David J. Price, Partner, Price Hanna Consultants LLC04.12.21
The impact of Covid-19 on the global spunlaid polypropylene nonwoven market in 2020 was dramatic to say the least. This market entered the year facing a variety of opportunities and challenges. Rising capacity, brought about by the installation of new highly advanced technology, was entering the market against a backdrop of slowing economic growth in many global regions. An economic slowdown was expected to occur after an extended period of growth, further fueled by trade tensions and tariffs between the U.S. and China. This, in combination with low birth rates and healthcare concerns over a new Coronavirus, placed further pressure on utilization of capacity entering the market. Moreover, the business was faced with challenges to adopt sustainable raw materials in advance of looming governmental regulations.
These conditions were radically set to the side as the full impact of Covid-19 came to bear. The industry suddenly grappled with shortages of medical PPE, face masks and surge demand for anything nonwoven used in hygiene, medical and wiping markets.
Market oversupply concerns were suddenly reversed as spunlaid polypropylene capacity became fully utilized across the world. Many decommissioned lines returned to service to meet demand. Profits increased with full machine utilization and level raw material costs through mid-year.
Not all nonwoven markets benefited from the early impact of the Covid-19. The automotive and home furnishings markets encountered a severe decline in demand through mid-year but began to recover in Q3 2020.
Faced with unprecedented surge demand, spunlaid polypropylene nonwoven technology providers and producers, along with producers and providers of other nonwoven technologies, responded quickly to meet demand with resourcefulness and ingenuity.
While face mask demand and stand-alone meltblown capacity dominated the headlines, installations of new spunlaid polypropylene capacity continued to grow at an impressive rate.
We estimate that about 210,000 tons of new capacity were commissioned in 2020. Of that amount, about 155,000 tons was Reicofil 5 technology. This capacity, ordered in advance of the pandemic, quickly achieved full capacity utilization. In 2021, we estimate another 166,000 tons of new capacity will be commissioned of which 136,000 tons will be Reicofil 5 technology. We expect that 113,000 tons of Reicofil 5 technology will be installed in 2022 followed by 55,0000 tons in 2023 and 30,000 tons in 2024. In total, we judge that about 575,000 tons of spunlaid capacity will be commissioned during the period 2020-2024. This would represent an increase in capacity of just over 5% over that present in 2019. Additional capacity is expected to be installed from a variety of other technology providers during the period as well.
The spunlaid polypropylene nonwovens business has made great strides in developing new, more highly productive and reliable manufacturing technology and a variety of product innovations attractive to end use consumers. Producers of this technology around the world continue to install the most modern generation of technology to gain product and productivity benefits, notwithstanding the impact that these large increments of new capacity have on market capacity utilization.
We envision demand to remain elevated through 2021 resulting in high-capacity utilization during most of the year. We estimate that most of the new capacity scheduled to be commissioned in 2021 will occur in the second half of the year. We dare to say that we expect demand will return to being driven by normal demand drivers in 2022 and beyond. In that context, we expect that low birth rates in nearly all global regions will weigh on baby diaper demand. We expect year over year annual adult incontinence demand growth to range from 5-6% during the period. We expect moderate economic conditions in most global markets barring negative energy, inflation, debt, civil unrest, and war effects. We expect disposable market penetration to continue to increase in Southern Asia (India).
Oversupply can be expected to arise in selective global regions by 2024. In that case producer profitability will decline from current levels. Raw material costs will remain volatile and disproportionate among regions. In general, we expect raw material costs to favor the upside. We expect that pandemic driven demand will soften beginning in 2022. Prior and during 2022, we expect previously decommissioned units of capacity to be shut down as new capacity enters the market and demand slows. As is always the case, new capacity will be operated in favor of older generation technology.
We expect the pace of new capacity investment will slow after 2024 until new capacity is absorbed. This expectation could be impacted by the decommissioning of earlier generation capacity. We also expect that upgrades to existing capacity may occur to enhance the capability of existing machines.
Much like other regions, capacity in North America is fully utilized at present. We expect demand growth for baby diapers will slow from pandemic related stockpiling and fall in line with low year-over-year birth rates. Demand for adult incontinence products continues to increase at a 5–6% annual rate. Rationalization of formerly decommissioned capacity brought into service during the pandemic is expected to occur during 2021 as new generation capacity enters the market and demand ebbs. Demand for spunlaid polypropylene nonwovens in construction, medical and technical specialty markets is expected to continue to be attractive assuming stable macroeconomic and health conditions. More than 120,000 tons of new capacity are expected to be commissioned from 2021-2024 equal to a year-on-year growth rate of 5%. Overcapacity is likely present in 2025. Nevertheless, some producers with aging capacity may need to invest in new technology near the end of the period bringing pressure to decommission early generation technology.
