Plans for the Big Boom have come and gone. Plans for the Quick Comeback have faded away too. So today when it comes to the airlaid segment of the nonwovens industry, the question on everyone’s mind is no longer when the market will break open but instead how much slow, painstaking recovery from crippling overcapacity and pricing problems has taken place.
Fortunately, the news is good and, although the industry is certainly not in the clear, the outlook is more optimistic overall. Although pricing levels are still lurking at about 80% of 2001’s high, product development is slightly up and innovative products are eventually expected to breath new life into the market. Other important recovery indicators are the new airlaid lines slated to come onstream in the U.S., Europe and China.
Pieter Meijer, vice president of marketing and sales, Europe for BBA Fiberweb, offered his perspective on the current state of the airlaid market. “Some overcapacity, mainly coming from older lines, still exists. This has an effect on pricing, but the new lines are less impacted. In terms of capacity utilization, the most modern lines are operating at capacity but utilization of the older lines may be as low as 60% to 70%,” he said.
Michael Brown, absorbent products sales manager for Buckeye, Memphis, TN, also pointed to an improved capacity situation. “Capacity has tightened up a bit in North America as demand for airlaid seems to be strong, and the airlaid companies have consolidated their operations for efficiency and profitability. Although capacity may be tight based on current operating schedules, overall there is definitely still some available capacity, especially in North America.” Mr. Brown went on to cite improved pricing due to increases in raw material and overall manufacturing costs. However, he doesn’t believe these increases have kept up with increased costs.
The company operates two main subsidiaries with two lines running at each, Concert GmbH in Falkenhagen, Germany and Concert Airlaid Ltd. in Gatineau, Canada. According to Mr. Molluso, Concert’s German facility has been sold out for the last four to five years while the Gatineau facility has struggled for about the same amount of time. “We have turned Gatineau around and—after 50 months of losses—it is now consistently profitable. We have gone from 360 to 210 employees and we have shut down a third, smaller, older machine there.”
Looking forward, Mr. Molluso indicated that Concert would either build a line or acquire capacity in Europe in the future. “If our lines are sold out,d that means we are turning away business. One thing is sure—we will look for more capacity in Europe.”
At Georgia-Pacific Corporation, improved conditions are also being reported. “We are currently operating our airlaid operation at full capacity and pricing has returned to 2001 levels,” explained Paul Farren, vice president. “This is due to emerging new market segments that have offset moderate declines in airlaid baby wipes. In addition, our speed to market in developing new customer requirements, quality assurance programs and solid customer service has continued to help us grow our relationships with existing, long-term customers along with selected new customers.” Mr. Farren added that G-P has spent a substantial amount of time improving its cost position and productivity to keep customers competitive in the markets they serve. “With Koch acquiring Georgia Pacific, renewed interest in developing the nonwovens business is evident,” he said. “The nonwovens business will benefit from Koch’s relationship due to its ownership of Invista and the fluff pulp mills as well as its dedicated interest in supporting its consumer products businesses.”
Machinery suppliers such as Neumag Denmark a/s (formerly M&J Fibretech), Horsens, Denmark, are seeing positive signs as well. “Fortunately I can confirm that airlaid is back in focus,” observed Henning Skov Jensen, managing director. “There are a lot of product development projects in progress.”
Also located in Horsens, Denmark, newly formed Danish Airlaid Technology, considers the future for airlaid, especially in niche markets, bright—so bright, in fact, that the company is building new production facilities that will house a state-of-the-art thermal bonding airlaid line with several special features. The relatively small, flexible line is expected to be ready for commercial production by June 2007.
“Overcapacity and pricing problems have been discussed quite a lot in the past few years,” remarked Lars Laursen, Danish Airlaid Technology’s managing director. “However, it seems the overcapacity is more or less gone. As a natural consequence of this, pricing problems will also become less of an issue. Looking back over the last year or so, there has been quite a lot of activity in the airlaid business in general, with some interesting collaborations being formed. We believe the airlaid market in general is facing better times than in the past three to five years.”
