In the past couple of years, China has been in the news a lot in the nonwovens industry with major expansions underway by both local players and international companies looking to capitalize on growth in this quickly growing emerging market. However, a number of companies are looking beyond China into other Asian markets, where similar growth is expected.
Like in China, growth in Pacific Rim countries such as Indonesia, Malaysia or Vietnam will be driven by increases in the gross domestic product (GDP) as consumers gain more disposable income for items like disposable diapers 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, which announced last year it would set up a subsidiary in Jakarta, Indonesia in an effort to capitalize on growth in the ASEAN region.
These investments are being driven by demand for disposable baby diapers, which is expected to grow at a rapid pace in the ASEAN countries on the back of high economic growth and lifestyle changes brought about by rising national incomes. Particularly 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.
“After the China market, ASEAN would have the most potential market before India. Among the ASEAN, Indonesia has the biggest population and has strong economic growth these days,” explains Evan Lee, deputy general manager of Toray Advanced Materials.
The company’s new 20,000-ton spunmelt line is expected to be operational sometime next year. Toray has also been ambitious in China where it is adding a third line—its second investment in as many years and its third since 2008—which will bring total output there to 58,000 tons.
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 within two years, 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.
For Unicharm, the group has made clear its objective to achieve a dominant position in 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.”