In South America, pandemic related capacity utilization is high. The last increment of new capacity added in the region was in 2016 by Fitesa in Brazil. Fitesa will commission an R5 machine with a nameplate capacity of about 30,000 tons in the second half of 2021. Selected producer capacity is aging, and the region’s economic trends continue to improve. Demand for disposable hygiene and other nonwoven markets is trending higher. Adult incontinence products hold a strong future growth potential. We expect additional capacity to be added before the end of the period to serve growing demand and modernize existing technology.
In Greater Europe, 75,000 tons of new capacity entered the market in 2020 of which 50,000 tons was in Turkey (Gulsan, General Tekstil). Union and Innovatec will together commission about 31,000 tons of capacity in 2021. Gulsan will add 25,000 tons in the second half 2022. We expect capacity utilization to weaken in 2022 as capacity outpaces demand growth in both regional and export markets.
In the Middle East and North Africa, the pandemic related demand surge provided much needed higher capacity utilization in the region. We expect capacity utilization to decline in 2022 and through the period but not significantly so. We do not include Iran in our analysis of the MENA region. The installation of advanced technology by Baftineh in Iran in the second half of 2020 has modernized the company’s technology platform and added product capabilities to its portfolio.
In South Africa, capacity installations by PFNonwovens and Spunchem were fully realized in 2020. We do not expect any additional capacity installations in the near term.
In Southern Asia, demand continues to grow as the market penetration of disposable nonwovens increases. Toray commissioned a new Reicofil 4s line with an annual nameplate capacity of 20,000 tons in its new plant in India in Q4 2020. Global Nonwovens is expected to commission an R5 line with a capacity of about 30,000 tons in 2022. This will result in Global Nonwovens having three lines with a total nameplate capacity of about 70,000 tons per year in India. Avgol will commission an upgraded Reicofil 3.1 line moved from Israel to a second new plant in India in 2022. We suspect there will be more capacity installed in India before 2025 as demand growth moves higher. Capacity utilization remains high in the region and supplemented with imports from the Middle East, Asia-Pacific and China based producers.
In Asia-Pacific, Fitesa/CNC commissioned an R5 machine in Thailand at year end 2020. This machine has an annual nameplate capacity of about 30,000 tons. Asahi (Thailand) and Fibertex (Malaysia) will commission individual lines in 2021 which have a total annual nameplate capacity of 30,000 tons. Asahi closed its typhoon damaged plan in Nobeoko, Japan, in 2020. This plant contained three lines with a total annual capacity of 26,000 tons. A Reicofil 3.1 line at this location was sold to Beautiful Nonwovens (China). Beautiful will reportedly recommission this line at its Uniquetex plant in the U.S. Demand in the region is growing but more slowing than prior periods. We expect further capacity announcements in the region may not occur until after 2023.
In China, at least 65,000 tons of new PP SB/SMS capacity were commissioned in 2020 and hundreds of stand-alone meltblown lines. Many of these meltblown lines have since been retired but ~100 or more remain in operation. In 2021, Jofo Wuxi and Allmed will install Reicofil 5 technology. Yizhou will also add capacity. We estimate that at least 50,000 tons of new capacity will be commissioned in 2021. Berry will install a new line in 2022 with an estimated annual nameplate capacity of 20,000 tons. China seems gearing to add much new capacity to supply nonwoven substrates for surgical gowns and drapes to the world in the face of localization talk. While we expect more capacity will be installed in China during 2021-2025, we estimate annual demand growth for Chinese-made spunlaid polypropylene nonwovens to soften as compared to prior periods which could impact future capacity growth.
At present, we expect average annual global demand growth in tons from 2020-2025 to be around 5% annually. This outlook is sensitive to macroeconomic factors, disease shocks and global unrest. Demand growth will be the highest in Southern Asia (India) and Africa followed by that in Asia-Pacific and China. Demand growth will be more moderate in North and South America, Greater Europe and the Middle East.
In summary, we expect capacity growth to be greater than demand through the period driven by the desire to modernize technology. This will create pressure to decommission early generation technology to achieve greater capacity utilization.
Demand growth for spunlaid polypropylene nonwovens in Southern Asia, Asia-Pacific and China is expected to be the highest in the world through 2025 and capacity will be installed to meet that demand. With that said, there is the risk that competitive pressures will result in more capacity than needed being added in these regions.
Leading global producers have achieved and continue to actively pursue advancements in spunlaid polypropylene nonwoven loft and softness surface features used in premium hygiene products to meet customer demand. While the highest consumer demand for these products is in Asia, demand for these products is also increasing in Western Europe and the U.S. It is remarkable to witness the results thus far of innovations on this front with producers addressing this challenge using and exploring mechanical and raw material variations.
