Although its been overshadowed by China, Southeast Asia, or the region known as the Pacific Rim, has recently emerged as a prime area of investment for the nonwovens industry. Driven by demand both in China and Japan as well as in the Pacific Rim region, these investments are slowly creating a powerful nonwovens industry in the area.
Just last month, CNC International announced it would add a 24,000-ton Reicofil 4 line in Thailand, adding to its current capacity of 15,000 tons by the end of the year. To be located in a new production site near CNC’s existing operation in the Rayong province of Thailand, this new line will target hygiene manufacturers both in China and in the Pacific Rim nation.
According to Chompoonut Kaewwiriyakijkul, spokesperson for CNC, Thailand has emerged as a center of logistics within the region, due largely to its ability to shop, via Dawai port, to many countries in Southeast Asia, the Middle East, North Africa and even Europe.
“In addition, Thailand has and will have a stable or even higher GDP due to both farming, tourism and automotive investment in the area,” Kaewwiriyakijkul says. “We are also much closer to the well-known sources of polypropylene resins, from which the majority of spunlaid materials are made from.”
CNC is owned by the CPPC Group, which falls under the umbrella of Charoen Pokphand Group (CP), the largest agriculture-based conglomerate in Thailand. Prior to this expansion, CNC has operated two lines with a capacity of 15,000 tons per year.
Like Thailand, other Pacific Rim countries like Indonesia, Malaysia and Vietnam, are seeing growth in hygiene products driven by increases in the gross domestic product (GDP) as consumers gain more disposable income for items like disposable diapers and/or feminine hygiene pads. Nonwovens producers like Denmark’s Fibertex and Korea’s Toray Advanced Materials both have ambitious expansion plans in the works as hygiene manufacturers from around the world build new plants in the region. At the forefront of this investment is consumer goods giant Procter & Gamble, which announced last August it would spend $100 million on a new diaper plant in Indonesia.
“Indonesia is an important market for the baby care industry,” Mohamed Ismael, president director of P&G Indonesia told the Jakarta Globe. The new plant should be complete next year and the company expects to meet diaper demands for about 8 million babies in Indonesia.
“Indonesia with its population of more than 220 million must be considered to be the next booming country in the areas of nonwoven and disposable hygiene products,” says Johan Berlin, managing director of Sweden-based machinery broker Investkonsult. “This will be driven not only by its own population but also to compete on export markets for the neighboring countries such as Thailand, Vietnam, Philippines and even Australia.”
Kevin Chen, assistant vice president of KNH Enterprises, a Taipei, Taiwan producer of nonwovens and converted products, agrees that Indonesia has been highly visible in its growth rate. He credits improvement in political stability as well as the mutually exempted tariff among the Association of Southeast Asian Nations (ASEAN) for this success.
“Indonesia’s growth opportunity is positively projected,” he says. “Evidently, all major consumer products suppliers have recently upgraded their production bases there. Indonesia is a market with both import and domestics production.”
According to Berlin, while Indonesia already has a number of roll goods manufacturers, the current levels of production reportedly do not meet the demand in markets like hygiene, automotives, construction, hygiene and wipes. This is slowly changing as more nonwovens producers eye this country for their next growth opportunity.
Leading the way here is Korean nonwovens maker Toray Advanced Materials. After establishing large-scale nonwovens production sites in Korea and later China, the company announced last year it would set up a subsidiary in Jakarta, Indonesia, known as Toray Polytech Jakarta, in an effort to capitalize on growth in the ASEAN region.
At the time of the investment, executives said Indonesia was chosen because of its large population and strong economic growth. Additionally, Toray already has subsidiaries in Indonesia, easing its expansion into this country.
The new site’s first line, a five-beam polypropylene-based spunbond line is expected to be complete in June 2013, manufacturing 20,000 tons of nonwovens per year and significantly broadening TAK’s footprint in Asia. “Once we finish this expansion, TAK can cover all of the Asian countries more promptly and safely from our three production sites in East Asia, China and South Asia,” says Evan Lee, deputy general manager of the fiber marketing team.
