business
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a case to the federal government to enact duties that would protect U.S. fiber and apparel makers, he says. The U.S. currently has its own polyes ter overcapacity problems. DuPont, for in stance, recently decided to idle two fila ment polyesterfiberlines in Kinston, N.C., and to indefinitely idle filament fiber pro duction in Charleston, S.C., affecting 600 jobs. But, says Casey, the situation in the U.S. is manageable. "What is not manage able," he continues, "is the overcapacity in the U.S. and Asia plus the dumping from Marc S. Reisch Asia." C&EN Northeast News Bureau Asia fiber capacity Still, Casey is hoping imports will slow outpaces rest of world and Wellman will benefit from a more or everal fiber producers have taken derly market in the near future. Wellman Billions of lb steps to alleviate the headache the 70 • Asia plans to bring onstream a 250 million-lbfiber business has become. Hoechst H Rest of world per-year polyester staple fiber line early in is in the midst of selling off its synthetic fi 60 the second half of 1999. The fiber line will ber portfolio. Akzo Nobel is combining its be at a facility that will also include capac fiber business with those of Courtaulds. 50 ity for 550 million lb per year of polyethyl And DuPont has placed its polyester and 40 ene terephthalate (PET) resins. The facili nylon fibers into a foundation businesses ty, in Bay St. Louis, Miss., near New Or unit in an effort to strengthen its fiber 30 leans, will start the first phase of bottle enterprises. resin production at the end of this year. "We've had better times," says Eduard 20 Although Wellman appears to be add J. Van Wely, DuPont senior vice presi 10 ing capacity at an inopportune time, the dent and head of the DuPont foundation company's plans seem a great deal more businesses. Fiber makers made less mon 0 a temperate than those of competitors in ey during the first six months of 1998 1993 94 95 96 97 98 Asia. According to the Washington, D.C.than during the same period in 1997. Note: Production of synthetic fiber, a Estimates. based Fiber Economics Bureau, Asian And prices for both synthetic and natural Source: Fiber Economics Bureau producers had synthetic fiber capacity of fibers have declined over the past year. 22.1 billion lb in 1993, equivalent to about In addition, the closedown of capacities and the personnel layoffs completed and veloping Asian nations that added enor 49% of world capacity. While the rest of anticipated tell something of the duress mous synthetic fiber capacity in recent the world added capacity at modest rates under which many U.S. and European fi years, in part to satisfy local demand, are of increase, developing Asian nations have now attempting to export more raw fiber, been adding capacity at a hectic pace. ber makers are operating. In its world fiber capacity survey last To say that the fiber business is in tur finished fabric, and apparel to earn hard moil would be something of an under currency. Those nations are flooding U.S. year, the Fiber Economics Bureau pro statement. More precisely, the forces of markets in particular, but European mar jected Asian fiber capacity would innature, the vagaries of fashion, changes in kets as well, with inexpensive technology, and the laws of economics textiles. are taking their toll on an international "The Asia flu is taking its business. toll on everyone in the fiber Floods in China and drought in Texas business," says Wellman Fi threaten to reduce this year's anticipated bers Group President Jim Ca bumper crop of cotton. Fashion demand sey. Many jobbers and bro for more casual clothes is affecting the kers are dumping Asian fiber mix of fibers in apparel, reducing, for in and finished goods, much of stance, the volume of wool used to make it containing polyester, charg tailored suits. New run-flat passenger es Casey, whose Shrewsbury, tires coming on the market are using N.J.-based company has seen more steel in place of polyester reinforc fiber profits slide in the first ing belts, potentially reducing demand half of 1998 compared with the same period in 1997. A for polyester in tire manufacture. But the impacts of natural forces, fash number of U.S. fiber manufac ion whims, and changing technology are turers are working now to small compared with the immediate effect document the injury to their the Asian currency crisis is having on the business and expect to make fiber business. Fiber demand in Japan, Tai wan, and South Korea seems to have dried Aryllc fibers are produced In Europe by Courtaulds. up, say those who follow the industry. De-
U.S., EUROPEAN FIBER PRODUCERS REGROUP
Asian fiber glut, economic woes, have Western fiber makers hanging by a thread
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12 AUGUST 31, 1998 C&EN
