Spandex Revisited

Spandex Revisited
Changing lifestyles, Third World production will drive spandex growth in coming
 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
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