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Spunmelt polypropylene: the leading global technology for nonwoven supply and demand.

In 2012, global demand for spunmelt polypropylene was estimated to be about 2.1 million tons and is projected to reach nearly 2.4 million tons in 2016. For hygiene uses alone, global demand for spunmelt polypropylene nonwovens was approximately 65 billion square meters in 2012 and this number is expected to grow to nearly 80 billion square meters in 2016.

Global demand growth in tons for spunmelt polypropylene nonwovens is forecast to rise slightly more than 4% annually from 2011-2016 and at higher rates in emerging markets. Growth rates are expected to be highest in China, Africa, Southern Asia, South America, Middle East and the Asia-Pacific regions while more moderate growth rates are projected for Europe and North America. Global demand growth in square meters is forecast to be even higher than in tons, rising above 5.6% per year during this period. Higher square meter demand growth is related to the growing use of lower weight nonwovens in hygiene end uses, which results in lower demand in tons.

The global economic recession, which began in the third quarter of 2008, resulted in immediate and severe reductions in most markets for spunmelt polypropylene in 2009-2010 but not in hygiene. Unlike nearly all other markets for spunmelt nonwoven polypropylene, hygiene demand continued to increase across the world as if no recession was underway. This resiliency led many to characterize the hygiene market for nonwovens as "recession proof".

Unaffected demand for spunmelt polypropylene nonwovens in hygiene due to the recession was not to last. Beginning in the last half of 2011, hygiene demand began to weaken on lower birth rates and lower consumption, lagging the actual peak in the global economic downturn. In most cases, other non-hygiene markets began to recover from the economic downturn before hygiene demand softened. We believe a recovery in hygiene demand in most global markets has begun but will be slow to realize. At the present time, birth rates in the U.S. are the lowest since the great recession., Economic growth in China and many Asia-Pacific countries is improving but still below that present prior to the recession.

The largest market for spunmelt polypropylene is hygiene, which commands about two-thirds of the total worldwide capacity of Fine and coarse denier spunmelt polypropylene nonwovens. Other important markets for nonwovens made from spunmelt polypropylene technology include a variety of construction ap-plications--geotextiles, residential and commercial wall wrap and ground covers--home furnishings--furniture construction fabrics and carpet backing--medical and industrial protective apparel, automotive and other end uses. We estimate that more nonwovens are made from spunmelt polypropylene technology than any other type of nonwovens technology worldwide.

Prospects for further growth in spunmelt polypropylene are promising in select emerging markets but measured in the developed markets of North America and Western Europe. While nonwovens made from this technology have already penetrated the hygiene applications within developed markets, spunmelt polypropylene penetration is still low in the rapidly growing hygiene markets of the developing countries. Market penetration of spunmelt polypropylene in markets other than hygiene is well less than half of their potential and may be far lower in developing regions.

Historically, spunmelt polypropylene capacity has grown to keep pace with rising demand. Over the last several years, however, other reasons have arisen to install new capacity. Demand for lower weight spunmelt nonwovens, which could not be cost efficiently made on older generation technology, drove installation of new capacity. Secondly, the latest generation spunmelt technology offers more spinning beams, wider widths, higher throughput, faster line speeds, finer fiber denier extrusion, greater energy efficiency and higher output than earlier generation technology. This new technology, once fully utilized, can make a lower cost product. The versatility and benefits of the new generation of technology has likely motivated many producers to modernize, even in advance of demand being sufficient to absorb the new capacity. This development has and continues to occur in nearly every global region.

Thirdly, there has been significant competitive positioning in strategic and emerging markets in the last few years. New producers have entered North America, China, Chile, Egypt and Russia. New plants and high output lines are being built in India and Indonesia and will be operating in 2014. Lastly, while there has been some consolidation among producers, there has been very little equipment rationalization. Early generation equipment continues to operate, mostly at cash cost margins.

