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Spandex Revisited

Changing lifestyles, Third World production will drive spandex growth.

Spandex Revisited Changing lifestyles, Third World production will drive spandex growth in coming decade. About three years ago, TI explored the world of spandex fibers (See The Textile Industrys Silent Spring, ATI, June 1998). At that time, we projected spandex use would grow significantly by the beginning of the new millennium, and industry business models would metamorphose into substantially different structures.As befalls all who try to prognosticate, TI was right in some conclusions and not right in others. Specifically, world consumption of spandex materials has not kept pace with expectations, so the ready availability of comfort stretch garments and materials is less than anticipated.Unfortunately, the expectations of industry seers led to another miss. Business models changed dramatically, but the resulting form was almost entirely unexpected. As predicted, the marketplace has changed dramatically, and the use of spandex continues to rise at significant rates. However, the competitive environment is totally different from what was expected and threatens to destabilize spandex marketing and technology. It is time to revisit spandex and try to refine the picture of this important and changing marketplace.  World DemandFrom the introduction of spandex fibers in the late 1950s, 30 years passed before total world consumption exceeded 50 million pounds, a level considered large enough to be called a business. By 1985, DuPont Lycra® controlled 80 percent of spandex distribution. Utility dictated spandex use. Marketing focused on replacing increasingly scarce and expensive rubber yarns in lingerie fabrics, girdles, designer full-length womens support hosiery and the cuffs of mens over-the-calf dress hosiery.Since the mid-1970s, change has rocked textile and apparel markets, as a result of the impact of Third World labor costs and forces unleashed by the Baby Boomer social revolution. The former will continue unabated as long as industry searches for better returns from investment and labor capital. The latter is a revolution in the making, setting new rules of style and comfort daily. The consumer and the fiber industry believe that additional changes are on the horizon, changes driven by incorporating elastomeric fibers into new lifestyle clothing.Consumers continue to alter lifestyles and purchasing patterns. Baby Boomers, the oldest of whom now are approaching early retirement, driven by egos and self-interest, look to an increasingly casual lifestyle supplemented by exercise to tone bodies confined to offices in the pursuit of wealth.Spandex usage rose at an 11-percent compounded growth rate to more than 150 million pounds in 1995, sliding to 7-percent, 211 million pounds, in 2000 in response to such forces as the 1998 Asian flu and the freedom from panty hose attitude of recent years. Industry seers estimate worldwide spandex demand will grow between 5 and 10 percent per year for the next decade. TI has built its own projections on rates slowing from almost 9-percent in 1996 to less than 4 percent for 2001 and 2002, in response to the current economic slowdown. Sales should recover to almost 6-percent growth by the end of this decade.Spandex is the prototype niche product. The industry traditionally is divided into five segments, each of which is further broken down into sub-markets with homogeneous demand characteristics. Table 1 details recent sales history for spandex and tentatively projects growth into 2005. 
 HosieryThere are three markets formal, casual and sport in four segments: mens; womens; boys; and girls. Womens formal includes full-length nylon hosiery and pantyhose. Casual is cotton, acrylic or wool ankle and knee-length socks. Sport means nylon staple/acrylic/wool/cotton sport-specific socks. Mens casual and sport socks are defined the same way as womens, while mens formal means over-the-calf. Spandex content ranges from barely more than zero in anklet cuffs to upwards of 15 percent in full-length hosiery and some mens over-the calf items. Spandex in the leg in full-length womens hosiery usually is bare, but in the panty and cuffs, it is covered with nylon and/or cotton. Spandex in the body of sport hosiery almost always is covered with the major fiber in the sock. The covering material is comfortable and compatible with the garment body material, as well as being a source of dye sites, as urethane-based fibers are notoriously undyeable.According to estimates, 2000 world usage of spandex in hosiery totaled about 27 million pounds. Of that total, two-thirds was used in womens hosiery, one-fifth in mens hosiery, with the remainder in childrens hosiery, split almost evenly between boys and girls. The main component of womens full-length and panty hose is filament nylon, with approximately 20-percent spandex added for performance. The industry traditionally categorizes hosiery containing spandex into two groups: that containing up to 18-percent spandex in sheer hosiery for fit and comfort, and that containing 19-percent and greater for control. In knit fabric construction, the spandex-containing stitch acts in the horizontal direction, providing stretch and recovery horizontally around the wearers body or leg. Recent data from The Hosiery Association (THA) exposes annual sheer-hosiery market decreases in excess of 2 percent for the past 10 years. Increased spandex use in hosiery will come through increased use in casual and sport socks, where THA data shows a 7+ percent 10-year annual increase, largely the result of the casual Friday phenomenon.Market sources estimate less than 25 percent of casual and sport hosiery currently contains spandex. Because the fiber has been available for more than 40 years, it is unlikely that there will be a rapid conversion of the remainder. Spandex adds cost, and because many socks are purchased for utility, fashion influence is limited. Spandex will continue to penetrate socks at a 2- to 3-percent annual rate. InnerwearInnerwear, or lingerie for women and underwear for men, encompasses myriad products made from virtually every fiber converted into fabric by virtually every known method. According to current estimates, innerwear in 2000 consumed approximately 61+ million pounds of spandex, with 40 percent used in brassieres, 10 percent in shapewear, 20+ percent in panties, 10+ percent in sleepwear, 10 percent in womens daywear, a relatively minor amount in robes and loungewear and the remaining 10 percent spread across a variety of womens garments, plus waistband and leg cuff materials in mens briefs and boxer shorts.Industry forecasts predict 7-percent annual penetration growth in bras and shapewear. The modern consumer wants to look and feel better, which means a combination of activities and clothes designed and constructed to enhance a trimmer figure. Exercise demands for sport-specific body-support innerwear will provide the impetus for most of the growth expected in the market area. Sport participants and wannabes want shapewear to hide imperfections even the most rigorous exercise program cannot repair. While the modern shapewear woman rejects the control garments her mother wore, she recognizes derriere, stomach and bust lifters and waist thinners as serious pieces of apparel.Generally, lingerie is made from cotton and/or filament nylon or polyester. When spandex is present, it usually is wrapped with the primary fiber. Overall spandex content ranges from 2 to 3 percent for hem, lace and cuff applications; up to 20 to 25 percent for body-control garments; and approaching 50 percent for girdles and waist-cinch garments. OuterwearOuterwear means only that it is not innerwear. Spandex is used in constructions targeted at dress suiting, shirting, and dress and active sport clothing for men and women. The spandex proportion of the total fabric is 2 to 5 percent, just enough to provide fit and comfort. Bare spandex is used in circular knits by platting an end of spandex with an end of the body yarn through the same needle. Wrapping is the covering system of choice, but technology improvements are expected to help core spinning replace wrapping in several years. Wrapped spandex yarns, depending upon end-use, usually are covered with cotton yarns or nylon or polyester continuous-filament fibers and are knitted or woven. In Europe, work has focused on wool as the covering fiber, but logic suggests that cotton, aimed at the more casual U.S. market, offers more opportunities.Woven outerwear comfort garments containing spandex are largely European phenomena. Demands for high productivity in the U.S. textile/ apparel complex to compete with international fabric suppliers and imported garments have relegated woven comfort outerwear to a minor role. Textured polyester filling stretch falls short of the classical definition of comfort, and, in light of developments in spandex-containing fabrics, textured yarns should be viewed as fair-to-poor attempts to expand a boring bottom-weight market.Spandex growth in outerwear is heavily based upon penetration by fiber blends targeted at dress suiting, shirting, and dress and active sport clothing. Dress-down Fridays provide the impetus for woven, fitted but comfortable dress-up/dress-down apparel. The spandex proportion of the total fabric is 2 to 5 percent, sufficient to provide fit and comfort, but not enough to be called control or power. The almost 50-percent growth projected for spandex in outerwear from 11.5 million pounds in 2000 to almost 19 million pounds in 2005 is due almost entirely to increased interest in woven-filling stretch comfort fabrics aimed first at sportswear and later at dress garments. ActivewearAccording to DuPont, the top U.S. participation sports are exercise walking (73 million people), swimming (60 million), biking (53 million) and exercise with equipment (48 million). Apparel for these groups forms the backbone of the activewear category a major area for spandex but one that will experience slowing growth, as the smaller Generation X fails to buy as many activewear garments as does/did the predecessor Boomer generation.Activewear includes sweatpants, sweatshirts, jogging suits, T-shirts, elastic-waist shorts, warm-up jackets, leotards, swimwear, skiwear, biking garments, etc. It includes garments with an athletic heritage redesigned to be equally at home in the supermarket as on the tennis court. Activewear implies power, so spandex content and fabric manufacturing technique are geared to the amount of control desired from the garment. Most activewear spandex is run-wrapped and most activewear is knitted, but woven materials are finding their way into the category. 
