In recent years, Southeast Asia, including such countries as Malaysia, Thailand, Vietnam and Indonesia has emerged as a hotbed of nonwovens activity as consumers become more sophisticated and increased income levels create more opportunities for disposable diapers.
According to industry statistics, nonwovens growth in this region has been in the double-digit range since 2010 and this growth is expected to continue as nonwovens producers and consumer products manufacturers, led by Procter & Gamble in the U.S. and Japan’s Unicharm, continue to invest ambitiously in the region.
“The markets for baby diapers and feminine hygiene, which are our main businesses are growing rapidly,” says a Unicharm spokesperson. “More development is expected from now on. It is the same for the larger Asian region as a whole.”
During the last 12 months, Unicharm has stepped up activity in Southeast Asia buying Myanmar Care Products, a maker of baby diapers and feminine hygiene items in Myanmar, and Diana Products, a Vietnamese hygiene products manufactuer. Unicharm has also established a production site in India.
“These are positive investments,” says Unicharm's spokesperson. “The objective is to accelerate the speed of development in both countries by introduction manufacturing technology and marketing skills into those companies’ distribution network and brand power.”
As Unicharm focuses on Southeast Asia so have Japan’s nonwovens producers with many of the country’s top manufacturers establishing operations tghere.
Unitika is expected to increase capacity at its polyester spunbond nonwovens plant in Thailand, where it currently makes 4,500 tons of material per year. The new site, which will likely come onstream in 2015-2016 will make 10,000 tons of nonwovens per year and will not only meet demand for materials in southeast Asia but also reinforce exports to both China and the U.S.
Also in Thailand, Asahi Kasei had an official opening for its new spunbond plant in February 2013. The company announced it would build a 20,000 ton line in Thailand in 2011 to expand its business in the Asian hygiene market. Another Japanese producer, Mitsui Chemical, has a two-line operation in Thailand.
As for thermal bonded nonwovens, JNC and Daiwabo Polytec are both starting offshore production—JNC in Thailand and Daiwabo in Indonesia—marking both companies’ first production sites outside of Thailand. Tapyrus now makes meltblown nonwovens in Thailand.
All of this investment is the result of increased demand for diapers and sanitary products both in China and Southeast Asia. Japanese hygiene manufacturers are pushing forward local production and expansion of overseas production bases and the local production of polypropylene spunbond nonwovens and thermal bonded nonwovens is targeting the production of hygiene products like diapers and other sanitary products. As these hygiene manufacturers have moved into Southeast Asia so have the Japanese nonwovens makers who want to supply them.
Because this overseas production is less expensive than Japanese operations, these nonwovens makers are shifting a lot of their output to these new production sites. Therefore, the continued investment of Japanese nonwovens companies in foreign operations could likely result in a decrease of Japanese-made goods.
A Diaper Dandy
The majority of growth in the region is being generated by the diaper category, thanks to a robust growth rate and rising incomes in many countries. The most populous country is Indonesia and is experiencing rapid economic development. One company optimistic about this company’s future is Procter & Gamble, who last fall opened a new diaper plant near Karawang and unveiled plans to add a second plant in the country, making the site that largest for the company in Southeast Asia.
The new plant will primarily produce Pampers diapers for the local market, but will also serve as the source of exports needed to balance supply and demand in the region, and serve as a regional hub for raw materials supplies. Under construction since 2011, the plant is now ready to be fully operational and serve the growing demand for P&G’s products in Indonesia and Asia. There will be approximately 8 million Indonesian babies alone within the next five years.
Local Indonesian producer Spunindo Jaya was established in 1997 in Surabaya, the country’s second largest city. Since then, the operation has evolved from a 3,500 ton manufacturer with one spinning bean to a major manufacturer of SSMMS nonwovens with 12,000 tons of capacity per year. Other technologies available include metlblown nonwovens.
According to Spunindo’s Teguh Luntoro, the company serves the U.S., Asia, Europe, Australia and New Zealand in markets ranging from personal care, medical, apparel, automotives, agriculture and home furnishings and filtration. He says he has seen a lot of changes in his home market, where Spunindo was the first to manufacturer spunmelt on a large-scale, in recent years.
“A lot of foreign investment is being made in Southeast Asia reflecting that this market is promising. This region has big market potential which still has a big opportunity for development, he says. “With this investment coming, industry players have a better supply chain, which in the end increases their capabilities to drive the market penetration for new products faster.”
Noting that not all markets are created equal, Luntoro adds that companies need to meet the needs of customers in different regions.
“The market characteristics here are quite different from Europe,” he says. “Customers in Europe usually need specifically developed products which involve intense research and development compared with customers in Asia. High specifications, more technical requirements for products are usually what differs them from Asian customers.”
Also in Indonesia, Toray Advance Materials, a Korean company that has expanded ambitiously in Asia in recent years, has recently completed work on a 20,000-ton spunbond line in Tangerang. According to commercial manager Evan Lee, the decision to invest in Indonesia is in sync with the company’s ambition to be the leading spunbond maker in Asia. Toray has already committed to a new line in China, the country’s fourth in under a decade.
“We have proceeded with the continuous and planned investment in the Asian market with full consideration before making any decisions,” Lee says. “But, we worry about the current oversupply situation due to over investments in a short period in certain areas even though the market is growing. There is not much differences between nonwoven suppliers because of similar machines used and manufacturing processes utilized. This can be negative and hinder proper profit management for growth.”
According to data provided by Toray, 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.
In other investment news, Thailand’s own CNC International announced in early 2013 it would add a 24,000-ton Reicofil 4 line in Thailand, adding to its current capacity of 15,000 tons. 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 and 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.
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.
Michale Staal Axelsen, CEO of Fibertex Personal Care, says his company chose the Malaysian locations for a number of reasons including a low cost base, ease of operation, a highly skilled labor force, central location and attractive trade agreements. “We have definitely chosen an ideal base and entered a long term growth market,” he says adding that his company supplies the entire Asia-Pacific region from this base.
“From a population view point alone China and India are of course driving growth but we also see significant growth in ASEAN and especially in Indonesia and Vietnam and the demand for adult incontinence products is growing in Japan,” says Axelsen.
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.
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.