Eugene Gerden, contributing editor04.12.16
Russian sales for Kimberly-Clark, Procter & Gamble and other global majors specialized in the production of diapers, napkins and feminine hygiene products on the basis of nonwovens may significantly decline this year, due to recently announced plans of the Russian government together with some leading domestic nonwovens producers to allocate funds for the establishment of large-scale domestic production of these products.
To date, the Russian market of nonwoven healthcare products has been mainly dominated by several global leaders, mostly based in the U.S., which were able to withdraw the majority of competitors out of the market as far back as at the beginning of the 2000s.
According to estimates of the Russian Ministry of Industry and Trade, the combined share of global majors in Russia is estimated at about 96%, while the share of domestic producers was insignificant.
However, the beginning of the economic crisis in Russia and devaluation of the national currency—the ruble, (that was mostly caused by Western sanctions) has resulted in the change of a balance in the market.
One of the major influences of this reversal is the decision of global majors to increase prices for their Russian range by an average of 25-30% with the possibility that further price increases may follow—due to the weakened Russian currency. This can negatively affect the profits of producers.
The price increase has already sparked fierce criticism from Russian customers and some local officials, who feel that the major companies are abusing their dominant position in the Russian market in order to dictate prices for both local consumers and retail chains. Meanwhile, the market currently is experiencing a lack of real competition.
To date, several complaints have already been sent to the Russian government and the local Federal Anti-Monopoly Service, asking to take a more closer look at the current situation, which is observed in some segments of the Russian market for nonwovens.
In the meantime, the Russian government is aware of the current problems of the market and is considering ways to solve them.
Part of the plan is to stimulate competition in the domestic market through the establishment and positioning of local players. These new companies are expected to offer products that are 20-30% cheaper than products imported from Western companies and even products made within Russia by Western companies.
According to Nadezhda Samoylenko, vice president of the Russian Union of Entrepreneurs of Textile and Light Industry, (a public association, which unites Russia’s leading light industry and nonwovens producers), the first plant capable of making diapers in Russia will be launched in coming weeks. Production is expected to be located near one of the country’s leading nonwovens producers, the name of which will be announced later this year.
And this plant will not be the only one. Plans are underway for similar plants to be established in different parts of Russia during the next couple of years.
According to Viktor Evtukhov, Russia’s deputy minister of industry and trade, the government plans to provide support for the investors of the project, which is expected to be in the form of cheap loans and other benefits.
Ukraine to Attract U.S. Investments in Domestic Nonwovens Industry
Ukraine plans to create conditions that will lead to a significant increase of the volume of foreign investments in the domestic nonwovens industry during the next several years, according to a recent report, issued by the Ukranian Ministry of Economy. The company expects to attract foreign investment from Western countries, particularly the U.S., through the privatization of some of the country’s leading nonwovens producers.
As part of these plans, representatives of the Ukranian government plan to visit the U.S. during the next several months in order to conduct talks with local businesses.
Last year Arseniy Yatsenyuk, Ukraine’s prime minister, visited the U.S., where he presented a list of several domestic nonwovens producers that will be privatized by the end of the current year. This presentation took place during the investment conference in Washington, which was held on July 13, 2015, and was organized by the The U.S. Chamber of Commerce and the Department of Commerce.
The Ukranian government hopes to sell some of the country’s leading nonwovens enterprises, many of which currently have remained idle due to the ongoing economic crisis in the country and devaluation of the local currency—hryvna and currently do not have enough funds for their further development.
From its side, the Ukranian state has already promised to provide numerous benefits and concessions to foreign investors, that will provide funds in the development of the domestic nonwovens enterprises, as well as to significantly improve business climate in the country.
In recent years the development of the domestic nonwovens production has become one of the priorities for the Ukranian government, due to higher margins, associated with the industry, compared to the segment of common textile.
Until 2014 the majority of investments in the Ukranian nonwovens industry have been provided by Russian businesses, however, due to the current tensions between the two countries, the volume of Russian investment has significantly declined.
According to plans of the Ukranian government, up to $300 million of investments from Western countries should be attracted to the Ukranian nonwovens industry during the next several years. It is planned that this will allow it to increase the volume of domestic nonwovens production by at least 1.5 times and even to start exports to abroad.
The attraction of foreign investments is expected to take place also through the design of a special roadmap, which should create an investment profile of the Ukranian industry of nonwovens and technical textile, and which should be designed by the experts of the Ukranian Ministry of Economy together with the U.S. experts already by the middle of autumn of the current year.
It is planned that the expansion of the U.S. and other Western investors to Ukraine may take place through the acquisition of some of Ukraine’s leading nonwovens enterprises, or establishing new companies on the basis of the existing facilities.
