FIBER MAKERS SEE RETURN TO GROWTH IN 2000
Byline: Scott Malone
NEW YORK — After suffering through the Asian financial crisis and then seeing a recovery in recent months, makers of synthetic fibers expect continued improvement in 2000.
Driven by the rising cost of petroleum and other raw materials, synthetic fiber makers early this year started trying to exact price increases. They report that the hikes have been only somewhat successful because of the reluctance of customers to pay the full increase. However, even with the increase in costs, the prices of most synthetic fibers are still at extraordinary lows after the market weakness of the past few years, and synthetic-fiber makers said further increases were likely.
The most recent hikes have come in acrylic. On Monday, Solutia said it would raise its rates 10 to 12 percent on commodity fibers and 3 to 7 percent on specialty fibers, effective January.
That followed last week’s moves in nylon, when BASF Corp. on Friday announced it would raise its rates for mid-denier partially oriented yarn and selected flat hosiery yarns by around 10 percent, effective Jan. 1. BASF’s decision followed on the heels of a similar one by DuPont.
Discussing the increase, Bill Scott, BASF business director for nylon, said, “Prices in this category have been so deeply depressed that even our most aggressive cost-containment efforts have not been sufficient to offset rising business costs.”
For natural fibers, the price dynamic is somewhat different. The price of cotton remains depressed and is expected to remain low in the year ahead, while the cost of wool is on the rise.
“At the macro level, since the middle of the year, we at Wellman have seen a major turnaround in our utilization rate of both filament and staple. At this moment in time, we are full in both product lines,” said John Anderson, vice president of marketing for fibers at the Shrewsbury, N.J., company.
He added that Wellman Inc. was now looking forward to the expected February opening of additional staple production facilities at its Pearl River, Miss., plant. They had originally been scheduled to open in the third quarter of 1999, but in April the company decided to delay, partly due to then-weak demand for domestically made fiber.
At DuPont, based in Wilmington, Del., Harry Parker, vice president and general manager of Dacron, said, “We have seen recovery this year. Even though it has not been as much as we had hoped for, we did see recovery. We saw the amount of imports coming into this country, in both fiber form and somewhat in garment form, reduced.”
Polyester makers attributed the market improvements to the recovery in Asia, which left that region’s makers of fiber, fabric and apparel less desperate for cash and less willing to sell their goods at cut-rate prices. The recovery and the rise in oil prices early this year drove up Asian prices as much as 60 percent in some cases and made North American prices much more competitive for the domestic market.
Even those companies that didn’t report significant recovery during the year noted the importance of the Asian rebound.
Eduardo Rocha, vice president and general manager of polyester fibers at KoSa, based in Houston, described 1999 as “one of the tough years for textile fibers.”
However, he noted, “Demand is increasing now. The Asian economies are picking up and we see less imports than we were seeing in the beginning of the year. This is making the situation a little better.”
While mills initially fought the price hikes in synthetic fibers this year, fiber makers said they had been somewhat successful getting the hikes. But they warned that fiber price increases so far have not totally offset the rising cost of raw materials.
“While we are working very closely with our customers, understanding the dilemma this puts them in, we’re also trying to offset some of the ingredients’ price increases,” said DuPont’s Parker. “We’ve not totally done that.”
Wellman’s Anderson noted that polyester prices were still below the pre-crisis levels.
“If you look at what happened to polyester in a 12-month period, the industry managed to give away about 40 percent of its price,” he continued. “It takes a lot of 5 to 10 percent increases to get you back to where you were.”
Anderson said he expected to see price hikes continue into 2000; so did the other polyester makers.
Most other segments of the synthetics business are improving as well.
Dave Rea, group vice president of nylon technology and apparel at DuPont, said, “The market has come back faster and stronger than we were thinking it would.”
He said that without the spate of natural disasters that affected the textile industry around the world this year, the recovery could have been even more significant.
“We have had some supply issues because of various natural disasters that have impacted us around the world, like earthquakes and hurricanes,” he said. “If that had not occurred, the demand right now would have been greater than we would have been able to supply.”
However, Rea warned that the surge in fourth-quarter buying for many textile companies might be a result of customers stockpiling supplies out of fears that the millennium bug will prevent them from receiving goods in early 2000.
