Production prospects and demand for Spunmelt polypropylene materials in 2022-2025

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Production prospects and demand for Spunmelt polypropylene materials in 2022-2025

Based on the information Price Hanna Consultants LLC.

By the end of the first quarter of 2022, a slight decrease in the number of cases of Covid-19 and its variants is beginning to be observed in the world. At the same time, the negative impact of Covid on the global economy remains in the world, expressed in supply chain failures and high inflation. In addition, it is predicted that Russia's invasion of Ukraine will have a long-term negative impact on world trade and the economy. Against this background, the global polypropylene materials business "spanmelt" (SB/SMS) continues to expand along with market corrections and volatility in almost all world markets. This is mainly due to the commissioning of previously ordered capacities and the residual growth in demand after the peak of Covid.

The impact of Covid on the global market of nonwoven polypropylene nonwovens in 2020 was dramatic, followed by a market correction that reduced demand in the second half of 2021 as Covid weakened. As soon as supply chain disruptions and a surge in demand related to Covid began to normalize in early 2022, Russia invaded Ukraine, causing concern around the world. To this was added smoldering inflation and other hidden threats to the global economic system. Russia's actions are expected to affect energy, raw materials and the global economy for some time.

The world market of polypropylene nonwovens is now facing a period of both opportunities and challenges. In addition to short-term??? Economic shocks caused by Russia's invasion of Ukraine, a drop in the birth rate in most regions of the world, rising inflation, rising interest rates and ongoing geopolitical tensions may lead to a further decline in global demand. Noticeable progress has been achieved and continues to be achieved in the use of sustainable raw materials in the production of nonwovens, but this trend may face obstacles, since the solution of the problems of war and economy by States is more priority than concern for the environment.

Global capacities

In 2022, production facilities will enter the market, caused by the installation of new advanced technologies and the reaction to the surge in demand due to Covid. In 2021, about 159,000 tons of new capacity were put into operation, most of which is accounted for by Reicofil 5 technology. These capacities, ordered before the pandemic, quickly reached full capacity. In 2022, about 192,000 tons of new capacity will be commissioned, resulting in a total production capacity of about 5,308.8 thousand tons. Most of the production lines were ordered at the end of 2020, when the Covid virus was rampant. Some of these lines, which could have been commissioned in 2021, have experienced commissioning delays due to supply chain disruptions, restrictions on international and local travel, preventing the provision of installation supervision services by technicians, and the huge volume of previously ordered equipment awaiting installation. In 2023, another 128,000 tons of new capacity will be introduced. It is predicted that in the period from 2021 to 2025, about 502,000 tons of spanmelt capacity will be put into operation in the world. This will mean an increase in capacity by a little more than 10% compared to the 2020 level.

The nonwoven polypropylene nonwovens business has achieved great success in developing new, high-performance and reliable production technologies, as well as a variety of innovative products that are attractive to end consumers.

Demand

Demand began to gradually decline at the end of the third quarter of 2021 and more sharply in the fourth quarter of 2021. Demand is expected to continue to decline moderately during 2022 compared to demand in 2021. We expect that demand and annual growth will normalize and resume in 2023 under the influence of traditional demand drivers. It is assumed that the low birth rate in almost all regions of the world will reduce the demand for baby diapers, but the increase in demand for hygiene items against urinary incontinence in adults will be from 5 to 6% during this period.

Currently, it is projected that the average annual growth in global demand for nonwoven polypropylene materials in tons in the period from 2021 to 2026 will be about 5% per year. This forecast is sensitive to macroeconomic factors, epidemics, diseases and global unrest. Demand growth will be highest in South Asia (India) and Africa, followed by the Asia-Pacific region and China. Demand growth will be more moderate in the Americas, Greater Europe and the Middle East.

It can be expected that by 2024 there will be an oversupply of nonwovens in some regions of the world, since the effect of new capacities will fully manifest itself on the market. Offsetting this increase in capacity is most likely the shutdown of earlier-generation technologies re-commissioned during the surge of the recent pandemic. As always, the new facilities will be operated by closing the technologies of the old generation. Prices for raw materials and processing will remain unstable and disproportionate between regions. In general, it is expected that the cost of raw materials will increase. Against this background, approximately in 2024, investments in new plants and equipment may slow down. Although this period will not be long - the decommissioning of previously installed obsolete production facilities will do its job and the cycle will start again. During this period, manufacturers will be more inclined to upgrade existing facilities to expand their capabilities than to install new equipment.

Market capacity and demand in North America

In North America, only about 12 thousand tons of new capacity were commissioned in 2021, some of which were stopped, sold, and then re-commissioned. It is expected that during 2022–2024, 81,000 tons of new capacity will enter the market due to production lines that will be put into operation in 2022–2023. This equipment was ordered in the first half of 2021. Since then, the installation of new capacities has not been reported.