David J. Price is the author of the Price Hanna Consultants LLC report Spunbonded and Spunmelt Nonwoven Polypropylene World Capacities, Supply/Demand, Manufacturing Economics and Profitability. Our latest report on this topic will be published in April 2021 covering the period 2015, 2020 - 2025. To obtain a detailed prospectus for this study, please contact Michele Scannapieco, Price Hanna Consultants LLC, at mscannapieco@pricehanna.com or visit our website www.pricehanna.com.
These conditions were radically set to the side as the full impact of Covid-19 came to bear. The industry suddenly grappled with shortages of medical PPE, face masks and surge demand for anything nonwoven used in hygiene, medical and wiping markets.
Market oversupply concerns were suddenly reversed as spunlaid polypropylene capacity became fully utilized across the world. Many decommissioned lines returned to service to meet demand. Profits increased with full machine utilization and level raw material costs through mid-year.
Not all nonwoven markets benefited from the early impact of the Covid-19. The automotive and home furnishings markets encountered a severe decline in demand through mid-year but began to recover in Q3 2020.
Faced with unprecedented surge demand, spunlaid polypropylene nonwoven technology providers and producers, along with producers and providers of other nonwoven technologies, responded quickly to meet demand with resourcefulness and ingenuity.
While face mask demand and stand-alone meltblown capacity dominated the headlines, installations of new spunlaid polypropylene capacity continued to grow at an impressive rate.
We estimate that about 210,000 tons of new capacity were commissioned in 2020. Of that amount, about 155,000 tons was Reicofil 5 technology. This capacity, ordered in advance of the pandemic, quickly achieved full capacity utilization. In 2021, we estimate another 166,000 tons of new capacity will be commissioned of which 136,000 tons will be Reicofil 5 technology. We expect that 113,000 tons of Reicofil 5 technology will be installed in 2022 followed by 55,0000 tons in 2023 and 30,000 tons in 2024. In total, we judge that about 575,000 tons of spunlaid capacity will be commissioned during the period 2020-2024. This would represent an increase in capacity of just over 5% over that present in 2019. Additional capacity is expected to be installed from a variety of other technology providers during the period as well.
The spunlaid polypropylene nonwovens business has made great strides in developing new, more highly productive and reliable manufacturing technology and a variety of product innovations attractive to end use consumers. Producers of this technology around the world continue to install the most modern generation of technology to gain product and productivity benefits, notwithstanding the impact that these large increments of new capacity have on market capacity utilization.
We envision demand to remain elevated through 2021 resulting in high-capacity utilization during most of the year. We estimate that most of the new capacity scheduled to be commissioned in 2021 will occur in the second half of the year. We dare to say that we expect demand will return to being driven by normal demand drivers in 2022 and beyond. In that context, we expect that low birth rates in nearly all global regions will weigh on baby diaper demand. We expect year over year annual adult incontinence demand growth to range from 5-6% during the period. We expect moderate economic conditions in most global markets barring negative energy, inflation, debt, civil unrest, and war effects. We expect disposable market penetration to continue to increase in Southern Asia (India).
Oversupply can be expected to arise in selective global regions by 2024. In that case producer profitability will decline from current levels. Raw material costs will remain volatile and disproportionate among regions. In general, we expect raw material costs to favor the upside. We expect that pandemic driven demand will soften beginning in 2022. Prior and during 2022, we expect previously decommissioned units of capacity to be shut down as new capacity enters the market and demand slows. As is always the case, new capacity will be operated in favor of older generation technology.
We expect the pace of new capacity investment will slow after 2024 until new capacity is absorbed. This expectation could be impacted by the decommissioning of earlier generation capacity. We also expect that upgrades to existing capacity may occur to enhance the capability of existing machines.
Much like other regions, capacity in North America is fully utilized at present. We expect demand growth for baby diapers will slow from pandemic related stockpiling and fall in line with low year-over-year birth rates. Demand for adult incontinence products continues to increase at a 5–6% annual rate. Rationalization of formerly decommissioned capacity brought into service during the pandemic is expected to occur during 2021 as new generation capacity enters the market and demand ebbs. Demand for spunlaid polypropylene nonwovens in construction, medical and technical specialty markets is expected to continue to be attractive assuming stable macroeconomic and health conditions. More than 120,000 tons of new capacity are expected to be commissioned from 2021-2024 equal to a year-on-year growth rate of 5%. Overcapacity is likely present in 2025. Nevertheless, some producers with aging capacity may need to invest in new technology near the end of the period bringing pressure to decommission early generation technology.
In South America, pandemic related capacity utilization is high. The last increment of new capacity added in the region was in 2016 by Fitesa in Brazil. Fitesa will commission an R5 machine with a nameplate capacity of about 30,000 tons in the second half of 2021. Selected producer capacity is aging, and the region’s economic trends continue to improve. Demand for disposable hygiene and other nonwoven markets is trending higher. Adult incontinence products hold a strong future growth potential. We expect additional capacity to be added before the end of the period to serve growing demand and modernize existing technology.
