The Year That Was
despite economic crises, raw material pricing and consolidation, the nonwovens industry continue to invest in the future.
By Karen McIntyre, Editor
In the history books, 2008 will be remembered as the year when the global financial system crashed, the U.S. elected its first African American president or Michael Phelp’ earned the most-ever gold medals in one Olympics game. In the nonwovens industry, it will be remembered as a time when nonwovens producers battled record high raw material prices by creating more efficient manufacturing prices, looked for new markets to combat pricing pressures and market maturity and still found time to invest in new technologies.
As we move into 2009, Nonwovens Industry has taken the time to compile what we consider to be the year’s top 10 most important news stories.
First Quality Enters
The Baby Diaper Market
In late 2007, First Quality, a maker of spunmelt nonwovens and marketer of some private label feminine hygiene articles, said it would buy the retail business of Covidien, including its sizable private label diaper business. The nonwovens industry then spent 2008 wondering how this deal would affect supply and demand in the spunmelt nonwovens market as one of its key consumers of spunmelt—Covidien—was now a part of a large-scale spunmelt manufacturer.
After the deal was announced spunmelt maker Avgol, a key supplier to Covidien, shelved plans to build a new line at its Mocksville, NC facility “It’s no secret that Covidien was a big customer of Avgol’s,” said company spokesman Dennis Durkin, shortly after the deal was announced. “There is no reason to not assume that they will source themselves but it is really too soon to judge the overall effect on the market. Of course, it could be a situation where we are just trading capacity—losing some business but gaining others.”
Covidien’s Retail Products business, headquartered in King of Prussia, PA, reported sales of $744 million in fiscal 2007. Products include adult incontinence, feminine hygiene, wet and dry wipes and baby diaper products. According to First Quality, the transaction, which was completed in the first calendar quarter of 2008, allows the company to enhance its relationships with retail customers by offering a broader, more innovative product line and greater value.
“The acquisition of Covidien’s Retail Products business is a compelling opportunity for First Quality,” said Richard Martorella, director of finance and treasury of First Quality. “The addition of Retail Products creates a more comprehensive Absorbent Hygiene business, solidifying First Quality’s position in our three core areas. Together, the First Quality Absorbent Hygiene division will provide customers with a full suite of premium products serving the infant care, adult incontinence and feminine hygiene segments. We welcome Covidien’s Retail Products business and its hardworking and dedicated employees to the First Quality family.”
Target the Hygiene Market
For years, the gold standard in hygiene markets has been Reifenhauser’s latest generation of Reicofil spunmelt technology. Praised for its cost efficiency and flexibility, Reicofil is the technology of choice for many of the key producers of disposable hygiene items, like baby diapers, and this has created a strong dominance for the technology in the spunmelt market, where its current marketshare is a reported 95%. The year 2008 was not much different with Reicofil investments announced by companies such as Pegas, Companhia Providencia and Fitesa; however, for the first time there are some rumblings felt for new technology in the hygiene market.
Italy’s Albis was the first major hygiene supplier to take the chance with non-Reicofil technology. Its seven-meter SMS line based on competing Oerlikon Neumag technology came onstream in April in time for the company to have samples present at the INDEX exhibition in April.
“The Neumag technology is completely different,” Albis commercial manager Pietro Landone told Nonwovens Industry this spring. “You can easily identify at least 10 major differences between this technology and Refenhauser. For one, this line is 40% wider than the widest Reicofil line.”
Additionally, the Neumag line uses thinner filaments resulting in more filaments per square inch, making the output stronger at a lower basis weight.
Meanwhile, RieterPerfojet in France has made strides in entering the spunmelt market with its PERFObond 3000 technology as well as sister company Rieter Automatik’s meltblown systems.
New to the spunmelt equipment market is Galileo Group, an Italian/
Bahrain company that has already contracted with new player Bahrain Nonwovens who is expected to being making product on the new line in 2009
Focus On Sustainability: Nonwovens Go Green
The green wave has hit the nonwovens industry on several fronts this year as the market faces the conundrum of how to make single-use products that can be deemed eco-friendly. In February, a session devoted to sustainability was by far the most popular part of the Vision 2008 Consumer Products conference in Fort Worth, TX. It was there that executives from Kimberly-Clark and Wal-Mart opened up on their companies’ approach to increasing sustainability on a corporate level.
The Vision conference’s tradition of honoring recent consumer product entrees also reflects an increased interest in green technologies. Last year, finalists for the prestigious Visionary Award included a glass cleaner with an impregnated nonwoven sleeve that reduces shipping weights considerably; a disposable dry sweeper cloth based on a renewable plastic derived from corn and a reusable nonwoven shopping bag.
