NEW YORK — Climbing prices of raw materials have polyester producers scrambling to maintain their competitive edge.
For spandex makers, it’s the increased capacity for the fiber that’s increasing the intensity in that market, while acrylic suppliers are still trying to eat into cotton’s huge market share, especially in socks and sweaters.
And all U.S. suppliers of fiber — no matter the product — are faced with increasing competitive capacity overseas along with a dwindling domestic customer base.
While every market faces challenges, all point to improved production efficiencies, shortened lead times and better quality products as the keys to prosperity.
The area hardest hit by the price hikes has been the polyester market, the largest of all the man-made fiber businesses. Polyester, with a 25 percent share of the retail market, trails only cotton with its 57 percent share, according to consumer research organization NPD Group, Port Washington, N.Y. According to industry estimates, the North American polyester staple business is about 3.5 billion pounds, while the filament segment accounts for 2 billion pounds.
The supply of glycol, parazylene and teraphthalic acid has tightened, causing their prices to rise, and also cause the big three domestic polyester producers — DuPont, Hoechst Celanese and Wellman — to all raise fiber prices twice in the last six months.
In May, the three raised prices on filament 7 to 8 percent. In August, DuPont increased prices 9 to 13 percent on its Dacron polyester staple, and 5 to 7 percent of Dacron filament; Hoechst Celanese increased the price of its staple fiber by up to 15 percent and its filament by up to 8 percent, and Wellman upped the price of its Fortrel staple by 9 to 13 percent and its filament by 8 to 10 percent.
Filament is generally used in more luxurious applications for drape and softer hand. It sells for about 15 to 20 percent more than staple.
“Raw materials were the driving force in the rise of polyester in the late Eighties, but import activity pushed prices back down, and the price of raw materials came down at the same time,” said Jim Casey, president of the fibers division of Wellman, who confirmed that the price of raw materials are increasing “at an aggressive rate.”
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Still, even with 10 to 15 percent price increases over the last 18 months, raw material prices are not as high as they were in 1990, executives said, who noted that deteriorating margins were the prime reasons for the recent wave of increases.
“We’ve been aware of some of the increases coming, but not all of them,” Casey added. “We saw the TPA increase as an issue of concern. We didn’t think we’d have a problem with glycol, but after the harsh winter we had, inventories of that raw material were depleted as the antifreeze industry — a major user of the substance — had been aggressively purchasing it.”
Casey went on the say that while the industry was predicting parazylene prices to rise, “we thought they would be more controlled.”
Jerald A. Blumberg, DuPont’s senior vice president who oversees that company’s $6.2 billion fibers business, noted that the raw material supplies for polyester “should remain tight for the next year or so.”
“What also happens is that in a lot of instances, suppliers of raw materials and chemical companies have formula-type approaches to pass on price increases,” said William A. Harris, head of worldwide fibers for Hoechst AG, parent of Hoechst Celanese Corp. “Margins are being squeezed in the fibers business.”
As for the increased capacity coming on-stream in the polyester business, more of the Far Eastern polyester is ending up in other markets.
“We’ve always addressed the international market, but up until three years ago the import situation was a very modest problem for our industry to contend with,” said Casey. “Now, their market share represents upwards of 15 percent. That represents what appears to be another fiber plant.”
“There’s been rapid expansion in polyester in Asia, and a new competitor [Nan Ya] in the U.S.,” DuPont’s Blumberg added. “In Western terms, it’s difficult to justify new capacity.”
Still, over the next 10 years, executives remain confident that polyester will continue to make strides globally. This year, most executives said the U.S. market will expand 2 to 3 percent, while it could grow about 6 percent worldwide.
The future uptick in polyester includes the emergence of recycled polyester made from plastic soda bottles, a fiber that’s taken the activewear market by storm and is slowly starting to filter into the sportswear and ready-to-wear markets.
To date, Wellman, Martin Color-Fi and Hoechst Celanese have been supplying the fiber, while DuPont is working on its own variation.
“It’s still in its infancy, but there is a tremendous amount of potential for it,” said Wellman’s Casey. “We’re looking at possible double-digit growth numbers for it.”
Polyester, while the biggest single man-made fiber, hasn’t been the only one facing the challenge of a changing market.
Spandex, a 160-million-pound fiber worldwide (half of it produced by DuPont), has begun to feel the impact of increased capacity. The increase is coming from two domestic suppliers: Globe Manufacturing and Miles Inc.