However, Mr. Mango warned of a less rosy long-term outlook. “There is trouble on the horizon. The large multinationals prefer cheap, overcapacity airlaid; thus, BBA Fiberweb has succumbed to pressure to build a new, large airlaid line in Italy. And McAirlaid’s has announced a new large line for North America, where overcapacity still exists. Not the crash of 2001, but not good news for airlaid in late 2007,” he predicted.
More to Come
Speaking of new capacity, many producers have plans underway to add a substantial amount of airlaid production in various spots around the globe. For starters, as Mr. Mango mentioned, McAirlaid’s Vliesstoffe GmbH, based in Steinfurt, is continuing to expand and plans to have its next airlaid line up and running this month in Berlingerode, Germany.
The company’s next two lines are scheduled for investment in Rocky Mountain, VA, a move that is part of a recently announced $85 million plan to open a plant and U.S. headquarters in Virginia. The project, which is expected to create 160 jobs, will include offices and a manufacturing plant, its first in the U.S., in Franklin County’s Commerce Center.
In Asia, BBA Fiberweb recently announced plans to invest in a second line at its factory in Tianjin, China. The new Chinese line will complement BBA’s existing M&J line, which came onstream in 2002. The new line targets the growing Chinese market for airlaid products. “By using local technology and Fiberweb’s expertise in this area, we will be able to offer innovative and attractively priced products to protect and expand our premier position in Asia,” stated Mr. Meijer. “The Chinese market continues to grow in terms of consumption and the local supply base is also expanding, which is why we have decided to invest in another line in that area.”
This line follows an announcement in March that the company will build a new airlaid production line at its Korma facility near Monza, Italy. The project includes the next generation of flexible and modular airlaid technology, developed by M&J Fibretech, and represents a $20 million investment for BBA.
“(The new line) is another important step for us in developing a global strategy and presence in this growing specialty market,” said Daniel Dayan, CEO of Fiberweb. “Fiberweb already operates a premier airlaid manufacturing facility in Asia and this new European investment will allow us to offer outstanding service, quality and flexibility to our customers on another continent. Synergies between the two manufacturing sites will significantly support the success of the Italian investment.”
In Russia, vertically integrated airlaid producer C-Airlaid has added production in the form of a new bicomponent staple fiber line that was installed at the beginning of 2006. “Now we purchase from outside of Russia only one component for airlaid material—SAP,” reported C-Airlaid’s executive director Grishin Alexander, “along with various products necessary for laminating (films, nets, etc.). This year we also plan to start a new line for manufacturing packed napkins.”
Mr. Alexander described the airlaid market in Russia as being in a developmental stage. “C-Airlaid is the only producer of airlaid material in Russia so in this respect we hold a monopoly position. We do not expect this situation to change for at least three years,” he said. “Today our plant is using 75-80% of its capacity. We also produce fem care products, so we convert a certain amount of our airlaid material.”
From an end use point of view, new and increasingly popular wiping applications continue to represent one of the airlaid market’s best bets. One company banking on this trend is A.Celli Nonwovens, Porcari, Italy, which is entering the airlaid market with the introduction of its Wingformer proprietary technology for web formation.
“The availability of new Wingformer technology opens up opportunities for new products (such as composite wipes featuring spunbond and airlaid materials) and capacity increases that will provide a competitive edge over competitors,” said Paolo Dini, sales and marketing director. “Celli’s patented Wingformer technology is higher performing in terms of flexibility, productivity and efficiency (it offers double the capacity and 30% lower energy consumption).”
Another machinery supplier with an eye on the airlaid wipes market is Neumag Denmark. “The addition of airlaid pulp in wipes is a hot issue as it offers significant cost savings,” commented the company’s Mr. Jensen. “New applications for the airlaid process are also being implemented but these, as well as many of our development projects, are highly confidential and cannot be disclosed at this point in time.” He did reveal that Neumag Denmark is currently working on the installation of three M&J airlaid machine projects.
