062415_IFAI Outlook Review

Posted June 24, 2015

By Devin Steele

WHITE SULPHUR SPRINGS, W.Va. – The 2015 Outlook Conference here recently attracted more than 100 industry professionals for two days of executive forums and networking opportunities.

The conference is co-developed by the United States Industrial Fabrics Institute (USIFI) and the Narrow Fabrics Institute (NFI), divisions of the Industrial Fabrics Association International (IFAI). This leadership symposium for the specialty textile industry brought together technical textile executives and decision makers to focus on the industry’s business, legislative and economic outlook.

During the event, the USIFI presented its inaugural Advocacy Award to Jean Lineberger, general manager of Cramerton, N.C.-based Brawer Technical Yarns, a division of Brawer Bros. Inc. (Read story here.)

Economic forecast

Kicking off the forum was Dr. Raman Kumar, R.V. and A.F. Oliver Professor of Investment Management in the Department of Finance at Virginia Tech, who provided a broad, well-researched look at the global economy.

Looking at GDP, the effect of oil price declines will determine the winners and losers in the immediate future, he said, referencing the IMF World Economic Outlook. Russia, in particular, will show negative growth in the coming months as a result. The U.S., Canada and Australia will enjoy a moderate level of GDP growth, he added.

“Even a small percentage of growth in U.S. means a large percentage of growth worldwide,” Kumar said. “U.S. GDP growth will be big for the world economy, and this will be important for manufacturing.”

Among net winners as a result of oil price decreases are the U.S., Brazil, Argentina, China and Australia, he said.

“So many segments of our economy that depend on oil prices have been affected,” Kumar said. “Its effect was expected to be bigger because the thinking was the less consumers spend at the gas pump, the more money they’ll spend elsewhere. That hasn’t been the case. Maybe they’re paying off credit card debt or home equity loans or adding to their retirement accounts. However, casual dining showed an increase in spending in April. That is usually the first area that begins to rise. So we expect consumer spending to increase in the coming months. If they spend more, we will see a higher growth rate in the U.S.”

Global supply chain dynamics

The next two speakers also covered the effects of oil prices in a “Global Supply Chain Dynamics” segment. Alasdair Carmichael, president-Americas for PCI Fibres, Spartanburg, S.C., discussed the impact of oil prices on fibers, while Anna Gamboa-Torres, associate director of Alkali & Vinyls, IHS Chemical, Houston, went over energy trends and other matters that affect feedstock.

Carmichael pointed out that oil prices reached a peak last June 23 at $107.17 per barrel and a low of $42.53 on March 18 of this year before things started to bounce back slightly. He added that oil production growth in 2014 in the U.S. was the largest in more than 100 years, noting that “the price of oil is fundamentally unstable.”

In comparing West Texas (WTI) oil to Brent oil, he said that because WTI cannot be exported, it is not so relevant to polyester raw materials as Asia drives prices and Brent oil is a better indication of Asian oil prices.

He went on to show trend charts related to raw material price changes for major synthetic fibers and cotton, as well as fiber demand and mill consumption. He reminded attendees that polyester surpassed cotton demand in 2001 and has since “roared away. That is just fiber, not the bottle resins,” he said. If you take polyester out of the equation, all other fibers have shown only 1.4 percent growth since 1980, he added.

The resurgence of auto manufacturing also has had a huge impact on the synthetic fibers market, Carmichael said. Since reaching a peak in the late 1990s and bottoming out at 8.67 million vehicles in 2009, North American auto production surged “spectacularly” to nearly 17 million vehicles in 2014, he added.

On that note, he said he sees great potential in Mexico, which possibly has the best free trade agreements in the world, along with two coastlines and good labor costs. In two years, Mexico has announced or started up $11 billion of automotive investment, he indicated, and it will become the seventh largest vehicle producer in the world this year.

He added that South Carolina also is attractive for this sector, noting that BMW invested another $1 billion Spartanburg, making it the company’s largest manufacturing plant in the world. And Volvo announced a $500 million plant in the state in April, he said.

Auto manufacturing is important to synthetic fibers, particularly polyester and nylon, as they are used in interior fabrics, seatbelts, tires, belts, hoses and carpets and mats, Carmichael said.

“Thirty-two pounds of nylon and polyester go into a vehicle build,” he said. “That’s a big number. It’s a great story and a growing story that continues to be strong.”

Though it hasn’t enjoyed as strong a surge as automotive, the housing market continues to recover, with tremendous potential for improvement, he added, which will also have positive impact on textiles.

He also noted that consumer demand for carbon fiber continues to climb precipitously, with energy-related applications (usage or production) being the biggest growth markets.

The short-term forecast sees polyester prices increasing due to raw materials and full utilization, Carmichael said. Midterm, as oil prices increase, synthetic fibers will increase, and PCI expects oil to plateau through mid-year and increase in the fourth quarter, he added.

