 metric tons this year, followed by Mexico at 98,000 metric tons, Argentina at 27,000 metric tons, Colombia and Venezuela each at about 20,000 metric tons and Chile at 12,000 metric tons, Mr. Butler projected.

Consumer Income Limits Some Segment Growth

Unlike the U.S. and other industrialized countries' consumption patterns where two-thirds of all consumed nonwovens are disposable, in Latin America, durable nonwovens represent almost two-thirds of all nonwovens consumed. Expectations are that disposable consumption in Latin America will grow with net disposable income-particularly in the absorbent hygiene segment. But, Latin American consumers cannot afford higher-priced nonwovens, another executive said. "Per capita consumption is rising, but distribution of wealth is much more of a problem in this region," said Wagner Souto Carvalho, the president of ABINT, and the commercial director of Companhia Providencia, one of Brazil's largest nonwovens producers.

Foreign exchange volatility, inflation and political factors have set back the real purchasing power of many Latin American consumers in dollar terms. "Our salary levels have slid to the point that we are back to 1993 levels now," Mr. Carvalho said.

According to projections by the UBS Warburg's Latin America research team led by Michael Gavin, Stamford, CT, average regional per capita income dropped from a high of $4596 in 1997 to $4009 in 2001, before the trend turned positive once again. This year the figure is expected to reach $3773, and in 2005 per capita income is expected to continue to rise to $3891.

Brazil Leads Regional Growth

Comprising about half of the region's population, Brazil leads other Latin American countries in production and consumption. INDA projects that Brazil will increase its value share of South American consumption from 58% in 2002 to 61% in 2007, as the market grows from $583 million to $772 million during the same time period.

Brazil's gross domestic product is expected to grow 5% this year, following a 0.2% retraction in 2003, the UBS team projects. With a GDP worth $558 billion, per capita income in Brazil is expected to reach $3134 this year, below the regional average, and to continue rising to $3320 in 2005, UBS figures suggest.

At 0.68 kilograms of consumption per capita, Brazil consumes more nonwovens than any other South American country, which consume 0.40 kilograms, said Mr. Saito. Part of the explanation is that during the past decade, the Brazil's economy has improved the lifestyle of many poor, who have joined the ranks of the consumer class. Another factor is the cost competitiveness of the Brazilian nonwovens industry, which has world-class spunlaced and spunbond technology, he said.

Leading nonwovens producers include Bidim, BP, Fitesa, and Providencia. These and other producers invested some $130 million in new capacity, largely comprising spunmelt materials for the hygiene segments, during the past four years, and much of that will finally come online now that the crisis in the market has subsided, suggested Mr. Carvalho.

Mexico Consolidates NAFTA Gains

Mexico has the largest economy in Latin America, with a GDP valued at $653 billion this year, according to the UBS forecasts. This growth translates into per capita income of $6181, the highest among the leading nonwovens producers in the region.

With its economy inexorably linked to the U.S., Mexico has suffered during the past three years while the U.S. economy has recovered. This year, Mexican GDP is expected to expand 4.3%, following growth of 1.3% last year.

Consumption of nonwovens in Mexico was forecast two years ago by INDA to rise from 97,000 metric tons to 140,000 metric tons by 2007, with converted consumer nonwovens sales increasing from $1.9 billion to $2.4 billion.

Given the close ties between U.S. and Mexican manufacturers, Mexico's consumption of long-life nonwoven goods is high and expected to rise to 58,000 metric tons, worth $169 million, by 2007, INDA projects. These products are expected to be led by the automotive and interlining segments, followed by the coated/laminated and geotextile segments.

"One unknown with the industry in Mexico is whether NAFTA will become less important as the U.S. drops its tariffs on imports from other countries," noted Mr. Holmes. "If the gates are opened, China and Taiwan will start flooding North America. Mexican labor rates are significantly higher than in Asia, and some medical companies, for example, are already moving from Mexico to Asia," he said.

Leading producers in Mexico include Fibras, Mexicana de No Tejidos, Milyon, PGI, Polimeros y Derivados and Tecnavan. PGI, which operates a plant in San Luis Potosi, opened a new production line this year. The new line is expected to increase PGI sales in Latin America by 20%. The region accounts for about 14% of PGI sales worldwide and contributed $90 million to total sales during the 10 months ended January 2004, according to a recent company report. PGI reported lower selling prices in Mexico in 2003.