A more guarded outlook was voiced by Phil Cogbill, general manager of acetate filament at Celanese Ltd., with U.S. headquarters in Summit, N.J., who said 1999 was a difficult year.
“The beginning of the year was probably the darkest part,” he said. “We’re starting to see the glimmer of a turnaround starting.”
He said Celanese had been “only partially” successful in passing a price increase through earlier this year, because mills were having great difficulties passing those increases along to apparel makers.
“There’s tremendous pressure from the retailers not to raise any prices,” he said. “It’s only when the apparel manufacturers are sure they can’t buy that fabric anywhere else in the world that they’ll accept them.”
Ellen Flynn, vice president of marketing at Acordis Cellulosic Fibers Inc., maker of the Tencel brand lyocell, said the company saw an improved market in 1999 and was bullish about 2000.
“When we started the year, we were a little tentative. We didn’t know if the other regions, Asia and South America, were going to come back as strongly as they did,” Flynn said. “But as it turned out, our business has really been better than we expected. Asia has come back extremely aggressively, and South America has been better than we anticipated.”
She noted that Tencel’s sales to Asia had returned to pre-crisis levels.
The price of lyocell, which is made from wood pulp, has been stable for the last six months, Flynn said.
Spandex makers had mixed assessments of ’99.
Bob Bailey, vice president of sales and marketing at Globe Manufacturing, in Fall River, Mass., said, “We had a very good year, volume-wise. We had an expansion that came on stream at the end of last year in Tuscaloosa, Ala., and we were able to sell that out completely.”
The expansion boosted the company’s spandex capacity by 18 to 20 percent, Bailey said.
“Unfortunately, due to a lot of the competitive pressures and the Asians, the pricing has not been as good as we had anticipated,” he continued.
Steve McCracken, president of DuPont Lycra, said his company also faced price pressure this year, but noted, “That’s nothing new for the spandex business. If you look at our history, we’ve been in a deflationary cycle for quite a while.”
Overall, he said, Lycra spandex sales were rising.
“We’re well positioned in Asia, so we’ve been able to grow,” he said. “If you look at our results by region, Asia has demonstrated the highest growth in ’98 and ’99.”
The natural-fibers environment is more mixed.
J. Berrye Worsham 3rd, president and chief executive officer of Cotton Inc., said that while demand for cotton apparel in the U.S. had remained strong, the low price of synthetic fibers had left international demand for cotton weak. As a result, cotton prices are also at extremely low levels.
“This will be the fifth crop year in a row where cotton prices declined, but I think we’re near the bottom,” he said. “Worldwide, you will see an increase in demand for cotton as a result of the low prices. I think the supply and demand situation will tighten up a little bit.”
However, he added that he expected no significant rise in cotton prices until at least fall 2000.
In wool, “we’ve had what can only be described as a very mixed scenario,” said Sarah McCann, president and group manager of the Americas for The Woolmark Co.
But while women’s demand for wool knits has been strong, McCann continued, in the wovens business it has been on the decline, as shoppers have increasingly chosen wool blends over pure wool garments.
She said she expected the growth in knits and decline in wovens to continue in 2000.
After dropping precipitously in 1998, the price of cashmere rebounded about 60 percent this year, according to Dick Forte, president of Dawson-Forte Cashmere Co., of South Natick, Mass. That could result in a 40 percent increase in the price of cashmere sweaters next year, he predicted.
Forte added that with the price of cashmere likely to continue to rise as rebounding economies in Asia and Europe increase demand for the luxury fiber, there will be a bit of a shakeout in the U.S. market, where cashmere products have popped up in lower-cost retail outlets than they traditionally occupied.
DuPont’s Parker predicted growth for polyester in 2000: “We think that business should be good for the first half, but we’ll see more of the recovery in the second half than in the first.”
Flynn of Acordis said she expected Tencel sales to continue to rise as the fiber increases its presence in the knitwear market. “We’re planning pretty aggressive increases for next year,” she said.
Wellman’s Anderson said, “We’re looking for between a 2 and 4 percent recovery from ’99 levels in polyester in the domestic market in terms of pounds of polyester sold.”