In Greater Europe, 75,000 tons of new capacity entered the market in 2020 of which 50,000 tons was in Turkey (Gulsan, General Tekstil). Union and Innovatec will together commission about 31,000 tons of capacity in 2021. Gulsan will add 25,000 tons in the second half 2022. We expect capacity utilization to weaken in 2022 as capacity outpaces demand growth in both regional and export markets.
In the Middle East and North Africa, the pandemic related demand surge provided much needed higher capacity utilization in the region. We expect capacity utilization to decline in 2022 and through the period but not significantly so. We do not include Iran in our analysis of the MENA region. The installation of advanced technology by Baftineh in Iran in the second half of 2020 has modernized the company’s technology platform and added product capabilities to its portfolio.
In South Africa, capacity installations by PFNonwovens and Spunchem were fully realized in 2020. We do not expect any additional capacity installations in the near term.
In Southern Asia, demand continues to grow as the market penetration of disposable nonwovens increases. Toray commissioned a new Reicofil 4s line with an annual nameplate capacity of 20,000 tons in its new plant in India in Q4 2020. Global Nonwovens is expected to commission an R5 line with a capacity of about 30,000 tons in 2022. This will result in Global Nonwovens having three lines with a total nameplate capacity of about 70,000 tons per year in India. Avgol will commission an upgraded Reicofil 3.1 line moved from Israel to a second new plant in India in 2022. We suspect there will be more capacity installed in India before 2025 as demand growth moves higher. Capacity utilization remains high in the region and supplemented with imports from the Middle East, Asia-Pacific and China based producers.
In Asia-Pacific, Fitesa/CNC commissioned an R5 machine in Thailand at year end 2020. This machine has an annual nameplate capacity of about 30,000 tons. Asahi (Thailand) and Fibertex (Malaysia) will commission individual lines in 2021 which have a total annual nameplate capacity of 30,000 tons. Asahi closed its typhoon damaged plan in Nobeoko, Japan, in 2020. This plant contained three lines with a total annual capacity of 26,000 tons. A Reicofil 3.1 line at this location was sold to Beautiful Nonwovens (China). Beautiful will reportedly recommission this line at its Uniquetex plant in the U.S. Demand in the region is growing but more slowing than prior periods. We expect further capacity announcements in the region may not occur until after 2023.
In China, at least 65,000 tons of new PP SB/SMS capacity were commissioned in 2020 and hundreds of stand-alone meltblown lines. Many of these meltblown lines have since been retired but ~100 or more remain in operation. In 2021, Jofo Wuxi and Allmed will install Reicofil 5 technology. Yizhou will also add capacity. We estimate that at least 50,000 tons of new capacity will be commissioned in 2021. Berry will install a new line in 2022 with an estimated annual nameplate capacity of 20,000 tons. China seems gearing to add much new capacity to supply nonwoven substrates for surgical gowns and drapes to the world in the face of localization talk. While we expect more capacity will be installed in China during 2021-2025, we estimate annual demand growth for Chinese-made spunlaid polypropylene nonwovens to soften as compared to prior periods which could impact future capacity growth.
At present, we expect average annual global demand growth in tons from 2020-2025 to be around 5% annually. This outlook is sensitive to macroeconomic factors, disease shocks and global unrest. Demand growth will be the highest in Southern Asia (India) and Africa followed by that in Asia-Pacific and China. Demand growth will be more moderate in North and South America, Greater Europe and the Middle East.
In summary, we expect capacity growth to be greater than demand through the period driven by the desire to modernize technology. This will create pressure to decommission early generation technology to achieve greater capacity utilization.
Demand growth for spunlaid polypropylene nonwovens in Southern Asia, Asia-Pacific and China is expected to be the highest in the world through 2025 and capacity will be installed to meet that demand. With that said, there is the risk that competitive pressures will result in more capacity than needed being added in these regions.
Leading global producers have achieved and continue to actively pursue advancements in spunlaid polypropylene nonwoven loft and softness surface features used in premium hygiene products to meet customer demand. While the highest consumer demand for these products is in Asia, demand for these products is also increasing in Western Europe and the U.S. It is remarkable to witness the results thus far of innovations on this front with producers addressing this challenge using and exploring mechanical and raw material variations.
David J. Price is the author of the Price Hanna Consultants LLC report Spunbonded and Spunmelt Nonwoven Polypropylene World Capacities, Supply/Demand, Manufacturing Economics and Profitability. Our latest report on this topic will be published in April 2021 covering the period 2015, 2020 - 2025. To obtain a detailed prospectus for this study, please contact Michele Scannapieco, Price Hanna Consultants LLC, at mscannapieco@pricehanna.com or visit our website www.pricehanna.com.