On the whole, the global industry for polypropylene spunmelt nonwovens has been installing the latest generation high output technology at a frenzied pace. These investments seemed to be justified when hygiene demand continued to be buoyant during the beginning of the global recession, but may be less attractive now that hygiene demand has weakened.

In 2006, global capacity of fine and coarse denier spunmelt polypropylene technology was approximately 2 million tons. From 2006-2012, global capacity was estimated to have grown at a rate of 5.3% per year to 2.8 million tons. It is worth noting that tons of capacity are expressed as nameplate or design capacity, gross of machine downtime or resin to fabric yield. Nameplate capacity for hygiene end uses in 2012 was approdrnately 92 billion square meters in 2012.

From September 2010 to September 2011, 28 high capacity production lines were announced for installation which together totals well more than 500,000 tons of nameplate capacity. The largest amount of this new capacity is being installed in China, the Middle East and North Africa (MENA) and in selected Asia-Pacific countries by 2016. All other global regions will have new line installations as well. Most notable are modern, high capacity line installations in India, Egypt and Indonesia to serve the requirements of expanding hygiene product converting capacity.

The commissioning of new capacity impacts the utilization rate of spunmelt polypropylene equipment worldwide and within global regions. On a global basis, we estimate the supply/demand ratio of capacity utilization of fine denier polypropylene spunmelt nonwovens in tons fell below 75% in 2012 and was lower when calculated in square meters. We estimate that capacity utilization will rise above 75% by 2016 in tons, but remain below that amount when calculated in square meters.

Supply/demand utilization varied among regions in 2012 and will continue to do so through 2017. The increments of capacity installed compared to demand growth in any single year will raise or lower capacity utilization rates.

We expect that the newest units of capacity will be utilized first as this technology will have the greatest product capability and will achieve lowest cost of manufacture once the lines are fully utilized. The next earliest generation of capacity may then replace even older units of capacity now in operation, possibly resulting in the retirement of very early generation technology. We estimate that in 2012, 23% of all fine denier spunbonded capacity still in operation was early generation.

In addition to how producers deal with the installation of new and the rationalization of old capacity, there may be other impacts that this new round of spunbonded polypropylene capacity could bring about. One of these impacts is the increasingly high capital cost of new spunmelt polypropylene technology, which could prompt consolidation among some producers to share the burden of the high investment cost. A second related impact is the challenge of technological obsolescence requiring continuing re-investment to remain competitive. The rapid pace of technology modernization drives concern about falling behind in the race to modernize forcing a choice between modernizing, repositioning or even withdrawing from the market. Still, another issue may be the change in import and export flows as new producers in regions formerly requiring imports seek to become exporters.
of Tonnes)

2012 Total Demand-2,100

2006 1,300

Growth 800

Source: Price Hanna Consultants LLC estunates

Note: Table made from pie chart.

of Tonnes)

2012 Total Capacity-2,785

2006 2,035

Growth 750

Source: Price Hanna Consultants LIC estimate.

Note: Table made from pie chart.

Despite these growth impacts, the modernization of the spunmelt polypropylene technology platform is healthy and positive. New capacity is being installed to serve growing market demand and the markets' challenging and ever changing needs. This dynamic demonstrates the vibrancy of the market demand for products made on this leading nonwoven technology.

By David J. Price, Partner

Price Hanna Consultants LLC

David J, Price is. the author of the Price Hanna Consultants LLC subscription report, Spun bonded and Spumnelt Nonwoven Polypropylene World Capacities, Supply/De/nand and Manufacturing Economics 2006, 2012 and 2016 that was published in September 2012. To obtain a detailed prospectus for this study, please contact David J. Price., Price Hanna Consultants LLC, at
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Comment:Spunmelt polypropylene: the leading global technology for nonwoven supply and demand.
Author:Price, David J.
Publication:Nonwovens Industry
Geographic Code:9CHIN
Date:Feb 1, 2013
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