Airlaid: All The Way Back
Recovery Complete... What's Next?
By Philip Mango, Nonwovens Staff
The airlaid industry has enjoyed 12 months of reasonable prosperity. Supply and demand are in balance, prices are up, new products in automotive, agriculture and mattress barrier fabrics are promising, and expansion is in the air. Certainly, there have been some bumps in the road over the last year, but despite a weakening global economy, exploding petroleum prices—and even with fluff pulp pricing near its historical record high—all of the major airlaid producers are profitable.
While only a few years ago, airlaid producers worried about whether or not they would make money, today they worry about how much money they will make. But if the future of airlaid producers is more promising than it’s been for several years, the future of the airlaid industry is less clear. Having recovered from the massive overcapacity crisis of 2001-2002, the question now is…what’s next?
Déjà Vu...All Over Again
The current situation is very familiar to the airlaid industry; it is very much like it was in the years 2000-2001. Prices were high, profits were high, supply was tight, and markets like feminine hygiene core and wipes were growing. New markets like food pads, nonwoven mops, swim diapers and training pants all looked promising. Moist toilet tissue on a roll was going to require 50,000 tons of new capacity, and it was based on airlaid. Everyone wanted a piece (or bigger piece) of this spectacular industry.
Unfortunately, everyone built airlaid lines in 2001. Buckeye and Rayonier chased airlaid diaper dreams, Kimberly-Clark thought everyone wanted Rollwipes, and Concert wanted to dominate the absorbent core market. When the dust cleared, the airlaid industry had added about 33% to its existing global capacity, much of it in North America. Prices collapsed, markets failed to materialize, supply overwhelmed demand and the largest airlaid producers faced financial ruin.
Airlaid Learns Its Lesson
The oversupply crisis in 2001–2002 was a traumatic event for the airlaid industry, and one that has not been forgotten. Since 2002, only 50,000 tons of new airlaid capacity has been added; less than half of what was added in 2001 alone.
Airlaid demand in its conventional markets alone increases by between 18,000-20,000 tons every year. Expansion has only accounted for about half of this demand growth! Of course, there was all of that excess supply from 2001–2002 to use up, but that was gone by the end of 2005. In 2006, airlaid lines began to fill and in 2007, prices started to climb.
In Europe, airlaid shortages have resulted in late deliveries and allocations. In North America, where no new capacity has been added since 2001, some airlaid grades are already in short supply, and the newer, most efficient lines are nearly full.
But this time, with the situation clearly calling for new capacity, no one is answering.
Too Much Of A Good Thing
One of the key factors in the recovery of the airlaid industry has been effective, rational business management, including a much more conservative view of expansion. Supply has been carefully monitored and managed. Extravagant customer projections and new market estimates, which once would have had airlaid producers ordering new lines, now is met with skepticism and downright resistance. When the world’s largest airlaid consumers tell their suppliers that they are concerned about supply, those suppliers “study” the situation for months before making a decision. All of this is good, and has brought prosperity back to the airlaid industry. But there can be too much of a good thing. Just as overeating can cause health problems, so, too, can eating too little. Sometimes, those new fantastic opportunities and new markets are real; sometimes those large consumers do need more airlaid, and are not just trying to lower prices. Sometimes, there is a real need for more airlaid.
The Situation Today
Since 2002, none of the three largest airlaid producers has added capacity (actually, two of the three have closed plants). Those companies with the most experience and expertise in starting up and operating airlaid lines have chosen not to add capacity. Additionally, much of that 50,000 tons of capacity added since 2002 has been either specialized production, like hydrogen bonded airlaid (not suited for wipes), or geographically limited, like the lines added in Russia or Poland.
Announced expansions are few. In June 2008, Concert announced a new, modern multibonded airlaid line for Germany. McAirlaids has a hydrogen bonded airlaid line planned for the U.S. A second Fiberweb line in China has already “officially” started. But, since it takes about two years between ordering equipment and producing meaningful quantities of airlaid, these new lines will not even keep up with normal demand over the next two years.
Why No New Airlaid Lines?
There are several reasons why expansion has been so slow to come, even when rising demand became obvious. The first reason is the residual trauma from the oversupply crisis. Equally important, though, is the difficulty in starting up and operating an airlaid line. Unlike spunmelt, where a turnkey line is really turnkey, airlaid still has a great deal of art mixed in with the science. Even experienced airlaid managers ordering lines from established airlaid equipment suppliers have had difficulties installing airlaid capacity on time and on budget. Fiberweb’s Italian line exemplifies that. The problems multiply for new producers or new equipment suppliers; McAirlaids’ second German line (an internal equipment design) and Fiberweb’s second line in China (from a new airlaid equipment supplier) both have had extended start-up periods.
Another reason slowing expansion is the perception that supply still exceeds demand in some regions, notably North America. Admittedly, on paper, airlaid capacity utilization in North America is only around 80%, leaving over 35,000 tons of airlaid surplus. But this is extremely misleading, with about a third of this “surplus” coming from Buckeye’s older, less efficient lines in Delta, BC, where production and transportation costs coupled with product quality issues limit markets. Another third comes from obsolete, smaller lines, like PGI’s FFP line in North Little Rock or the ACI S.A. line in Argentina, which also are limited to few markets. Some of this “surplus” is on limited use lines, like hydrogen bonded airlaid (no wet strength) or latex bonded airlaid (little or no use with superabsorbents) or thermal bonded airlaid (too dusty for wipes). The actual amount of “surplus” modern multibonded airlaid in North America, suitable for all markets, is actually 5%.
Why Is This Bad?
With airlaid supply tight, and expansion minimal, prices have and will continue to climb. The airlaid producers will become even more profitable. Marginal lines, limited by geography or technology, will eventually fill, generating more profits. Large airlaid consumers, who have for decades demanded and received advantageous prices, are being forced to share profits with the airlaid producer.
So, why is this bad? This is bad for the same reason it was bad in 2000–2001; when supply is tight and prices are high, consumers look for alternate substrates. In 2000, it was the shift from airlaid to spunlace in wipes; today, it is Procter & Gamble developing foam-based feminine hygiene cores to replace airlaid in ultrathin maxipads (Infinity) or Ahlstrom’s Hydraspun (hydroentangled wetlaid lyocel/wood pulp) replacing airlaid in flushable wipe applications. Spunlace, based on precursor webs of carded staple fibers or even spunbonded polypropylene (PGI’s Spinlace or Ahlstrom’s Genesis), continues to take volume from airlaid in the growing wipes markets, especially as significant price differentials disappear. The new markets needed to fuel future airlaid growth are being diverted to alternate substrates.
Airlaid’s “Natural” Advantage
For many years, spunmelts and spunlaces have enjoyed high growth rates and an increased share of the global nonwovens market. One reason has been continued, sufficient supply. Turnkey lines for these technologies have short learning curves, and consumers accept the aesthetics of such products.
But oil prices are rapidly increasing, and it appears unlikely that the long term trend will be for reduced prices. Petroleum-based raw materials, like polypropylene and polyester, will follow petroleum pricing. Petroleum, and petroleum-based raw materials, may also experience supply issues, as well.
Consumers who once considered environmental issues near the bottom of the list of priorities, are becoming more and more environmentally aware, helped by the availability today of high performance, cost-effective “green” nonwovens.
Airlaid has a “natural” advantage in the markets of today and the future; it relies heavily on non-petroleum-based, environmentally sustainable and renewable fluff pulp as its major raw material. Pulp is currently near its historical high price and yet is less than half of the price of polyester fiber, and one-third the price of polypropylene fiber. Pulp is biodegradable, sustainable and compostable.
Standard, commercial grades of airlaid are naturally 85-90% biodegradable; dispersibility, repulpability and 100% biodegradability are all attainable modifications.
Products like Procter & Gamble’s foam-based Infinity feminine hygiene core appear counterproductive; replacing airlaid, a North American pulp-based core, with an imported petroleum-based foam core. Similarly, spunlace wipes using petroleum-based synthetic fibers or spunbonded polypropylene are not biodegradable, sustainable, or renewable; these replace airlaid wipes based on biodegradable, renewable and sustainable pulp.
Profitability and rational management have made the largest airlaid producers better. Similarly, new owners and new management have made key equipment suppliers, like Dan Web and Oerlikon Neumag, better. Experience and expertise in operating airlaid businesses, coupled with better turnkey lines, will make investment in airlaid expansion less risky and more profitable. Escalating petroleum-based raw material costs, coupled with an awakening consumer awareness of environmental issues, will make new and existing airlaid markets more reliable.
Concert’s announced expansion in Germany, after an extended and comprehensive market evaluation and line design, is an example of the new airlaid expansion model. Expansion based on a rational business decision. Its expected short start-up time and quick profitability should encourage additional similar expansion.
Airlaid has returned to profitability; soon, rational expansion will balance supply and demand. Add in low cost, renewable raw materials and escalating petroleum prices, and the formula for steady, long-term profitable growth is in place.
Phillip Mango is a former technology executive and airlaid company owner. His consulting firm Phillip Mango Consulting focuses on new product and new market development in airlaid and other nonwovens. Mr. Mango can be reached at firstname.lastname@example.org.