From its new $40 million, 165,000-square-foot plant at Tuscaloosa, Ala., Globe will add 3.5 million pounds of dry-spun spandex. Globe currently makes 15.5 million pounds of spandex.
Miles, meanwhile, will add more than 7 million pounds to Dorlastan spandex production from a $170 million site at Bushy Park, S.C. The Globe plant has begun production; the Miles site is slated to come on-stream next year.
To illustrate Globe’s and Miles’s push in the U.S. market, once those two companies’ plants are at 100 percent capacity, their combined output will be about 25 million pounds — only about 5 million pounds less than DuPont. Still, in spite of the increased spandex capacity, executives said there is a market for the fiber. Hosiery and circular knits (primarily in activewear and swimwear) continue to gain, and woven applications — a difficult area for spandex to crack thus far — is seen as a growth opportunity.
“Customers’ expectations keep increasing, as they should,” said James Heslep 3rd, Miles’s director of marketing. “They expect us to make efficiency gains and not increase the price of spandex year after year. They demand no hassles, and they want us to keep improving EDI capabilities. They want good service all the way around.”
Heslep said Miles, which also makes 9 million pounds of spandex at Dormagen, Germany, “could be about 12 percent of the market.
“We brought over 1 million pounds from Germany and sold it, so the market is there,” he said.
Heslep also said that eventually, Miles would like to add more spandex capacity, above and beyond the 7 million initially planned, “although no timetable has been set.”
Robert Bailey, Globe’s vice president of marketing and sales, added, “There is overcapacity, but if you can be a high tech, low-cost producer, you can make some gains in this market.”
As for acrylic, which industry executives say has about a 5 percent share, the key to increasing its presence lies in taking some share from cotton and wool, while at the same time, making some headway on its own.
Currently, the capacity in the U.S. acrylic market — which consists of two manufacturers — is about 435 million pounds, according to the Fiber Economics Bureau. Monsanto makes nearly 300 million pounds, said industry sources; Cytec Industries supplies the rest.
While acrylic still is more expensive than cotton, it can be more cost-effective for mills because it requires fewer processes in the handling stages.
“There are always challenges in this market,” said Gary Petersen, director of Acrilan marketing for Monsanto, the
largest domestic manufacturer of acrylic. “We have some positive things to say in fashion and performance as an industry, and our efforts have been modestly successful. Still, we know there’s a lot of work to do.”
In sweaters, acrylic stands to benefit from the trend toward lighter weights. In the sock market, moisture management, faster drying and greater durability are the attributes acrylic can tout, executives said.
“Cotton’s had a stranglehold on the market,” said David Lyttle, director of marketing for Cytec, the other domestic acrylic manufacturer. “But we, as a company, and we, as an industry, think we can get some back.”
Even rayon, which like many fibers was helped by the world shortage of cotton, could see positive movement.
The two top U.S. manufacturers, Courtaulds and Lenzing Fibers Corp., have made substantial investments. Lenzing added capacity at its Lowland, Tenn., plant, and Courtaulds improved efficiencies and manufacturing standards at its Axis, Ala., facility. The two companies provide more than 90 percent of the rayon used in the U.S.
However, increasing raw materials costs could cause that industry to hit a snag, at least temporarily.
“Wood pulp and caustic soda are already looking to increase, so we expect a fourth-quarter price hike on those materials,” said Doug Noble, Lenzing’s vice president of marketing and sales.
“Last year was a good one for rayon; this one’s been a tough one to date,” Noble added. “You see a lot of rayon in the stores, but most of it is coming in from offshore.”
Richard Doidge-Harrison, president of rayon at Courtaulds, added, “The world rayon situation is growing in the right direction, and the U.S. is bound to be positively impacted, provided we all do the right things.”
Noble and Doidge-Harrison noted that being able to compete globally, increasing environmental expenditures and better productivity will strengthen the U.S. rayon market.
As for nylon, executives also professed the need to expand globally while at the same time protect their markets in the U.S.
DuPont, for instance, is in the midst of several joint ventures overseas to produce nylon, while BASF continues to eye international opportunities, said Charles Kale, BASF’s business director, nylon textile products.
“We will continue to put more money into our plants moving forward over the next seven years,” said Kale. “We’ve decided to be a player in the textile nylon business.”