The global nonwovens industry must now address post-pandemic challenges. The impact of the COVID-19 pandemic that began in 2019 on the global spunmelt polypropylene nonwovens market in 2020 was significant, and demand has now begun to normalize, especially in those product categories where demand surged during the peak of the pandemic. We estimate that peak demand for masks, protective clothing and wipes will peak in mid-2021. Since then, demand for nonwovens in these product categories has slowed, and at the beginning of 2023, this demand has slowed even further. In the medical market, inventories of nonwoven coils and disposable medical products have increased in some parts of the world since the third quarter of 2022, due to slowing demand. The destocking of these medical protective products has already begun, and we believe it will continue through most of 2023.
In addition, businesses across the globe face challenges and uncertainties stemming from the Russia/Ukraine issue, as well as ongoing inflation and other potential threats to the global economic system.
At present, the global spunbond/spunmelt polypropylene nonwovens market has ushered in a period of opportunities and challenges. Declining birth rates in most parts of the world, rising inflation, rising interest rates, and rising geopolitical tensions are all likely to lead to further declines in global demand.
Nonwovens, on the other hand, have made significant progress in adopting sustainable raw materials, but this may face headwinds as society's focus on war and the economy rises. Despite the uncertainties, the nonwovens industry is resilient and able to successfully meet the challenges, as witnessed during the start and duration of the coronavirus.
1. Global capacity and demand
In 2022, we estimate that approximately 239,500 tonnes of new fine denier capacity will come on stream, primarily comprised of technology from Reicofil 5, Fare and China. These new units bring the total global production capacity to 5,351.2 kilotons. This capacity was mainly ordered during the height of the outbreak, but demand has been falling as the number of infections has continued to decline throughout the year. By the end of 2022, capacity utilization had declined from its mid-2022 peak. We expect an additional 191,000 tonnes of new fine denier capacity to come on stream in 2023, bringing capacity to approximately 5,542.2 tonnes.
By 2024, we expect a further 110,000 tonnes of new capacity to come online. This will bring the total global fine denier production capacity to approximately 5,642.2 kilotons. In total, we judge that approximately 541,000 tonnes of fine denier spunbond capacity will come on stream during the 2022-2024 period. This would represent an increase of more than 10% over 2021 capacity, i.e., a compound annual growth rate of 2.7% from 2021 to 2024.
We expect demand and growth to normalize in 2023 and return to normal demand drivers. In this case, the low birth rate in almost all regions of the world will affect the demand for baby diapers. During this period, the annual growth rate of demand for adult incontinence products will be between 5-6%.
From 2022 to 2027, global average annual demand growth is expected to be around 5%. This outlook is sensitive to macroeconomic factors, disease shocks and global instability. The fastest growth in demand will be in South Asia (India) and Africa, followed by Asia Pacific and China. Demand growth will be more modest in North and South America, greater Europe and the Middle East.
As the full impact of the new capacity is gradually felt in the market, by 2024, there is expected to be an oversupply in some parts of the world. Offsetting this capacity increase is the potential shutdown of previous generation technology that was reactivated at the peak of the pandemic. Raw material costs will remain volatile and disproportionate across regions.
Overall, we expect raw material costs to decline in 2023 and rise in 2024. Against this backdrop, we believe that investment in plant and equipment is likely to slow when the next round of investment is made in 2024 due to uncertainty and rising investment costs. We also anticipate that there may be upgrades to existing capacity to increase the capacity of existing machines.
2. Capacity and demand in North America
Between 2022 and 2024, 131,500 tonnes of new capacity is expected to enter the market. This increase in capacity was primarily due to the construction of five new reicofil 5 production lines during the period, including a line ordered by Avgol that was supposed to be installed in Russia but was subsequently relocated to the United States. The increase in capacity in North America will put pressure on capacity utilization during this period. Capacity utilization in North America was fully utilized in the first half of 2021, but began to weaken in the third quarter as epidemy-related demand slowed.
Demand continued to weaken moderately throughout 2022, with demand weakening further in the fourth quarter as inventories of medical-related products increased due to reduced demand and deliveries of previously ordered goods. For most of 2023, stocks of nonwoven medical products will continue to shrink.
We expect the demand for hygiene products to remain unchanged, with the demand for baby diapers in line with the low birth rate. The demand for adult incontinence products is expected to grow at a rate of 4% per year, lower than in previous periods due to high market penetration.
As inventories shrink and demand returns to pre-pandemic levels, demand in the healthcare market will decline significantly in 2023. Demand in the construction and industrial markets is more attractive, but may face downward economic pressure. During this period, capacity utilization will decline as new capacity comes in and old capacity is rationalized. We expect our capacity to reach 8.969 million tons by the end of 2024.
3. Capacity and demand in South and Central America
In South America, capacity utilisation in 2022 was slightly lower than in 2021 due to a slowdown in CoVID related PPE demand, and Fitesa Brazil's reicofil 5 (R5) line, which was commissioned in the second half of 2021, reached full capacity in 2022. While no other large production line installations have been announced, several low-to-medium capacity Chinese-made production lines have been put into use in the region. The demand for disposable hygiene products and other nonwovens market is low to moderate. With increasing market penetration, the market demand for adult incontinence continues to grow faster than other hygiene product categories. Additional capacity is expected to be added by 2026 to meet growing demand and modernize existing technology. We expect our capacity to reach 354.0kt by the end of 2024.