tage of the low wages available in Asia and encouraged textile cut-and-sew operations, says Shariq. Western fiber producers followed suit by licensing technology or building joint-venture plants in Asia to fuel the growing textile industry. With so much of the large-volume fiber business shifting to Asia, Shariq opines that U.S. and European fiber companies will "increasingly turn to specialty fibers in order to survive." David Wilkinson, the director responsible for the fibers businesses of the Courtaulds subsidiary of Akzo Nobel, agrees. Currently a member of a seven-person team integrating Courtaulds and Akzo fibers, he says the resulting operations "will want to move more into specialty fibers. There is not a lot of money to be made in commodities." The key to that move is to exploit new technology and to provide unique new fibers, he adds. Wilkinson and his team will have the Aramid Products' worker checks aramid fit s being spun in Emmen, the Netherlands. unique opportunity to design a new fiber company. Akzo completed its purchase of crease to 38 billion lb in 1998, or about data, China's cellulosics capacity increased Courtaulds in July and made no bones about wanting Courtaulds' highly profit60% of world synthetic fiber capacity. nearly 106% to 1.19 billion. Even if some projects have been slowed According to Katherine Shariq, a mar- able high-growth paint and coatings busibecause of the currency crisis, the Fiber ket analyst with SRI Consulting, Menlo ness. Akzo did not see much future for itEconomics Bureau set Asian synthetic fi- Park, Calif., China increased cellulosics ca- self in fibers since it had already arranged ber capacity at more than 33 billion lb in pacity to compensate for past and possible to form a joint venture of its industrial fi1997, or about 58% of world capacity. future cotton crop shortfalls. Rayon can be bers with Sabancy Holdings of Turkey. But As global synthetic fiber capacity has easily substituted on the same textile yarn now that deal is off, and since Courtaulds risen, increases in polyester capacity in spinning lines as cotton or cotton and itself had planned to spin off its profit-limparticular have been large, with capacity polyester blends, she says. The rise of Chi- ited fiber business, managers of the growing more than 56% between 1993 and na and other Asian developing nations as merged company are going to meld the 1998, to 42.7 billion lb. China alone has in- textile fiber and textile goods giants is Akzo and Courtaulds fiber operations and creased polyester capacity more than 73% largely due to the 1974 Multi-Fiber Ar- sell, "demerge," or arrange a leveraged over the five-year period, with projected rangement that industrialized nations buyout of the resulting company. When the new company does emerge, annual polyester capacity of 6.2 billion lb signed with a number of developing counat the end of 1998. Based on 1997 figures, tries. The systematic reduction of tariffs on boasts Wilkinson, it will be the largest China's polyester fiber capacity is up more textiles the arrangement allowed is due to independent fiber-only producer, with be phased out entirely between 2002 and about $3 billion in sales. Only DuPont has than 58% to 5.6 billion lb. Other global fiber capacity increases 2005, says Shariq. "Minimal tariffs" will a larger fiber business, with global sales of have been more modest over that five-year then affect the flow of textiles from devel- more than $7 billion. like DuPont, Akzo will have a mix offibers.For the as-yet-unperiod. Nylon capacity could rise 18% be- oping countries to industrialized nations. tween 1993 and 1998, to 12.5 billion lb, Even when tariffs were higher, West- named company, the fiber mix will range while that for acrylic is projected to grow ern retailers and designers took advan- from the prosaic nylon, acrylic, and rayon, to the new cellulosic lyocell fi11%, according to Fiber Ecober, and to technically advanced nomics Bureau projections. And aramid and carbon fibers for ancapacity for the cellulosic fibers Global output of synthetics leads tiballistic fabrics or aerospace rayon and acetate will have that of overall fibers composite use. grown a mere 3% over the fiveAverage annual year period. Here, too, a close Before it emerges, the Akzo change, Billions of lb 1993 1994 1995 1996 1997 1993-97 look at the numbers shows the and Courtaulds executives inraging growth in capacity in tend to prune the fiber organizaCotton 37.3 41.1 44.0 43.0 43.3 3.8% China; other countries, particution. Akzo and Courtaulds toWool 5.9 5.9 5.9 5.6 5.5 -1.7 larly Western countries, have gether have about 19,000 emSynthetics 35.3 38.9 40.5 43.4 47.8 7.9 cut cellulosics capacity. Beployees. Wilkinson says, "Some Cellulosics 5.0 5.1 5.4 5.0 5.1 0.5 tween 1993 and 1998, China downsizing is going on now," TOTAL 83.5 91.0 95.8 97.0 101.7 5.1% will have increased cellulosics and adds that "we can't expect capacity more than 113% to things as they are to go forSource: SRI Consulting 1.23 billion lb. Based on 1997 ward." But he believes that the AUGUST 31, 1998 C&EN 13
