Volume 12. No. 4 August 1997

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Nylon Filament Fibers:
Competition, Capacity Changes Kick Global Nylon Contest Into High Gear

by Jean Sharpe, Manager of Market Research, BASF Corp.,
Fiber Products Division, Charlotte, North Carolina

Since nylon fibers were commercially introduced in the 1950s, they have enjoyed a long span of uninterrupted growth. World production has gone from just over 400,000 metric tons in 1960 to 3.9 million tons in 1995. Over this 35-year period, average annual growth rates have gone from an explosive 34% level in the 1960s to a more reasonable 6% level in the 1970s before settling down at a much more conservative 2% rate in the 1980s.

Today, as established products in mature end-use markets, world capacity is estimated at 5.6 million metric tons, with utilization rates fluctuating around 81%. Nylon's share of worldwide manufactured fiber production is currently about 15%. Following the rationalization and consolidation which took place during a sluggish period of the early 1990s, the worldwide nylon fiber industry is forecast to have an average annual growth rate in production of around 5% for the next few years.

Nylon fibers are produced all over the world, but since 1990 there has been a significant shift in the regional concentrations.

The U.S. and Europe combined to represent 86% of nylon world production back in 1965 but, throughout the 1970s, their collective share began to decrease and, by 1985, it had fallen to 69%. This decline came from a spurt of plant closings in Eastern Europe.

Beginning in the mid-1980s, there was a rapid increase in new capacity coming on-stream in Asia and production share for the West continued to shrink to today's 61% slice. In the Asian region, capacity increases and higher productivity rates boosted nylon world share from only 16% in 1975 to 32% in 1995.

Over the last decade, the big nylon producers in Europe and North America have been busy merging and restructuring their companies, consolidating manufacturing sites, modernizing and expanding existing plants and engineering new processes in an effort to make better quality products, improve utilization rates and increase profit margins. Much of this effort readied them for a new era of global competition.

Developing nylon production facilities in Asia was part of the same armamentarium. Much of the new capacity was placed in Taiwan, India, Republic of Korea and Thailand, but by far the greatest expansions occurred in China where the number of nylon plants jumped from only 12 in 1990 to 72 in 1994. Fifty-four percent of Asian nylon plants are located in China.

Nylon fiber was first produced in China in the 1960s. The plants were small, equipment was out of date and product quality was poor. Raw materials were in very short supply and only half of the domestic demand could be satisfied. In spite of these problems, nylon production grew more than 15% each year to 220,000 metric tons by 1995. Today, capacity is estimated at 310,000 metric tons, with a forecast of 510,000 metric tons by year 2002.

Many of these plants have been, or are being, constructed as part of a joint venture or partnership with Western companies. This means that, even though China may be a newcomer to big-volume nylon production, it will be able to by-pass regional learning curves and take an express route to the latest manufacturing technologies producing world-class quality products.

All of the efforts being made by the international community of nylon producers are now beginning to pay off and the next few years will bring a new intensity to the nylon contest.

The addition of new plants and the expansion or de-bottling of existing ones in the Asian region have occurred for a variety of reasons. By far the major reason is to keep pace (or, even better, stay ahead) of the massive waves of industrial expansion which are taking place on that side of the Pacific, and which make it imperative that nylon fiber be manufactured close to potential customers in the textile and apparel, carpet and automotive industries. And it is immaterial whether those customers are making products for domestic markets or for export.

It is only recently that nylon is becoming an important part of the Asian fiber mix. Cotton and cotton/polyester fabrics have long dominated textile production for use in apparel or home products. Even today, polyester fiber represents nearly 60% of total manufactured fiber capacity in the region. Nylon has made considerable gains with 20% current share.

Simultaneous to the shifts in nylon production geography, different regional profiles have emerged for the filament/staple mix of nylon products. Worldwide, this split has ranged from 88%-12% in the early 1970s to 80%-20% in the mid-1980s before leveling out at 84%-16% in the mid-'90s.

In all regions of the world, nylon fiber production means nylon filament products rather than nylon staple. In Europe, staple share has remained down around 18% to 19% for the last decade while in the U.S. it has fallen from a high of 36% in 1990 to the current 30% share. Nylon filament domination is even stronger in the other regions Latin America-98%, Japan-93%, China-96%, and other Asia-99%.

Worldwide, approximately 45% of nylon filament production is used in apparel and home textile applications. Thirty percent ends up in industrial products and the remaining 25% is used in carpet and rugs.

The mix of nylon filament end-uses varies greatly from one part of the world to another. It depends on the state of the domestic textile industry, the equipment and technologies being used, and the domestic or foreign markets it supplies. Increasingly, multinational partners and investors may introduce a new direction in support of changing global business strategies.

Regional concentrations of some nylon filament product categories have occurred. In the NAFTA region, for example, carpet fiber (BCF) accounts for a huge 73% of nylon filament capacity compared with about 30% in Europe, 8% in Asia and 40% worldwide.

This concentration of nylon BCF occurred because, when the U.S. carpet industry introduced tufting technology in the 1950s, it was initially married exclusively to nylon fiber. Nylon BCF producers rushed to increase capacity to supply a fast-growing North American carpet market. In the intervening years, several major carpet companies integrated back to fiber production, with estimates today that they now extrude at least 40% of the nylon BCF used by their industry. Tufted carpets are still the dominant carpet/rug construction and represent more than 90% of U.S.-made products while nylon BCF has a 42% fiber share.

Nylon filament going into apparel fabrics has a very different geographic concentration. While its world share of nylon filament production is about 23%, the share in both Asia and Europe is 30% and in the NAFTA region it's only 12%.

The huge NAFTA apparel market has not been a broad target for domestic nylon filament producers because of the popularity of cotton/polyester fabrics and also because of significant quantities of imported garments. Instead, U.S. nylon producers have claimed solid positions with high-quality and high-value specialty products going into a narrower range of apparel applications for which imported goods do not compete so successfully-high-performance activewear, swimwear, hosiery, foundations and lingerie.

Outlook

The decade of the 1990s has brought about significant and sometimes dramatic changes in worldwide patterns of fiber demand and consumption in an expanding range of textile-related products. The full implication of some of these changes remains to be assessed.

The production and consumption of Nylon has been impacted by change more than any other manufactured fiber and producers face many challenges.

Now the newly industrialized areas have begun their journey towards the economic levels and standards of living found in the rest of the world. It will take a long time. In the interim, there are some things about which we can be certain:

NAFTA will remain the No. 1 regional producer of nylon fiber. By year 2000, the population will total 420,000 million people. With per-capita fiber consumption rates around 70 lbs, the NAFTA region will remain the world's biggest consumer of fiber-related products.

The NAFTA region will remain the major destination for worldwide textile product exports in spite of a stronger shift away from Asian apparel imports in favor of apparel made in Mexico from U.S. fibers and fabrics.

Europe will remain in a strong No.2 producer position and will continue to be the major customer for industrial nylon filament. Economic recovery will push up demand for transportation products and boost industrial nylon consumption. But the problems in Eastern Europe will exert a drag effect on consumer markets for the whole area for the next few years. Japan will continue losing ground to Asian nylon producers in China and Taiwan.

Chapter Two in the Asian fiber story will begin to unfold as we turn to the "other Asia" countries like Thailand, India, Indonesia, South Korea, Bangladesh and Pakistan, which are slowly but surely writing a new script for themselves.

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Jean Sharpe is a 25-year veteran of BASF Corp. and for the past 10 years has managed the company's Market Research Group. She is a member of various committees of the Fiber Economics Bureau Inc. and the Carpet and Rug Institute.