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2013 State of the Industry

March 1st, 2013 / By: / Feature, Industry News, Markets

Part II discusses specific market segments and international industry participants.

Successful specialty fabrics organizations have made significant investments since 2009 to improve efficiencies in their organizations. They have emphasized a culture in their businesses that focuses resources on perpetual innovation in improving existing products and introducing new products. They have also done a much better job of improving the marketing of their products and their businesses to the customer. This was evident from interviews with suppliers and fabricators at Expo Americas 2012 in Boston, Mass.

Mills surviving in the U.S. specialty fabrics industry continue to invest in new plants and new material-producing equipment, believing that they cannot afford to ignore the latest improvements in productivity and quality or they risk losing their standing in the marketplace to their competitors. This belief has led to an increase in the capacity utilization rate for specialty fabric mills operating in the U.S. over the last three years. (Of particular note is the increase in the capacity utilization rate from 56 percent in 2009 to 77.2 percent in 2012.)

Key U.S. markets

There are four key U.S. markets within the specialty fabric industry: military, construction, transportation and recreation. All are impacted by different forces and economic drivers.

Military. The military segment covers safety and protective products (including the use of smart technology) for troops, firefighters and law enforcement. A driving force behind product development for the firefighter, law enforcement and industrial markets, the military’s influence on the safety and protective market should continue well into 2013.

Although spending on textiles and clothing decreased about 16 percent in 2012, the level of spending for textiles and clothing for U.S. troops by the U.S. Defense Logistics Agency (DLA) will remain substantial, increasing about 12.5 percent in 2013 compared with 2012.

Construction. Geosynthetic products, manufactured by about 50 companies for the U.S. marketplace, include geotextiles, geomembranes and geogrids, which are used in erosion control, road construction and other infrastructures. In terms of value, geomembranes made up about 34 percent of demand in 2012, owing to their usage in sealing waste containment areas and leachate pits in the $55 billion U.S. solid waste industry. Geotextiles, the second largest segment in value, represent about 25 percent of demand in the U.S.

The use of geosynthetics in construction has traditionally grown in the U.S. at about 5–6 percent annually; growth was up about 1.5 percent in 2012, but is expected to rebound to 2-3 percent in 2013. The prospects for positive growth in the U.S. geosynthetics market were buoyed in late June 2012 when Congress passed a bill that will spend more than $100 billion on federal highway and transit programs over the next two years.

Transportation. The largest segment affected in terms of dollars is transportation. The 2012 automobile and light vehicle market saw a noticeable improvement, reaching 14.4 million light vehicles sold, an increase of 13.4 percent over 2011. The big three U.S. auto manufacturers experienced sales gains in 2012 compared with 2011.

Going forward, the U.S. automobile and light vehicle market should be a positive source for growth in the U.S. specialty fabrics industry because each new light vehicle sold includes an average of 33.5 square yards of fabric. This translated to about 482 million square yards consumed in the U.S. light vehicle market in 2012.

Recreation. The recreation market includes awnings and marine fabrics. In 2012, growth was up 1-2 percent in the U.S. EPM (end product manufacturer) awnings and canopy market. A major factor in the slight uptick has been the improvement in housing sales, and construction activity picked up nicely in 2012.

In 2012, total U.S. construction was up 9 percent over 2011; in 2012 residential construction was up about 15 percent over the same period in 2011 and nonresidential construction was up 6 percent in 2012 compared with 2011. In 2013, IFAI’s market research is projecting a 2 percent increase in fabric consumption compared to the 2012 U.S./Canadian awning and canopy manufacturer market.

The U.S. and Canadian marine fabric market improved significantly in 2012; growth in the U.S. marine end product market in 2012 reached about 7 percent, which comes off the heels of 4 percent growth in 2011. This growth was due largely to recovers and upgrades of existing boats. Boat sales for the 2012 OEM market were up about 1 percent in 2012—similar to the growth it achieved in 2011. This is a nice sustainment in boat sales growth over the last two years compared to 2008–2010. The marine fabric market is expected to continue to be healthy in 2013 with a growth rate of about 7 percent.