Lee reports that all Toray’s investment strategy throughout Asia is being driven by growth in the overall Asian economy. “This is because personal income in China, Indonesia and Vietnam is increasing quickly, therefore the baby diaper market in Asia is growing quickly and this has influenced diaper makers to invest aggressively,” he says. “They want to receive their raw materials promptly and safely so they request that we invest with them.”
As it waits for its two large lines to come onstream adding a total of 40,000 tons of capacity in China and Indonesia, TAK has not made any other significant expansion announcements. However, Lee did say that the company will continue to invest at its sites in China and Indonesia until 2020 and investment in other emerging markets is definitely being examined. For now, success in China and ASEAN will be a top priority.
“We have more than 20 years of experience and know-how in spunbond business and our mother company the Toray Group has an excellent overseas network which has helped our success,” he says. “In the global hygiene market there is not another place like China or in the ASEAN regions where the diaper business is growing so quickly. That is why we chose those sites.”
According to data provided by TAK, in Indonesia, the market for disposable baby diapers is estimated to grow at a pace of 14% per year, increasing from approximately 1.9 billion diapers in 2010 to 3.7 billion diapers in 2015. This has prompted major hygiene product manufacturers to build new production facilities and expand existing facilities, according to the company.
While Toray targets Indonesia, Fibertex Personal Care continues to build on the success of its Malaysian operation. In April, the Danish company said it would invest $55 million in a state-of-the-art production line in Malaysia. The new line will be the third for the subsidiary, which Fibertex founded in 2002.
Expected to be operational by the end of next year, line number three will increase production capacity by 30% to 70,000 tons.
“In general, the increasing level of wealth in Asia is continuously resulting in positive hygiene improvements to the great benefit of the public health, especially in China, India and Southeast Asia where the population is to an increasing extent moving into single family homes, thereby setting completely new standards for personal hygiene,” says Mikael Staal Axelsen, CEO of Fibertex Personal Care. “The market growth will continue in coming years, and we must be ready for it.”
Fibertex Personal Care added its second line to the Malaysian operation two years ago with a $49 million investment. That new capacity is already fully utilized. The company also operates three spunmelt lines in Denmark.
Meanwhile, Japanese hygiene giant Unicharm is betting on Vietnam, which has the third largest population among the ASEAN countries and 7% annual GDP growth. Last year, Unicharm purchased a 95% stake in Diana, a leader in the hygiene market with a strong portfolio of brands. Executives expect that Diana’s knowledge of the market and Vietnamese-specific behaviors and Unicharm’s product development expertise will add up to growth in the country.
Additionally, Unicharm has included Vietnam, Thailand and Indonesia, as well as other emerging markets such has Egypt and Saudi Arabia, within an international expansion plan that will triple the company’s annual production of baby diapers and feminine napkins by the year 2020. By that time, 40% of the Japanese company’s total hygiene products are expected to be made and sold in the Middle East, North Africa and Asia.
As companies active in hygiene or nonwovens production continue to blaze trails in the Pacific Rim countries, they know a number of additional investments will be coming in the years ahead. Already, Berlin noted a shortage of converters in Indonesia, limiting the amount of end-use products being made in the country. This is particularly obvious in the hygiene segment but this will be changing as more investment dollars are poured into the market.
“Existing companies do plan for expansions and new entrepreneurs are knocking the doors to enter into this technical textile sector,” Berlin says. “There is no doubt that Southeast Asia and its future markets look bright with lots of opportunities.”
Beyond hygiene, demands for clean drinking water as well as growth in the automotive industry are driving growth in the filtration market. Here suppliers are challenged with matching the same level of quality in more developed regions at the lower price point. “Supplying local production with lower costs and reliable quality speedily is the real needs of customers in this area,” says Saori Shairator, marketing manager of Japanese meltblown manufacturer Tapyrus.
And, while the local market has not fully developed, the few local producers in this region face competition from products imported from China, Korea, Taiwan, Japan and even Europe. “Competition is very severe and it could be said that this area is supplied from markets all over the world,” says Shairator.