According to Thomas Donohue, head of the U.S. Chamber of Commerce, many U.S. companies are interested in the investments in the Ukraine, including its nonwovens sectors, but still have some fears that their funds will not be protected properly under the current legislative system of Ukraine.
Western European Nonwovens Industry May Face Stagnation in Coming Years
The Western European nonwovens industry may face a deep stagnation during the next several years that will be mainly due to the slowdown of growth rates in the local market, caused by the deterioration of the economic environment and general uncertainty in the largest economies of Western Europe.
According to a recent report from Germany-based Commerzbank, since 2013 the growth rates of the Western European nonwovens market have started to slow after a significant growth period from 2007-2013, which took place despite the global recession in 2008-2009 and its consequences.
The growth in 2007-2013 can be attributed to a significant increase in demand for nonwovens from the major consuming industries and extension of the scope of their application. At the same time there is a possibility that such a situation may change, as in recent years the demand for nonwovens in Western Europe has substantially declined, compared to previous years, which may result in the beginning of a recession in the industry.
These trends are confirmed by the analysts of the Russian Ministry of Industry and Trade, according to which the growth rates of the nonwovens industry of the U.K., France and Germany, the largest Western European economies, will not exceed 2-3% per year during the next several years.
This is significantly lower than the average annual growth rates of the country’s nonwovens industries, which were observed during the period of 2007-2013 and which were varied in range of 7-8%. At the same time the growth may be even slower in Spain, Italy, Greece and other southern countries of the European Union, as the demand for nonwovens in Southern Europe has traditionally been lower, compared to more developed northern EU states.
In the case of the U.K., which to date has been one of the EU’s largest producers and consumers of nonwovens, further predictions are even much worse due to the country’s possible leave of the European Union, which may take place in July of this year as a result of the forthcoming referendum.
The decision to leave the European Union may result in the outflow of investments out of the country and a significant decline in the demand and production of nonwovens in the country.
The expected U.K. decline means that Germany will remain the EU’s leading nonwovens producer during the next several years. Currently the share of the nonwovens and technical textiles sector in the overall structure of the German textile and light industry market is estimated at 50% with the possibility of increasing further at least until 2020.
The country will regain its leadership also due to a strong R&D base and its status as a global technology market leader. This is expected to result in the increase of exports of German nonwovens and technical textile products and technologies abroad. At the same time a lack of know-how protection currently remains one of the biggest challenges for German nonwovens producers.
In the meantime, analysts of the Russian Ministry of Industry and Trade believe that the slump in oil prices should provide additional support to the EU nonwovens producers, which will lead to the reduction in raw materials costs and should benefit the nonwovens and technical textiles industry as a whole.
To date, the Russian market of nonwoven healthcare products has been mainly dominated by several global leaders, mostly based in the U.S., which were able to withdraw the majority of competitors out of the market as far back as at the beginning of the 2000s.
According to estimates of the Russian Ministry of Industry and Trade, the combined share of global majors in Russia is estimated at about 96%, while the share of domestic producers was insignificant.
However, the beginning of the economic crisis in Russia and devaluation of the national currency—the ruble, (that was mostly caused by Western sanctions) has resulted in the change of a balance in the market.
One of the major influences of this reversal is the decision of global majors to increase prices for their Russian range by an average of 25-30% with the possibility that further price increases may follow—due to the weakened Russian currency. This can negatively affect the profits of producers.
The price increase has already sparked fierce criticism from Russian customers and some local officials, who feel that the major companies are abusing their dominant position in the Russian market in order to dictate prices for both local consumers and retail chains. Meanwhile, the market currently is experiencing a lack of real competition.
To date, several complaints have already been sent to the Russian government and the local Federal Anti-Monopoly Service, asking to take a more closer look at the current situation, which is observed in some segments of the Russian market for nonwovens.
In the meantime, the Russian government is aware of the current problems of the market and is considering ways to solve them.
Part of the plan is to stimulate competition in the domestic market through the establishment and positioning of local players. These new companies are expected to offer products that are 20-30% cheaper than products imported from Western companies and even products made within Russia by Western companies.
According to Nadezhda Samoylenko, vice president of the Russian Union of Entrepreneurs of Textile and Light Industry, (a public association, which unites Russia’s leading light industry and nonwovens producers), the first plant capable of making diapers in Russia will be launched in coming weeks. Production is expected to be located near one of the country’s leading nonwovens producers, the name of which will be announced later this year.
And this plant will not be the only one. Plans are underway for similar plants to be established in different parts of Russia during the next couple of years.
According to Viktor Evtukhov, Russia’s deputy minister of industry and trade, the government plans to provide support for the investors of the project, which is expected to be in the form of cheap loans and other benefits.