In 2000, world usage of spandex in activewear approximated 70 million pounds. Best estimates indicate that approximately 23 million pounds is used in swimwear, about 10 million pounds in full-length sport-specific tights/leotards, with another 12 million pounds for the cuffs, hems and some bodies of sweat apparel. About 27 million pounds is used in T-shirts, warm-up jackets, dancewear, leotards, biking garments, etc.Swimwear fabrics contain a higher percentage of spandex than all other categories except power/control garments an average of 15 to 17 percent with some extra-control items containing up to 31 to 35 percent. Under most circumstances, nylon, with its affinity for high colors, is the companion fiber. Swimwear demands spandex resistance to chlorine. Fibers lacking this property are precluded from long-term competition in the market, and improvement in this characteristic is high on every serious producers list. Sport-specific tights/leotards have bright colors in every form of print and geometric design. Natural heirs to hosiery and dance histories, this category is not expected to grow significantly in the next decade. Spandexs proportion in a tight/leotard fabric is approximately the same as in swimwear, with nylon the other component for strength and color. Major quantities of sweat apparel were produced in the early 1990s, and the market continues to struggle with overcapacity. After crashing and burning in 1998-99, the baggy sweat appears to have been replaced by a slimmer, trimmer silhouette. No growth is seen in sweats.It is virtually impossible to parse the approximately 27 million pounds of spandex in T-shirts, elastic-waist shorts, warm-up jackets, dancewear, leotards, skiwear, biking garments, etc. into specific categories. These activewear producers are geographically and stylistically diverse, supplying small amounts of special apparel to smaller retailers that service specific sport or market areas. Other ApplicationsOther applications for spandex, totaling 42+ million pounds in 2000 and projected to grow to 62 million pounds in 2005, include such end-uses as waist and leg cuff tapes in disposable diapers and clean-room and hospital apparel, components of shoe linings, Ace bandages and braces, fitted bed-sheet edges, slipcover edges and high-performance protective clothing including space suits. Spandex is expected to increasingly penetrate markets such as disposable hospital and clean-room apparel, shoe linings and protective clothing in the coming decade, to provide the almost 50-percent increase projected. One caveat: spandex use in disposable diapers might be replaced within five years by meltblown elastomerics and/or elastomeric films, particularly where returns on capital and product differentiation strategies drive replacement of expensive yarn processing with efficient film-type materials. ExportGenerally, export should not be treated as a separate market area, but the peculiarities of spandex growth make a separate discussion appropriate. Until the 1980s, DuPont dominated spandex distribution and was able to sell most production in U.S. markets. As international economies increasingly industrialized, spandex-containing garments became attractive and affordable. DuPont seeded these markets with fibers from its plant in Waynesboro, Va., and later built fiber plants around the world nine today, with more on the drawing board. In DuPonts mind, export was a temporary handmaiden of expansion; the strategy was expansion, not export. The distinction is important, particularly in light of the current market. DuPont controlled product distribution and, more importantly, controlled the use of cash in international expansion. 
In contrast, todays international market is a hash, driven to pure price competition by developing-nation, often state-sponsored export strategies designed to employ a maximum number of people and amass baskets of hard currencies. A building boom has made Asia a huge exporter of spandex fibers. The original logic behind the boom, in Korea particularly, has evaporated, and it appears that these bloated international firms are willing to sell at any price, hopeful of covering variable cost. A U.S. or European producer cannot compete with this Asian tiger.Export will continue to be important through 2005. However, TI expects the positive balance export has brought to the United States will evaporate as DuPont ceases Waynesboro seeding, developing economies continue to pour product into the United States, and continuing international price pressure forces U.S. producers out of the world market.  CompetitionTable 2 lists current reported spandex capacities by major world region. The data comes from the press and U.S. private and government sources. Because timing and capacities from these sources tend toward significant overstatement, TI and other industry observers estimate year-2000 effective world capacity at 397.0 million pounds. Asian reports, particularly, are subject to harsh review.
