By region and based upon already announced projects, capacity growth during 2015 - 2017 in Asia Pacific is expected to be just under 9% per year and to lead all other global regions. Capacity growth in Europe is expected to be above 4% per year during this period with most of that new capacity being installed in Northern Europe and Russia. In North America, capacity growth is expected to be consistent with that of demand while new installations in China are forecasted to be limited in the near term following a multi-year period of rapid expansion.
Global demand growth for nonwovens made on this technology is expected to grow about 5% per year in tonnes and higher in square meters. We expect demand to grow just under 6% per year in square meters from 2015 – 2020. Higher square meter demand growth is related to the growing use of lower weight nonwovens in hygiene end uses which results in lower demand in tonnes. We estimate that global machine capacity utilization improved slightly in 2015 and will inch higher through 2017.
Demand is expected to grow at higher rates in emerging markets. Total market growth in tons is expected to be highest in Southern Asia, China, Africa and Asia-Pacific regions over 2015-2019. More moderate growth is projected in Europe, Russia and South America, while smaller growth is expected in the Middle East and North America where market penetration is high. Hygiene demand growth, as measured in square meters, is estimated to be greatest in Southern Asia, China, Africa, Asia-Pacific, South America and Europe, with more moderate growth in North America.
Demand for spunbonded and spunmelt nonwovens in hygiene end uses as well as in other end use markets will drive growth. Year-over-year demand growth in China has weakened from high levels but still remains attractive. On the whole, hygiene demand growth in the Asia-Pacific region is continuing to gain momentum from increasing use of spunbonded and spunmelt polypropylene nonwovens as a substitute for other nonwoven materials, as well as from increasing penetration of disposable hygiene products. Improving growth is beginning to result in increased machine utilization, particularly in Asia as a whole and among selected producers worldwide. Attractive growth in Asia Pacific and increasing capacity utilization in South America and China will attract new machine installations late in the period.
The largest market for spunmelt polypropylene is hygiene, which commands about two-thirds of the total worldwide capacity of fine and coarse denier spunmelt polypropylene nonwovens. Other important markets for nonwovens made from spunmelt polypropylene technology include a variety of construction applications (geotextiles, residential and commercial wall wrap and ground covers), home furnishings (furniture construction fabrics and carpet backing), medical and industrial protective apparel, automotive and other end uses. We estimate that more nonwovens are made from spunmelt polypropylene technology than any other type of nonwovens technology worldwide.
We expect machine capacity utilization to increase through 2020. In certain global regions, this will lead to installation of new capacity to meet demand. In some of those global regions which are oversupplied, demand is somewhat concentrated among selected producers. These producers will have higher capacity utilization than the regional average, which may drive installation of added capacity in an otherwise oversupplied market.
Over the last several years, the global industry for polypropylene spunmelt nonwovens has been installing the latest generation high output technology at a frenzied pace.
Historically, spunmelt polypropylene capacity has grown to keep pace with rising demand. Over the last several years, however, other reasons have arisen to install new capacity. Demand for lower weight spunmelt nonwovens, which could not be cost efficiently made on older generation technology, drove installation of new capacity.
Secondly, the latest generation spunmelt technology offers more spinning beams, wider width, higher throughput, faster line speeds, finer fiber denier extrusion, greater energy efficiency and higher output than earlier generation technology. This new technology, once fully utilized, can make a lower cost product. The versatility and benefits of this new generation of technology motivated many producers to modernize, even in advance of demand being sufficient to absorb the new capacity.
Thirdly, there has been significant competitive positioning in strategic and emerging markets in the last few years. New producers have entered North America, China, Peru, Egypt, Russia, Indonesia and India. Lastly, while there has been some consolidation among producers, there has been very little equipment rationalization. Early generation equipment continues to operate, mostly at cash cost margins.
We expect that the newest units of capacity will be utilized first as this technology will have the greatest product capability and will achieve lowest cost of manufacture once the lines are fully utilized. The next earliest generation of capacity may then replace even older units of capacity now in operation, possibly resulting in the retirement of very early generation technology. We estimate that in 2015, 20% of all fine denier spunbonded capacity still in operation was early generation.
In addition to how producers deal with the installation of new and the rationalization of old capacity, there are other impacts that new installations of spunbonded polypropylene capacity bring about. One of these impacts is the increasingly high capital cost of new spunmelt polypropylene technology, which could prompt consolidation among some producers to lessen the burden of the high investment cost. A second related impact is the challenge of technological obsolescence requiring continuing reinvestment to remain competitive. The rapid pace of technology modernization drives concern about falling behind in the race to modernize, forcing a choice between modernizing, repositioning or even withdrawing from the market. Still, another issue will be the change in import and export flows as new producers in regions formerly requiring imports seek to become exporters.
We are now witnessing producers continuing to invest in new technology in order to remain product capable and to build new plants in developing markets to achieve higher growth. Consolidation among the largest producers has occurred and may likely continue. Consolidation among smaller producers may also occur for many of the same reasons we have described.
Despite these impacts, the modernization of the spunmelt polypropylene technology platform is healthy and positive. New capacity is being installed to serve growing market demand and the markets’ challenging and ever changing needs. This dynamic demonstrates the vibrancy of the market demand for products made on this, the leading technology for nonwoven manufacture in the world.