Import/export balances

China still holds a commanding lead in the U.S. specialty fabric import market with a 52 percent market share. Total specialty fabric imports into the U.S. increased about 2 percent in 2012, one-half percent higher than 2011. India, Pakistan, Mexico, South Korea, Canada and Vietnam represent the second tier of participants in the 2012 U.S. specialty fabric import market.

Mexico is number one in the U.S. specialty fabric export market, accounting for a 41.5 percent share in 2012—an increase of 4 percentage points over the 37.5 percent share it garnered in 2011; Canada is a distant second at about 17 percent and China holds a 4.9 percent share. Total U.S. specialty fabric exports increased about 8.3 percent in 2012 compared to 2011.

Asia’s influence

The real engine of world growth in the end-use consumption of specialty fabrics lies in Asia; the fastest growth prospects are in China, India, South Korea, Taiwan and other developing countries.

In 2012, the world market for specialty fabrics was about $129 billion, up 2.5 percent over 2011. Asia still accounts for about 45 percent of the world specialty fabric market. Key markets driving growth in Asia include automotive, infrastructure, medical and health care, agricultural and protective textiles.

China’s market growth

China is an important country for specialty fabrics in Asia with the country accounting for approximately 50 percent of total spending in Asia. Over the past 20 years, China’s consumption of specialty fabrics has grown about 10 percent per year.

Production, investment, sales and foreign trade were growing in China early in 2011; however, raw materials, labor costs and interest rates restrained further growth as small- and medium-sized companies suffered slower sales and squeezed margins from the higher costs of materials and labor. Overall, China´s economic growth rate decelerated in 2011 compared to 2010, but many officials and analysts believe the moderation is healthy because it helped to temper inflation and cushion slower growth in 2012.

The major specialty fabrics made in China are middle- and lower-grade products and intermediate materials; highly technical and added-value products are still dependent on imports.

Given China’s low labor costs relative to the U.S. and Europe, and with the opportunity to serve a large set of internal specialty fabrics markets such as infrastructure, automotive, defense (protective textiles) and filtration, it is forecast that China’s specialty fabrics industry will continue to possess advantages in the global market.

India’s fragmented market

India’s specialty fabric and nonwoven industry is highly fragmented and still in its infancy. There is no state-of-the-art technology in place compared to global players in the U.S., Europe and China. Unlike the traditional textile industry in India, the specialty fabric industry is import intensive, providing a base for a very interesting market for export-oriented manufacturers from Europe and elsewhere.

India’s share of the global specialty fabric market was about 9 percent in 2011 and was about the same in 2012. About 67 percent of their production is of commodities; only 33 percent is high-end products.

EPM market segments

Industry outlook

As stated in Part I of this report in the February issue of the Review, growth in the U.S. specialty fabrics industry increased by 2 percent in 2012. EPMs who focus on high value products and services in 2013 should achieve moderate sales growth. Industry leaders interviewed at IFAI Expo 2012 said they are optimistic about sales prospects and expect to allocate more funds for capital expenditures in 2013.

The Achilles’ heel for the industry is that not enough industry suppliers and fabricators are doing enough to grow their business and subsequently grow the industry. Many industry participants are not extending themselves by investing in a meaningful way in marketing and product innovation. They’re not pushing the envelope enough now that the dust has settled from the industry turmoil that sapped sales and growth in the specialty fabrics industry in late 2008 and 2009. Although the situation has improved since 2009, too many manufacturers are still employing marketing practices they’ve used in the past.

A good example of improved marketing in the industry was evident in the trade show booths on display at Expo Americas in Boston, Mass., in November 2012. Never before were so many booths exhibiting open, customer-oriented design layouts, with more messaging in the booths targeted to customers attending the show.

Nonetheless, more manufacturers need to get on board with serious investment in product innovation and marketing their products and businesses to the customer.

Great expectations

Successful players in the industry have seen opportunities in the marketplace and have taken advantage of them. They believe that investing in product and service innovation is critical to the success of their business in any economy, but especially in one that is slow-growing. This is no time to let your guard down. U.S. specialty fabrics industry participants may need to pursue opportunities in the global marketplace to reap the benefits from the gradually improving business climate in 2013 and beyond.

Jeff Rasmussen is market research manager for IFAI. He can be reached at +1 651 225 6967 or jcrasmussen@ifai.com.

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