C-Airlaid is also making the most of the growing wipes market and plans to launch a new brand of wet and dry household wipes made from airlaid material this fall. “This production will let us enter the market for disposable wiping materials,” said Mr. Alexander. Wet wipes will include wiping materials for furniture, refrigerators, microwave ovens, glass and multi-purpose wipes with antibacterial action. For other purposes, the company will offer a ‘dry’ line of products, including kitchen towels, mops for floor cleaning and multi-purpose cleaning wipes. “Additionally, a number of our clients have purchased unpacked airlaid material to use in industrial wipe applications,” Mr. Alexander continued.
As this segment grows, airlaid wipes are holding their own against other technologies such as spunlace. At Buckeye Technologies, wipes made of airlaid continue to represent a substantial market. “While spunlace has been trying to make inroads in North America, we have yet to feel the impact to our airlaid wipes,” said Mr. Brown. “We feel like airlaid still offers an excellent wiping product at a good value. As a matter of fact, we have been making some progress in Europe with our premium airlaid wipes versus the old standard of spunlace.”
Acknowledging ongoing activity in this sector, Mr. Mango referred to airlaid wipes as a market with surprising staying power, mainly in private label baby wipes. “The apocalyptic predictions about spunlace have not yet come to fruition, despite a growing oversupply situation in North America,” he said. “In fact, as airlaid prices increase, spunlace drops. But, the wet wipes market is still consumer-driven and the consumer still wants airlaid wipes for some segments, and they are growing,” he said. “The newly announced airlaid capacity worldwide is not suitable or targeted for wipes. This is a very long topic, with many additional points, but in summary, airlaid volume in wipes will stay about the same, but prices will increase.”
What Else Is There?
Beyond wipes, other airlaid applications are progressing, albeit slowly. Diaper cores continue to be among the most promising new applications for airlaid, but commercial realization is still very limited. “While applications such as automotive, building products, industrial wipes and filtration are promising, we have not yet seen major shifts in the commercial applications in which airlaid is used,” commented Mr. Meijer of BBA Fiberweb.
Once a key player in the commodity wipes area, Concert has moved away from the generic wipes business. “Wipes once made up 20% of our sales but we just couldn’t make enough money to make it worthwhile. Now we are very specific about the wipes business that we do get involved in and are focusing instead on working with partners to supply the fem care and home care markets.”
Mr. Molluso added that Concert is underway with three “out-of-the-box,” consumer-directed projects that use absorbent airlaid material to replace another (undisclosed) nonwovens technology. “Nobody is making this type of airlaid product yet. We feel pretty confident that we have found new uses for airlaid. When all of that capacity was brought on five years ago, everybody thought the diaper core was going to hit. Well, we need to forget that. If it happens, great, but we can’t wait around for it. The airlaid business is creative because we have big customers that challenge us to make our products cheaper, better, stronger and faster.” One example of this kind of creativity is in the niche diaper market, where Concert produces an airlaid material for a toddler-size diaper.
Filtration is a possible new application area for G-P. “We have little representation in diaper core markets but are reviewing the opportunities in filtration markets where airlaid technology provides advantages over other existing technologies,” said Mr. Farren. “A month does not pass by when new application opportunities do not open up to airlaid technology (being pulp-based has its advantages against technologies that are petroleum based).”
Another company finding success outside of wipes is German airlaid specialist McAirlaid’s, which produces nonwoven composite materials used in sanitary napkins, panty shields, meat packaging products and bandages. “Binder- and glue-free airlaids will take their share of the medical, hygiene and food packaging markets,” opined Alexander Maksimow, CEO of McAirlaid’s. “They offer better performance, absorption and wicking speed, plus they are safe to use as there are no issues with allergenic substances such as latex.”
C-Airlaid is also involved the food pad area, having begun production of food pads for frozen products, which it began supplying to local consumers this year. “Unfortunately, this sector is not developing as fast as we would have liked,” said Mr. Alexander.