Ukraine to Attract U.S. Investments in Domestic Nonwovens Industry
Ukraine plans to create conditions that will lead to a significant increase of the volume of foreign investments in the domestic nonwovens industry during the next several years, according to a recent report, issued by the Ukranian Ministry of Economy. The company expects to attract foreign investment from Western countries, particularly the U.S., through the privatization of some of the country’s leading nonwovens producers.
As part of these plans, representatives of the Ukranian government plan to visit the U.S. during the next several months in order to conduct talks with local businesses.
Last year Arseniy Yatsenyuk, Ukraine’s prime minister, visited the U.S., where he presented a list of several domestic nonwovens producers that will be privatized by the end of the current year. This presentation took place during the investment conference in Washington, which was held on July 13, 2015, and was organized by the The U.S. Chamber of Commerce and the Department of Commerce.
The Ukranian government hopes to sell some of the country’s leading nonwovens enterprises, many of which currently have remained idle due to the ongoing economic crisis in the country and devaluation of the local currency—hryvna and currently do not have enough funds for their further development.
From its side, the Ukranian state has already promised to provide numerous benefits and concessions to foreign investors, that will provide funds in the development of the domestic nonwovens enterprises, as well as to significantly improve business climate in the country.
In recent years the development of the domestic nonwovens production has become one of the priorities for the Ukranian government, due to higher margins, associated with the industry, compared to the segment of common textile.
Until 2014 the majority of investments in the Ukranian nonwovens industry have been provided by Russian businesses, however, due to the current tensions between the two countries, the volume of Russian investment has significantly declined.
According to plans of the Ukranian government, up to $300 million of investments from Western countries should be attracted to the Ukranian nonwovens industry during the next several years. It is planned that this will allow it to increase the volume of domestic nonwovens production by at least 1.5 times and even to start exports to abroad.
The attraction of foreign investments is expected to take place also through the design of a special roadmap, which should create an investment profile of the Ukranian industry of nonwovens and technical textile, and which should be designed by the experts of the Ukranian Ministry of Economy together with the U.S. experts already by the middle of autumn of the current year.
It is planned that the expansion of the U.S. and other Western investors to Ukraine may take place through the acquisition of some of Ukraine’s leading nonwovens enterprises, or establishing new companies on the basis of the existing facilities.
According to Thomas Donohue, head of the U.S. Chamber of Commerce, many U.S. companies are interested in the investments in the Ukraine, including its nonwovens sectors, but still have some fears that their funds will not be protected properly under the current legislative system of Ukraine.
Western European Nonwovens Industry May Face Stagnation in Coming Years
The Western European nonwovens industry may face a deep stagnation during the next several years that will be mainly due to the slowdown of growth rates in the local market, caused by the deterioration of the economic environment and general uncertainty in the largest economies of Western Europe.
According to a recent report from Germany-based Commerzbank, since 2013 the growth rates of the Western European nonwovens market have started to slow after a significant growth period from 2007-2013, which took place despite the global recession in 2008-2009 and its consequences.
The growth in 2007-2013 can be attributed to a significant increase in demand for nonwovens from the major consuming industries and extension of the scope of their application. At the same time there is a possibility that such a situation may change, as in recent years the demand for nonwovens in Western Europe has substantially declined, compared to previous years, which may result in the beginning of a recession in the industry.
These trends are confirmed by the analysts of the Russian Ministry of Industry and Trade, according to which the growth rates of the nonwovens industry of the U.K., France and Germany, the largest Western European economies, will not exceed 2-3% per year during the next several years.
This is significantly lower than the average annual growth rates of the country’s nonwovens industries, which were observed during the period of 2007-2013 and which were varied in range of 7-8%. At the same time the growth may be even slower in Spain, Italy, Greece and other southern countries of the European Union, as the demand for nonwovens in Southern Europe has traditionally been lower, compared to more developed northern EU states.
In the case of the U.K., which to date has been one of the EU’s largest producers and consumers of nonwovens, further predictions are even much worse due to the country’s possible leave of the European Union, which may take place in July of this year as a result of the forthcoming referendum.
The decision to leave the European Union may result in the outflow of investments out of the country and a significant decline in the demand and production of nonwovens in the country.
The expected U.K. decline means that Germany will remain the EU’s leading nonwovens producer during the next several years. Currently the share of the nonwovens and technical textiles sector in the overall structure of the German textile and light industry market is estimated at 50% with the possibility of increasing further at least until 2020.
The country will regain its leadership also due to a strong R&D base and its status as a global technology market leader. This is expected to result in the increase of exports of German nonwovens and technical textile products and technologies abroad. At the same time a lack of know-how protection currently remains one of the biggest challenges for German nonwovens producers.
In the meantime, analysts of the Russian Ministry of Industry and Trade believe that the slump in oil prices should provide additional support to the EU nonwovens producers, which will lead to the reduction in raw materials costs and should benefit the nonwovens and technical textiles industry as a whole.