business emergence of a new fiber company means "we have an opportunity to be a focused fiber company" without the pharmaceutical or coatings franchises a chemical conglomerate may have. The new fiber company will have the opportunity to confront another newly independent fiber company, with about $2.7 billion in annual sales and 11,000 employees. Hoechst signed a letter of intent in April to sell its North Americancentered polyester fiber and resins assets to an as-yet-unnamed joint venture between privately held Koch Industries, based in Wichita, Kan., and Mexican industrialist Isaac Saba and his family. When they complete the deal, the Koch-Saba group will have snagged the crown jewel of the Hoechst polyester operations, consisting of textile fibers, industrial fibers, and PET bottle resins. But it will not be able to use the well-known Trevira polyester trade name; Hoechst sold that name and European textile fiber assets to the Indonesian company Multikarsa Investama. The Koch-Saba folks decline to comment on their soon-to-beacquired business now referred to in the industry as FKAT (formerly known as Trevira). Koch-Saba has named executives to head the fiber company once the acquisition is completed, but Bill Harris, Hoechst Polyester's well-regarded president and chief executive officer, is not among them. While he decides what he will do after Koch-Saba secures FKAT, Harris continues to oversee operations, and he is sanguine about the survival of the new company. Only about half of the company's business will be dependent on the variable textile polyester business, says Harris. Because of the resins and industrial fibers business, the new business will "have enough here to diversify" the new company and allow it to survive. In addition, the new KochSaba company will benefit from Koch's backward-integration into /^-xylene and Hoechst Polyester's recent acquisition of purified terephthalic acid technology from Mitsubishi. A little wrinkle in technology development, however, may hurt FKAT's industrial polyester business. Tire maker Goodyear has developed a new generation of run-flat tires that dispenses with the polyester belt plies traditionally used along with steel in steel-belted radial tires. "Polyester can't take the heat," explains Sam P. Landers, team leader for Goodyear's advanced passenger tire engineering group. The new tires are designed to run up to 50 miles should they 14 AUGUST 31, 1998 C&EN
World polyester fiber capacity up 6 0 % . . .
. . . while nylon's rises more modestly . . .
Billions of lb 50 f
Billions of lbb 15
40 30 20 10 1993
94
95
96
97
98a
1993
94
95
96
97
. . . acrylic's shows little change . . .
. . . and cellulosic fibers' hardly moves
Billions of lb 10
Billions of lb
101
""
4 2
O f » 1993
94
M 95
BHMiWi 96
97
98a
01 1993
94
95
96
97
98a
a Estimate, b Includes aramid except for U.S. Source: Fiber Economics Bureau
lose air. If they do run flat, the polyester adhesive system is not strong enough to maintain its integrity as heat builds up. That little wrinkle may or may not affect DuPont, but Van Wely has more pressing concerns at the moment. Recently incorporated into its "foundation" business portfolio, the fibers businesses are not as profitable as the faster growing life sciences or "differentiated" businesses, which include spandex fiber, admits Van Wely. But he promises to whip the nylon and polyester business into shape, admitting that the "asset productivity" particularly of the "polyester enterprise" can be substantially better. Van Wely says DuPont does not intend to "monetize" or spin off the fibers businesses. But, in fact, it has new technology that it may soon use to double polyester polymer capacity at existing facilities. Although the company has already reduced polyester fiber capacity in response to market conditions, DuPont could restart improved units and "participate in volume polyester markets," if conditions justify such moves. "We've got the number-one position in nylon and polyester and very much intend to keep it that way and to strengthen our businesses and further
globalize them through alliances and joint ventures where appropriate." One such venture under discussion is a deal with Alpek S.A., a subsidiary of Alfa of Mexico. Announced in May, the two partners plan to produce 750 million lb per year of polyester staple fiber at a facility to be built on the site of Alpek's terephthalic acid unit in Altamira, Mexico. The first phase of the project, a 350 million-lb-peryear unit, is scheduled to start up in late 2000. The venture will also include DuPont staple polyester operations in Wilmington, N.C., and Charleston, S.C. Considering all the consolidations in the fibers business, the growing capacity in Asia, and the changes in marketing and technology now under way, SRI Consulting's Shariq is philosophical. It is "artificial" to think nations ought to protect their integrated textile enterprise. The big fiber companies don't limit their production and marketing approach to specific countries; they freely import and export fiber and raw material to take advantage of production economies. "Economics says a country should let go of what it can't produce at favorable economics." And when it does, "the price will settle at free-market values."^
