Posted January 31, 2017

 

By Dave Rousse (drousse@inda.org)

President, INDA

 

As it’s the beginning of the new year, I’d like to share what is going on in nonwovens – basically growth and innovation. In this article I will discuss the growth, and next month, what’s at the forefront of nonwovens innovation.

 

Nonwovens are growing in North America through continued investments, investments in capacity and through mergers and acquisitions. INDA has noticed an acceleration of capacity investments. Capacity investments slowed between 2012 through 2014, as the decision to make those investments occurred during the Great Recession.

 

Nonwovens normally outpace real GDP; in the 25-year period from 1990 through 2015, nonwoven capacity in North America expanded 5.4% annually, compared to U.S. real GDP of 2.4% a year. During 2012 through 2014, however, capacity growth slowed to 1.3% annually. In 2015 the post-recession growth began to rebound, increasing 2.7%. Last year, though, it expanded 5.1%, a growth of 153,000 tonnes. This year, INDA is aware of at least another 112,000 tonnes coming online, a growth of 3.6%. This number will undoubtedly rise as we go through the year.

 

The growth in itself is interesting: there are companies that currently have production assets in North America adding more; then we have companies that currently do have a footprint in North America investing in production assets, from companies in countries such as Germany, Turkey and China; and then we have companies that were not in nonwovens investing in nonwoven production, such as Carver Nonwoven Technologies and U.S. Cotton.

 

The growth is also occurring across a range of production processes and towards a variety of end-use categories; it is not all one process going to one end use. There is a wide range of processes being added to meet growth in a wide range of end-uses. The majority of these production facilities are in the U.S. Southeast (Georgia, North Carolina and South Carolina), with 10 of the 17 new lines from 2016 and 2017 located there.

 

What’s driving growth?

 

You may wonder what is driving all this growth. Nonwoven growth has been occurring through existing end-use market growth taking share from other materials, and in entirely new uses. Three specific end-uses of notable growth I would like to address are wipes, absorbent hygiene and transportation.

 

Wipes, so many wipes, it seems every day I see a new wipe introduction in North America. There currently is no end in sight for wipes growth, as anything that is a product that is a liquid, cream or gel can be applied by a wipe. Both household wipes – as there now is a wipe for every corner of the household, including the sink – and personal care wipes are experiencing significant growth through increased usage in existing categories to the growth in new categories within those segments. 

 

The largest nonwoven end use is the absorbent hygiene category. The main drivers are demographics, an aging population with increased life expectancy, and in the U.S. the forecasted Echo Boom, that is the Boomers’ children having children. A few years ago one had very few choices in incontinence products, especially for light incontinence, which impacts four out of 10 women ages 18 through 64 in the United States. Now when one walks down the personal hygiene aisle, there are numerous products available to fit the consumer’s needs, including gender-specific items.

 

In the area of transportation, primarily light vehicles, nonwovens have proven themselves extremely versatile, saving resources and making vehicles quieter and more comfortable. Automakers are under pressure to lower weights and take out heavy metal parts, replacing them with lighter-weight products such as composite material in door paneling, wheel wells, engine compartments and underbody shields.

 

Not only is this end-use growing through nonwovens taking share away from other materials in vehicles, but more vehicles are being sold in North America – seven years of expanding sales. A greater percentage of those vehicles are being produced in North America at an ever-increasing size. In the United States the 2016 sales ratio of light trucks (including cross-overs, minvans, and SUV’s) to automobiles was 60:40; as recently as 2013 it was 50:50.

 

Sector attractive for acquisitions

 

All of this growth and attractiveness in the nonwovens sector is generating a significant amount of M&A activity, mostly acquisitions. There are adjacent companies acquiring nonwoven companies, such as Berry Plastics acquisition of Avintiv, which raised the awareness of the sector in the investment banker community. Adjacent companies are also acquiring nonwoven-related companies, such as Parker Hannifin purchase of Clarcor. CPG companies have also shown an interest in nonwoven relation companies with Unilever’s acquisition of Seventh Generation and S.C. Johnson’s purchase of Babyganics.

 

There are also paper companies investing in and acquiring nonwoven companies, such as Shweitzer-Mauduit International’s acquisitions of DelStar and Domtar’s acquisitions of EAM Corporation, Associated Hygienic Products (AHP), Attends Healthcare Limited (Attends Europe), Laboratorios Indas, SAU (Indas), Butterfly Health and Home Delivery Incontinent Supplies. Then there are nonwoven companies acquiring other nonwoven companies, such as Lydall acquiring Texel.

 

Outlook for North America encouraging

 

The North American nonwovens are a successful, growing, continuously evolving, dynamic and diverse industry. The outlook for the North American nonwovens industry is very encouraging, not only with the positives of improving economic outlook and demographic trends that are positive for nonwoven usage, but also growth by the inherent nature of nonwoven being an engineered fabric.

 

As nonwovens can be engineered to meet specific performance attributes for a specific end use, the gaining of share from other materials in existing end uses and the ability to enter entirely new end uses will continue to be catalysts for nonwovens’ growth. Further, as nonwoven material tends to stay where it is produced, and as the demand for nonwovens increases, further capacity investments will be needed in North America.