Of course, these are just some of the eco-friendly, nonwovens-based products to emerge on store shelves in recent years. In fact, green products are appearing throughout the nonwovens supply chain. This movement has largely been led by green-minded consumer products companies such as Method, with a number of biodegradable and sustainable wiping products, and W.I.P. srl, a maker of hygiene products based on polylactic acid.
In January, a nonwovens industry newcomer set up shop in a facility once owned by PGI in Rogers, AG, with the goal of using regenerated cotton waste as raw material for spunlaced nonwoven wipes. Strateline Industries will use scrap materials from the manufacture of cotton T-shirts to make spunlace material which will be converted by Rockline Industries into wiping material.
According to company spokesman Jeffrey Post, nonwovens are ideal prducts for using regenerated materials because of their flexibility in combining other materials. “Even if it’s only 20% regenerated material, it bumps the cost down. Every time you replace some of the virgin with repurposed fibers, your costs go down.”
Meanwhile, industry veteran Ahlstrom late this year completed production of a new line able to make environmentally sound product based on recyclable and biodegradable materials, largely for the growing market for infusion products.
Much of the green activity taking place within nonwovens can be attributed to Natureworks PLA fiber, which is based on a renewable resource—corn—and uses less CO2 and few greenhouse emissions than typical petroleum-based feedstocks.
The Brazilian Invasion
The year 2008 brought with it announcements from Brazil’s two largest nonwovens producers that they would establish North American subsidiaries in the southeast U.S. In April, Fitesa said it would invest $120 million in the North American market where it would eventually build two spunmelt lines targeting the hygiene, medical and industrial markets. “We already have a customer base in North America and this will ease capacity on our South American lines to better serve those countries,” said Fernanda Gastal, director of marketing for Fitesa. The new lines, which will be built in Laurens County, SC.
Currently about 55-60% of Fitesa’s sales are targeted domestically. The maker of 40,000 tons of spunmelt nonwovens previously operated a nonwovens plant in Mooresville, NC but sold that operation to PGI in the early 1990s.
Fitesa’s announcement was followed by a similar move by Brazilian spunmelt maker Companhia Providencia, which said in early August it had established a wholly-owned subsidiary with the intent to begin production in Statesville, SC. The company’s board of directors has approved a plan to establish this subsidiary with the goal of creating a two-line nonwovens operation that will make an estimated 40,000 tons of nonwovens per year.
The two lines will represent an investment of $120 million for the company. The first line is expected to begin operation in July 2009; the second will come onstream during the first half of 2010. Both will be purchased from Reicofil.
According to executives, this deal was intended to reduce logistic costs and better position itself with its customer base in North America. Companhia Providencia currently operates nine spunmelt nonwovens line, all in Brazil. Its sales are split evenly between its local Brazilian market and foreign sales, including North America.
Raw Material Prices
2008 saw record high energy costs, which sent shock waves throughout the economy. As a major consumer of polypropylene and other petroleum-based raw materials, the nonwovens industry was doubly impacted by these increases. Not only did increased energy prices add to transportation and manufacturing expenses, so did the rising price of petroleum-based feedstocks. This summer, the pages of Nonwovens Industry magazine were filled with price increase announcements throughout the nonwovens industry supply chain. Around this time one nonwovens industry executive reported that nearly 50% of his time was spent determining how to combat increasing raw material prices.
Of course raising prices—and passing along increased costs to cash-strapped customers—is not the only way to combat rising raw material prices. In fact, it is a last resort for many nonwovens producers who have worked hard at doing more with less during these trying economic times. This has meant lowering basis weights without sacrificing quality, streamlining operations and, in some cases, exiting businesses deemed unprofitable.
As 2008 comes to a close, raw material prices seem to have stabilized for now, and while experts doubt that prices will ever return to the lower levels of the mid-1990s, they have pulled back to some degree and now leaner, more efficient nonwovens producers are ready to benefit.
Airlaid Restores Its Health
In 2001, the airlaid market created a serious oversupply issue when more than 100,000 tons of the material came onstream and the market has since then worked at trying to absorb all of this new capacity. In fact, only 50,000 tons—or less than half of what was installed in 2001 alone—has been added in the seven or eight years since then. The years following this unprecedented expansion were bleak for many nonwovens producers who had to deal with oversupply and low prices. During this time, two of North America’s airlaid leaders were forced to either shut down plants (Buckeye) or even file bankruptcy (Concert Industries) but slowly but surely the industry has gotten itself on track. In fact, the past 12 months have been described as a period of reasonable prosperity with supply and demand in balance and increasing prices.
