An Industry For The Millennia
Fiber producers look to make strategic moves that will strengthen the man-made market.<B>By John E. Luke</B>
Fiber UpdateBy John E. LukeAn Industry For The MillenniaFiber producers look to make strategic moves that will strengthen the man-made market Recent data from the Fiber Economics Bureau provides insights into the posture of man-made fiber producers in the United States as they enter the millennium. Examination of the information, largely composed of shipment and capacity data, offers clues to strategic moves in the early years of the 21st century.Regular readers of this space will recall our many references to the inevitability of the shift of fiber, textile and apparel production to world areas offering lower labor costs and raw material (i.e., cotton) proximity.The capital intensity of the technology of man-made fiber manufacturing likely means that the U.S. industry can compete with any in the world, given access to comparable, not obsolete, technology.International WoesUnfortunately, international competitors have discovered the importance to trade accounts of retaining the entire value chain in the host country. Thus, as economies built on large quantities of inexpensive labor gradually mature and become increasingly dependent on investment capital, it is logical to see that investment directed toward industries that will capitalize on existing ventures like apparel manufacturing and distribution. In the past 20 years, we have seen imports grow increasingly national with fiber, fabric and finished product all coming from one country.In addition to the flood of finished product imports that have plagued the U.S. fiber/textile/apparel complex, man-made fibers have been transformed from generators of positive trade balances into victims of negative trade balances.While some trade accounts are heavily weighted by shifting production in response to NAFTA advantages, many fibers still suffer intense pressure from the rash of new man-made producers, built particularly in Southeast Asia. And, economic struggles in several Asian countries continue to exacerbate this situation.For example, in 1999, Korea and Taiwan together represented almost 22 percent of U.S. man-made fiber filament imports and 53 percent of man-made staple fiber imports while they accepted less than 3 percent of total U.S. man-made fiber exports.Filament Capacity And ProductionContrary to our usual preference to compare sales against capacity, we choose this time to use capacity and production since it creates the details necessary to permit commentary on operating rates and efficiencies. The U.S. man-made fiber industry reduced overall inventories in 1999, and we will comment to those changes as we discuss individual fibers.Table 1 details the U.S. man-made filament industry. It is obvious that U.S. capacity plans are flat at best few significant additions and in fact, some large subtractions, particularly in cellulosic and textile nylon products. The only expansions planned are in olefin capacity although even it is only 10 percent above 1997 levels and 3 percent above 1999 levels. Nylon filament is the large winner in operating rates for the period studied. In total, this portion of the industry operated at the 91-percent level during 1997, 98 and 99, driven by its greater than 70-percent distribution to carpets.Nylon filament production of carpet materials totaled 1,454 million pounds in 1999, an 8-percent increase in two years. It appears that, in not increasing production plans for the 1999 to 2001 period, the industry is playing a waiting game with interest rates and their impact on housing starts. Probably a wise position given the length and recently reported strength of the countrys current economic expansion.Imports of nylon filament carpet fibers are on the increase, heavily from Canada, a trend started in the mid-90s with NAFTA-driven product shifting.While nylon industrial yarn production plans are static through the period, textile yarn production plans are tailing off after serious sales erosion in the past several years.Polyester filament, both imported and domestically produced, at very attractive prices, has eaten the nylon filament market share with regularity. Nylon textile production achieved a more than 90-percent operating rate by reducing capacity, not by increasing sales.It appears that nylon values have been switched from textile and industrial deniers to carpet fibers with a hold currently in place on additional capacity.Polyester filament capacity plans show a slight increase by 2001. Textile and industrial yarn manufacturers plan only incremental increases although the textile portion, by virtue of a projected 1-percent decrease in average denier, is slightly larger than it first seems.Recent experience, and the continued lack of economic stability in several nations heavily involved in man-made fiber production, suggest that U.S. polyester filament producers will continue to struggle in price and volume against a wave of imported fiber. Industrial End-UsesPolyester producers have concluded that fibers for industrial end uses have reached a peak. The past three years shipments have averaged 508 (+/- 3) million pounds, the steadiest pattern of all major fibers. We see no joy in this capacity conservatism since industrial end uses, many times driven by detailed and complicated specifications, appear to be one of the ways for the U.S. fiber/fabric/finished product complex to insulate itself from the ravages of imports.Olefin filament shipments continue to expand as the economics and performance values of the product provide market opportunities in carpets, rope and cordage and woven constructions, including the growing area of geotextiles. While future capacity plans are couched in total olefin filament terms, recent shipment histories suggest that olefin film and olefin yarns outsell monofilament and film, and yarn will receive the lions share of investment. Filament inventories, including cellulosics, ended 1999 below 1998 levels.A 22-percent decrease in cellulosic stocks was the major star as synthetic inventories were steady, moving by only several million pounds plus or minus in each of the six major fiber categories.Cellulosic producers shipped significantly more than they produced assisted by a fashion change to glitter; synthetic producers shipped exactly what they made. Considering the price and quantity pressures exerted by imports, not gaining inventory is a victory.Staple Capacity And ProductionTable 2 details the U.S. man-made staple fiber industry. Overall production is down in the period with only olefin gaining. Polyester suffered from imported fiber competition, the "shiny" fashion helping filament cellulose in womens wear worked against staple cellulosic. Acrylics were hammered by continuing evaporation of traditional export markets and shrinking domestic markets.