Capacities in North America were fully loaded in the first half of 2021, but in the third quarter they began to weaken due to a slowdown in demand for polypropylene nonwovens, previously stimulated by the pandemic. It is expected that the demand for hygiene items will be static, and the demand for baby diapers will correspond to low birth rates on an annualized basis. The demand for hygiene products for adults suffering from urinary incontinence will continue to grow at a rate of 5-6% per year. The demand for medical clothing and accessories made of nonwovens will remain above the pre-pandemic level in 2023-2024 due to the transition from hospitalizations due to Covid to an increase in the number of previously postponed elective surgeries. The demand for nonwovens in the construction and technical applications market may be attractive, but may face downward economic pressure depending on the regions. Capacity utilization will decrease slightly during the commissioning of new capacities and the rationalization of old technologies that were put into operation again during the pandemic. During this period, there will probably be an excess of production capacity, and some manufacturers will replace early-generation technologies with late-generation technologies. It is expected that by the end of 2023, the design capacity in North America will be 892.2 thousand tons.

Market capacity and demand in South and Central America

In South America, capacity utilization has been high in recent years due to the pandemic. Fitesa Brazil has commissioned the Reicofil 5 (R5) production line with a passport capacity of about 30,000 tons in the second half of 2021. No other large-scale projects have been announced. The demand for disposable hygiene products and other applications of nonwovens tends to grow. Hygiene products for adults suffering from urinary incontinence have great growth potential in the future. It is expected that additional capacities will be added by the end of 2023 to meet the growing demand and the existing technological base will be upgraded. The estimated design capacity for polypropylene nonwovens by the end of 2023 will be 360.5 thousand tons.

Greater Europe, including Turkey and Russia

In Greater Europe, Union (Italy) and Innovatec (Germany) jointly commissioned about 31,000 tons of R5 capacity in 2021. For comparison, 50,000 tons were commissioned in 2020. Gulsan (Turkey) will add 25,000 tons in the second half of 2022, and Avgol (Russia) will add 20,000 tons in the first half of 2024. Capacity utilization has been high for most of 2021 due to the outbreak of the pandemic and has declined in the last months of the year. It is expected that in 2022–2023, demand will further weaken to a pre-pandemic level, as capacity outstrips demand growth in both regional and export markets. The estimated design capacity at the end of 2023 will be 1,132.4 thousand tons.

Middle East and Africa

In the Middle East and North Africa, the surge in demand associated with the pandemic has provided much-needed higher capacity utilization in the region from 2020 to the first half of 2021. Capacity utilization is expected to decrease, but only slightly, in 2022 due to the installation of new capacities by Gulsan (Egypt) and PFNonwovens (South Africa). In North Africa, Gulsan (Egypt) will put into operation the Reicofil 5 line with a passport capacity of 25,000 tons in the first quarter of 2023. This installation will increase the number of lines operated by Gulsan in Egypt to three. PFNonwovens will add 15,000 tons of capacity with the installation of R5 in 2023 in South Africa. The estimated design capacity at the end of 2023 will be 216.5 thousand tons in the Middle East and 169.0 thousand tons throughout Africa.

Market capacity and demand in South Asia

In South Asia, the demand for polypropylene nonwovens continues to grow. Toray has commissioned a new Reicofil 4s line with an annual passport capacity of 20,000 tons at its new plant in India in the fourth quarter of 2020. Global Nonwovens will commission the R5 line with a capacity of about 30,000 tons in the second half of 2022. As a result, Global Nonwovens will have three lines in India with a total passport capacity of about 70,000 tons per year. Avgol will put into operation the upgraded Reicofil 3.1 line, transported from Israel to the second new plant in India in the second half of 2022. The third R5 machine will be installed in South Asia by a new manufacturer and will have a capacity of 15,000 tons to serve the health and hygiene markets. Capacity utilization in the region remains high and will be supplemented by imports from the Middle East, Asia-Pacific and China. The estimated design capacity at the end of 2023 will be 239.0 thousand tons.

Market capacity and demand in the Asia-Pacific region

In the Asia-Pacific region, Fitesa/CNC commissioned the R5 installation in Thailand at the end of 2020. The annual passport capacity of this production line is ~30,000 tons. In the third quarter of 2021, Asahi commissioned a 15,000-ton line in Thailand. Fibertex commissioned the R5 line in Malaysia in the first quarter of 2022 with a capacity of 15,000 tons. Asahi closed its typhoon-hit factory in Nobeoko, Japan, in 2020. This plant consisted of three lines with a total annual capacity of 26,000 tons. The Reicofil 3.1 line from this factory was sold to Beautiful Nonwovens (China). It is reported that Beautiful Nonwovens will re-commission this line at its Uniquetex plant in the USA. The new lines will also be commissioned by Cobes Industries in Myanmar and Hanil in South Korea in the third quarter of 2022. Demand in the region is growing, but more slowly than in previous periods. It is expected that further announcements about the capacities in the region may appear only after 2023. The estimated design capacity at the end of 2023 will be 523.0 thousand tons.

Market capacity and demand in China

In China, in 2022, it is planned to put into operation 129,000 tons of new production facilities for polypropylene materials "spanmelt" SB/SMS. This assessment includes the new capacities of Jofo Wuxi, Berry and Allmed, which will put R5 technologies into operation. China plans to add much more new capacities for the supply of nonwovens for surgical gowns and disposable sheets in the world, despite talk of localization. Despite the fact that a significant increase in capacity in China is projected until 2026, the annual growth in demand for Chinese-made polypropylene nonwovens will decrease compared to previous periods, which may affect capacity growth in the future. The estimated design capacity at the end of 2023 will be 1,943.7 thousand tons.

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