4. Capacity and demand in Greater Europe
In the Greater Europe region (including Turkey and Russia), capacity increased by 355,000 tonnes in 2022 as new production lines came on stream in Union (Italy) and Innovatec (Germany), and new capacity came on stream in Master Plast (Hungary) and Gulsan (Turkey). With the commissioning of a line at Fitesa and the full capacity of a new line in Gulsan to be commissioned in 2022, capacity will increase by 30,00t in 2023.
Capacity utilization in Greater Europe is uneven among producers and dependent on exports. Capacity utilization was moderate for most of 2021 due to the severity of the pandemic situation and weakened in the final months of the year. During 2022, demand weakened further, to more normal pre-pandemic levels. As destocking takes place, demand in the healthcare market will decline in 2023. With capacity outpacing demand growth in regional and export markets, capacity utilization in Greater Europe will remain low in 2023-2024. We expect capacity to reach 11.606 million tons by the end of 2023.
5. Capacity and demand in the Middle East and Africa
In the Middle East and Africa, the surge in epidemy-related demand has provided the region with higher capacity utilization in 2020 and the first half of 2021. In the absence of COVID-19 related demand, high capacity utilization in the Middle East depends on exports to Europe and South Asia. Based on our assessment of demand and imports and exports, capacity utilisation by producers in the Middle East and Africa is expected to remain attractive through 2023-2024, with pressure coming from new production lines in Gulsan (Egypt) and PFNonwovens (South Africa) during this period. Our analysis of the Middle East does not include Iran. Baftineh installed advanced technology in Iran in the second half of 2020, modernizing the company's technology platform and adding more product features to its portfolio. In addition, SGN (Saudi Arabia) announced plans to install an R5 production line in Saudi Arabia in 2024/2025.
In North Africa, Gulsan (Egypt) will open a Reicofil 5 production line with a capacity of 25,000 tonnes in the first quarter of 2023. This brings the number of production lines operated by Gulsan in Egypt to three. PFNonwovens will install the R5 production line in South Africa in 2023, adding 15,000 tonnes of capacity. We expect the Middle East's production capacity to reach 192.0 kilotons by the end of 2024. Across Africa, capacity is expected to reach 197,000 tonnes by 2024.
6. Capacity and demand in South Asia
In South Asia, with increasing market penetration of nonwovens, demand continues to grow and production capacity surges. Toray, Global Nonwovens, Manjushree Spntek and other producers have added 1.025 million tonnes of capacity in India since 2021, a 52 per cent increase from 2021. In the fourth quarter of 2020, Toray launched a new Reicofil 4s production line at its new plant in India with an annual capacity of 20,000 tonnes.
Global Nonwovens commissioned a 300,000-ton R5 production line at its Indian plant in mid-2022, the company's third production line. Starting in 2015, Global became the first company in India to install high-capacity spunmelt equipment in the region. In the second half of 2022, Avgol commissioned the transfer of the upgraded Reicofil 3.1 production line from Israel to a second new plant in India. Manjushree has launched a new R5 production line in India. The production line has a capacity of 15,000 tons and is designed to serve the healthcare and hygiene products market. We expect India to install more capacity by 2026 as demand continues to grow. Capacity utilization in the region remains high, and we expect capacity to reach 271.5 kilotons by the end of 2024.
7. Capacity and demand in Asia Pacific
By 2023, the largest producers in the region are Mitsui/Asahi (Japan, Thailand, 148.0 kilotons), Toray (South Korea, Indonesia, 103.0 kilotons), Fibertex (Malaysia, 96 kilotons) and Fitesa/CNC (Thailand, 69.0 kilotons). Mitsui and Asahi Kasei will merge in October 2023 to become the world's fourth largest spunbonded PP nonwovens producer. Asahi Kasei started production of a production line with a capacity of 15,000 tons in the third quarter of 2021, which will reach full capacity in 2022.
Fibertex (Malaysia) commissioned an R5 production line with a capacity of 15,000 tonnes in the first quarter of 2022. The production line will reach full capacity in 2023. In the third quarter of 2022, Myanmar's Cobes Industries and South Korea's Hanil launched new production lines. The demand for sanitary products in the region is growing, especially excluding Japan, where the market is fully penetrated. The increase in capacity reflects the increase in demand, and we expect capacity to reach 512.0 kilotons by the end of 2024.
8. China's capacity and demand
In China, we expect 41,500 tonnes of new PP SB/SMS capacity to come on stream in 2023. 89.0 kilotons and 67.5 kilotons were put into production in 2022 and 2021, respectively. This estimate includes new capacity at Allmed, Jofo Wuxi, Berry, Cobes and Guan Hong, all of which will employ R5 technology.
China appears poised to add more new capacity to supply the world with nonwoven substrates used in surgical gowns and cave towels. While more lines are expected to be installed in China during the 2024-2026 period, annual demand growth for Chinese-made spunmelt polypropylene nonwovens is expected to slow. Increased capacity and reduced demand will affect capacity utilization in the future. We estimate that the capacity will reach 20.37 million tons by the end of 2024. China is seriously oversupplied, and restoring proper capacity utilization will depend on exports.
Source: | Nonwovens Industry