Now that economic conditions are favorable, the question is where new growth will come from. Some companies have already announced investments—Concert has a new line going in in Germany; Fiberweb has added lines in Italy and China and McAirlaids is rumored to build a production site in Virginia—but for the most part airlaid producers have not been quick to expand. Much of this can be blamed on residual trauma from the oversupply crisis but the difficulty in starting up and operating airlaid machinery can also be attributed as can perception that supply still exceeds demand.
Failure to invest when needed can be just as detrimental as overinvestment, according to industry watchers. Without extra capacity, the market has not incentive to search for new market applications and customers—sick of supply shortages and higher prices—are more motivated to examine alternative substrates for their products.
INDA/EDANA Releases Flushability Guidelines
After four years and 40 companies, this year INDA and EDANA finally introduced The Guidance Document on the flushability of Nonwoven Consumer Products. The document contains guidelines representing the first-ever initiative to provide companies with a comprehensive framework for testing products to determine their flushability. The document is the culmination of four years of collaboration between INDA and EDANA, including technical expertise from member companies, knowledge of experts in academia, consultant engineering and the wastewater industry.
These guidelines were developed amid concerns that the growing use of disposable wipes—coupled with ignorance over what impact flushing a wipe could have on municipal sewage and wastewater treatment facilities—could lead to a negative backlash on the wipes industry. Because there was no clear definition of flushability, flushable nonwovens were at risk of becoming the scapegoat for many other wastewater conveyance and treatment problems, creating the potential for flushable products to be banned.
Shuts Its Doors
The nonwovens industry said goodbye to what was once one of its most promising companies in 2008 when much of Western Nonwovens’ assets were sold at auction to Milliken & Co. for a reported $12 million. According to sources familiar with the situation, Milliken purchased its one-time rival WNI to gain access to its customer lists and some technology and has no plans to continue operations at any of the six sites purchased in the deal in Illinois, Missouri, California, Utah and Florida.
Having grown steadily through acquisition and capital investment since its founding in 1997, Western Nonwovens decided around 2004 to invest heavily in its flame retardant fabrics, which largely targeted the bedding market, a decision many blame for its eventual demise.
The troubles for WNI started surfacing in 2007 when it sold its nylon spunboned business, Cerex Advanced Fabrics. This deal was followed by the rest of the company’s sale to a private equity firm. By early 2008, WNI sites in Oakland and Los Angeles, CA, Clearfield, UT and St. Louis, MO had closed and its Commerce, CA facility was sold to Southern Fiber. Not long after, a deal was struck for Simmons Bedding Company to buy sites in Orlando, FL and Sauget, IL for a reported $4 million but at the last minute this deal was trumped by Milliken’s offer.
Now, all that remains of WNI, which at its peak operate 13 factories and achieved sales of $150 million is a Clinton, TN site, now owned by equity investor Jon Vesely and former WNI Ken Hardin, which manufactures the Climashield line of insulation.
However, as we move into 2009, there are rumors of two former WNI managers buying the group’s Sauget, IL site where they could make generic highloft nonwovens for markets other than flame retardant fabrics or geotextiles.
China Is A Major Player
Like it or not, China has emerged recently as a major force in the global nonwovens industry. As western companies continue to invest and local companies emerge, nonwovens output in this large nation has doubled since 2001 and now represents more than 1.15 million tons. China now makes about 20% of the world’s nonwovens compared to just 3.7% in 1989, according to INDA figures.
Chinese trade organization estmate there are more than 2000 nonwovens production lines operating in China currently, but many of these are based on local technology and are not as sophisticated as western technology. However, more Western companies are investing in technology. In fact, of the top five nonwovens producers currently in China, one is based in Europe and another is based in the U.S.
London-based Fiberweb has a sizable airlaid operation in Tianjin, China, which was doubled in 2007 with the addition of a Chinese-made production line. Meanwhile, PGI Nonwovens, based in Charlotte, NC, has invested heavily in medical substrate and converting operations in Suzhou, China. Other western-based companies with sizable Chinese operations include Fiberweb, Johns Manville, Southern Felt, Ahlstrom and Hollingsworth & Vose.
The Continued Quest
For New Markets
It’s no doubt that the nonwovens industry has faced its share of challenges during the past 12 months, but it has also seen its bright spots. One major one has been the industry’s constant creation of new markets for nonwovens to penetrate. From flame retardant bedding to acoustical applications to ground coverings to new applications for wipes and other consumer products, the strength of the nonwovens industry has always lied in its diversity. When one market faces challenges, another can present opportunities for sales growth and profits.
Of course, most nonwovens executives are tight-lipped about the really new, innovation end uses but the amount of capacity coming onstream, both here and abroad, signals that growth—whether in existing or emerging areas—is on the horizon.