In the hygiene sector, C-Airlaid is involved in a partnership for the production of wet toilet paper made from airlaid material. “This product has found its market and this is why we are interested in moving in this direction,” explained Mr. Alexander. “We have plans to produce wet toilet paper in partnerships and sell it under our label. Airlaid material in its present state is able to replace spunlace in some applications but there are quite a few problems to solve in this respect. The main disadvantage of airlaid wet toilet paper is that it is not flushable.”
In the automotive industry, C-Airlaid produces disposable automotive mats that absorb dirt and keep cars clean but this market presents some tough competition. “Airlaid materials cannot compete with traditional needlepunched materials, which are often produced from inexpensive, secondary, fibrous raw materials.” The company is also considering targeting areas such as disposable medical apparel, adult incontinence products and home furnishings.
For its part, Danish Airlaid Technology is also making inroads in niche application areas. “There is a huge market for what we would call standard products—this is the market where times have been tough over the last few years,” stated Mogens Olesen, sales director. “However, there is also the more specialized niche market. This market is for us very interesting, although it also requires more product development. We are particularly focusing on niche markets where volumes are smaller and the degree of specialization is higher than for standard airlaid products. We believe that the need for more specialized airlaid products will increase in the future—both within the standard segments (i.e. incontinence and medical) but also completely new uses/products will show up. The food pad area is one of our focus areas, and we strongly believe that with the right products, this is a growing area for airlaid products.”
Buckeye is also looking for new applications for airlaid nonwovens. “For airlaid to continue to move forward,” said Mr. Brown, “we need to move beyond the standard wipes and hygiene applications. The technology offers some advantages in certain areas that need to be explored for feasibility. There is still a lot of capacity out there that needs to be utilized.”
On The Horizon
Looking forward, suppliers agree that there are new applications on the horizon for airlaid companies that are willing to innovate, for instance in the area of adult incontinence. “The airlaid business can be profitable for us if we continue to innovate and bring products that are made on state-of-the-art machines utilizing the right technology for the market,” said Mr. Meijer of BBA Fiberweb. “In an effort to accomplish this, Fiberweb is investing in Europe and China and is continuing to evaluate the possibility of investing in airlaid production in North America to make this a truly global business.”
As for Georgia-Pacific, the company reports that it has achieved profitability, has an excellent customer base and describes demand as stronger than ever in the airlaid market. “Our strategy has always been to stay with the fundamentals—understanding customer needs (helping them make money) and serving them better than our competitors on a sustained basis,” summed up Mr. Farren. “Never be satisfied with what you are delivering today, because what you’re delivering today will not be satisfactory tomorrow. Our customers expect us to be better each day and we understand if we cannot deliver with comparative differences from our competitors, we do not deserve their business. We are constantly hungry and know that every day is a new day to deliver a better product on time and complete.”
Along with further growth stemming from increased demand, Mr. Molluso of Concert predicted further consolidation would take place in the airlaid sector. “I think there will be more consolidation and more shutting down of lines. Equity firms are getting involved in airlaid and they don’t have the patience that investors do, so the timeline is much shorter. They buy companies and want to make money quickly.”
As far as Mr. Mango is concerned, consolidation is just what the airlaid business needs to garner its power and achieve recovery. “Airlaid as an industry needs to consolidate and strengthen; a strong major player here can fund the innovation and process improvements needed to develop new, profitable products.”
Looking ahead, Mr. Mango expects a return to profitability for airlaid, at least for the short-term future. “Profitability is a moving target. BBA Fiberweb’s new line in Europe and McAirlaid’s adventure in North America will disrupt pricing. Buckeye will never be long-term profitable with $500 million in debt. Profitability will return when demand grows faster than supply. Either supply will be contained with a discipline that’s been so far hard to find, or someone will develop new markets and products that generate demand faster than supply can be increased. Looking at the short-term future, I think all of the ‘Big Three’ will be profitable in airlaid within a year.”