Argentina Continues Recovery

The Argentine market for nonwovens is rapidly recovering from a four-year recession that ended in 2002 with a 10.9% shrinkage in the economy. This year GDP, which is worth about $154 billion, is projected to increase 7.6%, following the 16.3% recovery last year.

"The growth in Argentina has not been real growth, because they are still recovering to where the economy was before the recession," says Mr. Carvalho.

With 27,000 metric tons of production, Argentina is the third largest nonwovens-producing country in Latin America. Argentina is expected to consume 13%, or about $100 million worth of South America's total consumption in 2007, INDA projects. With strong economic growth, per capita income is expected to rise this year to $4135 from $3552 in 2003, the UBS team predicts; in 2005, per capita income is pegged at $4650.

While Argentina's consumers are among the region's more sophisticated, boding well for disposables, substantial industrial capacity has eroded during the past decade, with automotive and other production moving to Brazil and elsewhere, suggesting that durable consumption will not rise as rapidly.

Major producers include Soft Bond and Dominion Sudamericana, a majority-owned PGI subsidiary. PGI reported higher selling prices in Argentina last year, offset by higher raw materials costs.

Andean Markets Recover Slowly

Political difficulties in Colombia and Venezuela have affected the rate of recovery of the nonwovens industry. Colombia's oil resources are helping it grow, inflation is headed down out of the double-digit range, and retail sales were up 6% at mid-year. Still, the peso is under pressure from stronger currencies like the dollar, and unemployment is over 50%.

With a GDP worth some $80 billion, per capita income was pegged at $1764 in 2003; this level has eroded during the past five years from a level of $2072 in 1999. This year GDP is expected to grow at 3.9%, on par with 2003; next year the economy is expected to maintain most of this growth rate.

One recent vote of confidence in Colombia was PGI's September announcement of plans to more than double its spunbond capacity in Call. The company said it will install a Reifenhauser Reico IV spunbond line with a startup planned for 2006. Fernando Espinosa, PGI's vice president and general manager for Latin America said, "Bonlam Andina is very pleased to announce the ability to provide customers in Colombia, Venezuela, Peru and Ecuador, as well as Central America and the Caribbean, with the highest quality hygiene products using state-of-the-art technology." PGI claims to hold the leading marketshare in the hygiene sector in this area.

Another Colombian nonwovens manufacturer, Fabricato Tejicondor, has announced plans to upgrade its Fibratolima unit, under company president Luis Mariano Sanin. However, high energy costs are one limit to growth cited by Fabricato.

Produsa, a manufacturer of feminine hygiene products, announced plans to enter the U.S. market through an expansion of its factory in Sabaneta by January 2005. The company will market its products through Puerto Rico and has plans to expand exports to Mexico, Brazil and Europe.

Chilean Market Strengthens

Chile, which was the first major Latin American country to introduce modern economic reforms, continues to grow as a market, with low inflation, a strong peso and increased imports and exports. Exports were up 50% at the end of September, while imports were up 40%.

With a GDP worth $72 billion, per capita income in Chile was high, at $4731 in 2003, and expected to rise to $5233 this year, according to ISI Emerging Markets of New York. GDP growth is expected this year at nearly 5.0%, up from 2.3% in 2003.

"Chile is the only South American market where consumers can afford higher-priced nonwovens; the market there operates differently from the rest of the region," said Mr. Carvalho. Major manufacturers there include Feltrex and Fisira.
South American Consumption of Nonwoven Fabrics

 1997 2002

 volume sales volumes
 (M tons) (MM $U.S.) (M tons)

Disposables 41 196 68

Durables 89 387 112

 2007 Growth

 sales volume sales tons
 (MM $U.S.) (M tons)

Disposables 271 96 6.8 6.7

Durables 501 149 5.4 6.0

source INDA

South American Sales of Nonwoven Fabrics
Used in Disposable Applications
(millions of U.S.)

 2002 2007 Change

Absorbent Hygiene 131 177 6%
Baby Wipes 7 12 12%
Other Wipes 2 6 High
Surgical Gowns/ 11 13 5%
Other Medical 5 7 5%
Other Disposables 36 51 7%
Total 196 271 7%

 (millions of tons)

 2002 2007

Absorbent Hygiene 51 69
Baby Wipes 2 4
Other Wipes <1 2
Surgical Gowns/ 2 2
Other Medical 1 2
Other Disposables 10 14
Total 68 95

source INDA
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Article Details
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Title Annotation:Latin American Report
Author:Thurston, Charles W.
Publication:Nonwovens Industry
Article Type:Industry Overview
Geographic Code:0LATI
Date:Nov 1, 2004
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