 Expansions announced for the next two years in Asia only serve to exacerbate the discrepancies. TI assumes that wiser heads will prevail, see overcapacity as the root cause of reduced margins and postpone/cancel some announced intentions. Competition in the United States is not among the three domestic producers. It is between the investment demands of industrialized economies and those of cash-hungry, surplus-labor-driven developing economies of Asia. DuPont alone continues to support a serious brand strategy that has been successful in maintaining price and stability. But even Dupont is folding. Recent announcements from company headquarters highlight agreements to build several thousand tons of unbranded spandex capacity in Asia. This strategy ensures the success of the Lycra brand and turns the competition into DuPonts partner with an investment in its future.  PricingLycra prices changed very little between 1995 and 1998, but they did respond to domestic and import pressures in 1999 with a denier-selective decrease approximating 20 percent, particularly in finer deniers. Prices for domestic unbranded spandex have maintained an almost constant 15-percent discount against Lycra.New spandex capacity in Asia was built largely around 40- and 70-denier yarns, the backbones of the areas circular (single) knit industry. As the T-shirt market tanked in 1997/98, Asian producers looked to the United States as an obvious and attractive outlet for excess capacity. The effort began in the mid-1990s during the Asian flu crisis, but it has reached fever pitch in the last 18 months. The result is seen in prices for imported spandex on tubes, which dropped dramatically in 1999. Seventy-denier reached the $7.00 level by year end, down from $10.00 a year earlier, and 40-denier reached $7.50. Seventy-denier import pricing is 13 percent below unbranded domestic supplies and 26+ percent below Lycra. Forty-denier is 32 percent below unbranded domestic offerings and 52 percent below Lycra. An October 2000 item in the Korea Herald reported domestic (Korean) spandex prices were averaging $4.53 per pound, close to manufacturing cost, down from $7.03 a year earlier. ConclusionsWhile conclusions are sprinkled throughout this piece, TI wishes to emphasize the more important ones.Sales Volumes. World demand for fabrics with elastic properties will continue to grow. Growth largely will be driven by increases in comfort vis-is power garments. As Baby Boomers and Generation Xers approach sedentary lifestyles, they will search for comfort over power.Imports. There is nothing to indicate that imports will decrease in the immediate future. It is obvious that several countries in Southeast Asia have embarked on a building binge apparently aimed at controlling the world fiber/fabric/garment industries. The gamble is so large, so politically sensitive and so demanding of cash infusions that turning off the international spigot is virtually impossible. Brands. DuPonts continued perseverance in actively supporting the Lycra brand is admirable. That, and DuPonts historical technological lead, have proven to be effective strategies in fending off domestic price pressure. The jury is out, however, on the brands ability to continue to maintain price differentials in the face of increasing international pressure. It is conceivable that DuPont will further join the competition by servicing some/all U.S. accounts with product imported from partner/ licensee companies in Asia.Pricing. Imports and overcapacity hold the keys to spandex pricing and to brand maintenance. The bottom line likely will surface this year, and we should discover the real costs of spandex manufacturing in Asia. Until then, it is anybodys guess when some of the more active exporters will drop out. Until such time, spandex pricing likely will be weak.Production Capacities. The market must wrestle with the capacities shown in Table 2. Compared to polyesters mature position on the product life-cycle curve, spandex still is a growth-phase material. DuPonts brand activities and chlorine resistance are differentiating strategies aimed at extending the growth phase and minimizing the evolution of competition and pricing strategies apparent in life-cycle maturity. Unfortunately, spandex price strategies, driven by capacity investment needs, have moved ahead of development efforts and might inhibit fabric innovation and expansion. The only logic bringing stability to pricing is shrinking the list as planned and actual capacity proves unprofitable. Market Expansion. The five market areas will take significantly different paths to expansion. All are forecast to grow, but for different reasons: hosiery, virtually stagnant, will grow marginally through continued spandex penetration of ankle hosiery, while sales to innerwear will expand as comfort fabrics displace traditional rigid versions. Activewear relies on consumer health responses with increased active sportswear and wannabe participation. In our view, only outerwear nears a revolutionary transformation. Because minor amounts of spandex can effect major changes in fabric performance, the recent somewhat lower fiber prices likely will engender mill interest in spandex-containing suit, dress and sportswear constructions. Unfortunately, however, U.S. fabric mills may find themselves at a technological disadvantage with European counterparts because many lack the hardware needed to produce the special-width fabrics for finishing into standard- and wider-width fabrics demanded by cut-and-sew operators. U.S. mill survivors will have to invest dollars they think they dont have. Editors note: John E. Luke is owner of Five Twenty Six Associates Inc., Bryn Mawr, Pa., a consulting firm specializing in strategic marketing and operations facing textile fiber and fabric manufacturers. He is also a professor of textile marketing at Philadelphia University, Philadelphia.

May 2001