Meanwhile, Gamboa-Torres of IHS Chemical, which offers information, analytics and expertise to organizations in many sectors around the world, also predicted that U.S. expansion will continue. Accelerations in consumer spending and homebuilding, along with continued robust capital spending, will support growth, she said.

As the largest net importer of crude oil, the U.S. benefits from lower oil prices, but oil industry investment will be cut this year, she added.

“Consumers will boost spending in response to declining gasoline prices and gains in employment, real disposable income and net worth,” Gamboa-Torres said.

She added that the recovery in homebuilding will gain momentum as labor markets improve and credit standards ease. And Interest rates will rise significantly over the next three years as monetary accommodation is withdrawn, she said.

Gamboa-Torres went on to show trends in regional energy flow chains, naphtha costs, ethylene capacity and prices, chlorine demand, polyvinyl chloride demand and more. She added that the U.S. revival of the chlor-alkali market has been supported by its energy advantage.

In closing, she said the North America advantaged cash cost position continues for PVC. However, currency appreciation in combination with the energy swing have changed the competitive landscape in the short term, she added. Also, ethylene availability is key for vinyl capacity expansions in the future for non-integrated producers, and domestic demand in North America will continue to grow hand in hand.

To round out the first day, two other speakers from the U.S. government provided off-the-record trade legislative updates on such matters as the Trans-Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP), the Africa Growth and Opportunity Act (AGOA), the Generalized System of Preferences (GSP), Miscellaneous Tariff Bills (MTBs) and more.

Addressing the group were Janet Heinzen, director of the office of textiles and apparel, International Trade Administration at the U.S. Dept. of Commerce; and Gail Strickler, assistant U.S. trade representative for Textiles and Apparel, Office of the U.S. Trade Representative, Executive Office of the President.

Military update

On Day 2, Carole Winterhaulter, chief technology officer and textile technologist with the U.S. Army Natick Soldier Research, Development and Engineering Center, provided an overview of opportunities for current and future warfighter needs for protective textiles, clothing and equipment.

She began by providing an update on and a detailed framework design of the Department of Defense’s Revolutionary Fibers and Textile Manufacturing Innovation Institute (RFT-MII), which is still in development. She called the institute a “game-changing opportunity” designed to “unleash new U.S. advanced manufacturing capabilities and industries for stronger global competitiveness and U.S. economic and national security.”

Winterhaulter later provided an update on Natick and its unique capabilities that foster external industrial/academic partnerships, among them being:

the Center for Military Biomechanics Research;
a High-Performance Fiber Facility;
Diriot Climatic Chambers;
the Ouellette Thermal Test Facility;
a 3D Laser Scanning Lab;
a Cognitive Performance Lab; and
a Polymer Film CoE.

She noted that Natick had 35 active cooperative R&D agreements in FY2014, 19 partnerships with academic institutions and 12 active patent license agreements, with 85 percent of the latter being with small businesses.

Winterhaulter also discussed opportunities related to aerial delivery, expeditionary basing/collective protection, textiles as structures, body armor, emerging ballistic protection, chemical/biological protection, camouflage, multifunctional combat uniform fabrics, antimicrobial interests, advanced/interactive textiles, electronic textiles and more.

Berry Amendment Textile Coalition (BATC) update

Houle, vice president for Washington Operations for HDT Expedentionary Systems Inc., a division of HDT global, offered the latest information on the Berry Amendment Textile Coalition. The Berry Amendment, in effect since 1941, mandates that textiles, clothing and footwear purchased with U.S. Department of Defense funds be made with U.S. content and labor.

The BATC is an informal coalition with four trade association members:

• the U.S. Industrial Fabrics Institute (USIFI);

• the Narrow Fabrics Institute (NFI);

• the National Council of Textile Organizations (NCTO); and

• the American Fiber Manufacturers Association (AFMA).

Individual companies from members also participate. Houle serves as the de facto chair of the BATC and Lloyd Wood serves as its de facto executive director. The group hosts regular meetings via conference call to discuss policy agenda and legislative/executive branch action items.

Recently, Houle reported, the BATC has been successful in mobilizing political support for the Berry Amendment, winning a key victory in the FY2014 National Defense Authorization Act (NDAA). In that, a law was passed requiring periodic audits of DoD compliance with Berry, he said.

The group is working to stop congressional attempts to erode Berry’s coverage by increasing the simplified acquisition threshold (SAT) in the FY2016 NDAA.

Houle added that the BATC has a successful outreach to other segments of the Berry Amendment supply chain.

Eye on elections

James P. Pinkerton, a Fox News Channel contributor since 1996, closed out the session with an insightful, informative overview of election cycles. In his presentation, “The Five Ideologies That Dominate America, and Why Voters Don’t Like Them,” he contended that every election is a wave election, meaning, “there’s no such thing as a predictable election anymore,” he said. “A wave election is the pollsters’ and pundits’ way of saying, ‘gee, we had no idea.’ ”

Pinkerton, who worked in the White House domestic policy offices of Presidents Reagan and George H.W. Bush, offered his take on those five ideologies, including: