The Fiber Year 2007/08” Is the Eighth Issue to Describe in Detail Developments in the World Manmade Fiber, Spun Yarn and Nonwovens Industry

Issue 8 – May 2008

The Fiber Year 2007 / 08 A World Survey on Textile and Nonwovens Industry Dear Readers,

We are on the right course. It was our aim to position Oerlikon as the new corporate umbrella brand as well as the global market and innovative leader in the textile sector. And we have been more than successful in doing so last year – in particular thanks to your confidence in our performance.

Therefore, we would like to thank you warmly, for example for your overwhelming feedback referring the ITMA 2007. There, you did not only show great interest in our innovative products. But you also accepted in a very positive way our five brands which we presented there under one roof for the first time. And we promise you: Oerlikon Barmag, Oerlikon Neumag, Oerlikon Saurer, Oerlikon Schlafhorst and Oerlikon Textile Components will continue to display their combined expertise in the fields of nonwovens, man-made fibres, natural fibres, twisting, embroidery and components. Dr. Carsten Voigtländer CEO Oerlikon Textile There are good reasons that you will profit from this: Our reorganisation creates synergies that will be of direct benefit for you. We offer leading total solutions all along the textile value-added chain and we are the number one player in almost all of our markets. Thus, we will offer you future- and solution-oriented products and services that are even more efficient. For we are able to advance product innovations and technological optimisation across the process chain stronger than before.

One example for this is our e-save energy efficiency programme. With this label, we mark machines which save energy to a great extend in internal and competition comparison. In doing so, we serve central concerns of our group such as resource conservation, environmental protection and sustainability – subjects that the segment Oerlikon Solar also puts in the focus of its activities.

We will consequently follow the pursued course in 2008 and are sure that we will be able, as has been the case so far, to provide the right answers to the questions of the future: highly productive machines. With our innovations, we are well prepared for 2008 and beyond.

And we would like to invite you: Share our success and competence with us also tomorrow. Consistently challenge our technological competence anew. We commit ourselves to your goals – literally with every fibre.

Yours sincerely,

Dr. Carsten Voigtländer CEO Oerlikon Textile Foreword

The information in this report is mainly based on the global network and in-house experience. Special thanks go to all companies and institutions below mentioned for their precious contribution.

ABRAFAS International Wool Textile Organisation (IWTO) Airbus S. A. S. Japan Chemical Fibers Association All Pakistan Textile Mills Association (Punjab Zone) Lenzing AG Asian Development Bank Malaysia Trade and Industry Portal Association of the Nonwoven Fabrics Industry Malaysian Textile Manufacturers Association Autoliv Inc. Mexican Clothing Industry (CNIV) Bangladesh Garments Manufacturers and Exporters Ass. Ministry of Economic Affairs, R.O.C. Bangladesh Textile Mills Association Ministry of Textiles (India) Brazilian Textile and Apparel Industry Association Montefibre SpA Bank of Kuwait National Bureau of Statistics of China Boeing Co. Nexis Fibers Sarl Camara Industrial Argentina de la Indumentaria Nilit Ltd. China Chemical Fibers Association Performance Fibers GmbH China Chemical Fiber Economic Information Network Poimena Analysis China Cotton Textile Association Polyamide High Performance GmbH China Nonwovens & Industrial Textiles Association Proexport Colombia China Textile Information Center Rhodia SA Dralon GmbH Spinners & Weavers Association of Korea EDANA Taiwan Textile Research Institute Federal Bureau of Statistics (Pakistan) The Woolmark Company Fiber Economics Bureau The World Bank Group Food and Agriculture Organization of the United Nations Trevira GmbH German Association of the Automotive Industry (VDA) United Nations Conference on Trade and Development Global Wind Energy Council United States Agency for International Development Hexcel Corp. United States Department of Agriculture INDA United States Department of Commerce Indonesian Synthetic Fiber Makers Association U.S. Census Bureau International Cotton Advisory Committee Woolmark Business Intelligence

© Oerlikon Textile GmbH & Co. KG, Remscheid 2008. The content of this report is protected by copyright. Oerlikon permits recipients of this report to make copies of Oerlikon’s copyright material in this report for their own use. Further distribution and/or publication is permitted provided that the source is acknowledged and no changes to the content are made. However, Oerlikon reserves the right to withdraw any of these permissions in relation to any particular user at any time.

The information provided in this report has been investigated and compiled with reasonable care. However, the information is provided “as is” without warranties of any kind, expressed or implied, including accuracy, timeliness and completeness.

For further information: Andreas Engelhardt Oerlikon Saurer Arbon Ltd. Textilstrasse 2 CH-9320 Arbon [email protected] Tel. +41 - 71 - 447 51 89

The Fiber Year 2007 / 08 03 Table of contents

1. Carbon Neutral Clothing...... 05

2. Upstream Raw Material Industry...... 06 2.1 Cotton...... 06 2.2 Wool...... 09 2.3 Polyester Fiber Intermediates...... 12

3. Worldwide Fiber Consumption in 2007...... 13

4. Manmade Filament Yarn and Staple Fibers...... 15 4.1 Polyester...... 17 4.2 Polyamide...... 23 4.3 Polypropylene...... 24 4.4 Acrylic...... 25 4.5 Cellulosic...... 26 4.6 Carbon Fibers...... 27 4.7 Spandex Yarns...... 29

5. Spun Yarn...... 30 5.1 NAFTA...... 31 5.2 South America...... 35 5.3 Asia ...... 38 5.4 Greater Europe...... 56 5.5 Africa...... 58 5.6 Installed Spinning Capacity...... 61

6. Nonwovens and Other Unspun End-Uses...... 62

7. Summary and Trends in Global Textile Industry...... 67

8. Textile Chain...... 70

9. Statistical Appendix...... 72

“The Fiber Year 2007/08” is the eighth issue to describe in detail developments in the world manmade fiber, spun yarn and nonwovens industry. Its target is to provide a compre- hensive picture on the textile industry. Statistical information is instrumental in achieving an overall impression and inevitable to disclose the story behind the figures. However, it cannot explain the fundamental changes that have been taking place, as politics explain much activity in this industry today and have consequences far beyond the boundaries of the industry. Last year, we have introduced the travels of a T-shirt in the global economy with trade flows around the globe from cotton cultivation in the United States to yarn spinners and garment factories in PR China, and ultimately to a used clothing market in Africa. This exciting book from Professor Pietra Rivoli did not treat the environmental aspects of a T-shirt’s life. This year, initial point is a T-shirt again, but this time under the aspect of the carbon footprint of clothing production.

04 The Fiber Year 2007/ 08 1. Carbon Neutral Clothing

“When it comes to textiles, sustainability is the new black. A few years ago in India, I was surprised to see a little boy wearing a Chicago Bulls T-Shirt with a big picture of Michael Jordan on the front. Even though Michael Jordan had been retired for a while, the shirt looked crisp and new. I couldn’t image how it had gotten as far as India, and was forced to consider the global nature of the textile industry. This event and the contemplation that followed helped inspire our Carbon Neutral Clothing certification system.

The commercially driven world is now being forced to realize a new set of standards based on the triple bottom line of economic, social, and environmental sustainability. The days of waste and disregard are over, in favour of aligning business with social causes, hoping to attract a more discerning consumer. Research has shown that companies with a public commitment to the environment and ethics perform better on 3 out 4 financial measures in addition to earning 18% higher profits on average (Institute of Business Ethics, 2003). As a result of globalization, the textile industry is finding it difficult to achieve sustainability. Sourcing, production, finishing, distribution, and final marketing may each be located on a different continent, which creates a tre- mendous carbon footprint far beyond what is caused by production alone. A carbon footprint is a complicated metric that takes into account every step of production, from raw material harvest through distribution, and finally to the consumer. The equation is complex, considering overseas textile manufacturing and shipping, is overwhelming. So where to begin?

Because the problem is so massive and far-reaching, the solution must begin with education. Car- bon Neutral Clothing was created to help address this problem. Textile manufacturers come in a Hans Fedderke, variety of forms, and are found strewn across our globe. Carbon Neutral Clothing is working with Co-Founder, manufacturers to calculate their current carbon footprint, and is helping to mitigate it through a Live It Green LLC, qualified carbon offset provider of their choice. Together we are creating a roadmap to sustainabil- Chicago, IL, ity. While identifying the largest contributing factors as well as the cost of improvement, we’ve been able to construct a sustainable agenda. www.liveitgreen.com

One of our current clients, Rene Geneva Designs, based in Austin, TX, has demonstrated a laud- able commitment to sustainability and is actively pursuing environmentally friendly materials and methods. They are not a global company with an unlimited budget, yet they have achieved significant steps towards truly sustainable textiles. They control and identify the emission sources from the production process and, for example, use formaldehyde-free silks and organic cottons with low-impact dyes. By considering the social and environmental issues, and not just the economic factors, Rene Geneva Designs has been able to create a sustainable clothing line that reso- nates with consumers not only because of its aesthetic appeal, but also because it is aligned with a growing consumer environmental awareness.

Sustainability is achievable for any committed company willing to become aware of the myriad of emission sources in the production chain and then accept responsibility for those emissions. Market-wide reformation of an industry as segmented and complex as textiles will not happen overnight. By focusing on the trinity of environmental, social, and economic sustainability, and through increased education about the carbon footprint of clothing production, the textile industry can begin to refine that process that put a Michael Jordan T-shirt on a boy halfway around the world.”

The Fiber Year 2007 / 08 05 2. Upstream Raw Material Industry

2.1 Cotton

World cotton production is estimated to decline 2.1% to 26.1 million tonnes in 2007/08. World consumption is projected to rise to a new all-time high of 27.2 million tonnes, up 0.4 million tonnes, or 1.4%, from last season. The approximately 1.2 million tonnes deficit in supply will result in a decline of ending stocks to 12.9 million tonnes.

The Cotlook A Index moved in the range from 54 US cents per pound to 72 US cents. Cotton prices have continued its long-term trend since 2005, in particular gaining momentum since May 2007.

06 The Fiber Year 2007/ 08 World cotton area for 2007/08 is forecast at 33.7 million hectares, down about 1 million hectares from the last season. Three quarters of the global cotton area is located in six countries – India (9.5 million hectares, +3.6% over 2006/07), PR China (6.1 million hectares, +1.7%), United States (4.2 million hectares, -17.5%), Pakistan (3.2 million hectares, unchanged), Uzbekistan (1.5 million hectares, +1.4%) and Brazil (1.1 million hectares, +3.7%). Significant declines in cotton area have been noticed in Turkey, Burkina Faso, Mali, Australia and Paraguay, in total down from 2.1 million to 1.5 million hectares.

Double-digit production increases materialized in India and Syria as well as in several African countries (Egypt, Kenya, Malawi, Nigeria, Tanzania, Togo, Uganda, Zambia and Zimbabwe). They were offset by reductions across the globe, i.e. in the Americas (Argentina, Paraguay and the United States), in Africa (Burkina Faso, Cameroon, Chad, Cote d’Ivoire, Mali, Mozambique and Sudan), in Greater Europe (Azerbaijan, Kyrgyzstan, Spain and Turkey) as well as in Australia and Pakistan.

The leading producing countries, representing about 90% of world cotton production, are listed below:

Country Production (mill. t) ± in % vs prev. year Yield (kg/ha) PR China 7.6 -1% 1,249 India 5.4 +15% 573 United States 4.2 -10% 995 Pakistan 2.0 -9% 603 Brazil 1.5 +1% 1,374 Uzbekistan 1.2 +3% 826 Turkey 0.7 -18% 1,222 Greece 0.3 ±0% 983 Turkmenistan 0.3 +8% 472 Rest of the World 2.9 -12% 426 World 26.1 -2% 775

The leading trading nations are listed below.

Major Exporter mill. t Major Importer mill. t United States 3.2 PR China 2.7 India 1.3 Turkey 0.8 Uzbekistan 1.0 Pakistan 0.8 Brazil 0.5 Bangladesh 0.5 Australia 0.3 Indonesia 0.5

The Fiber Year 2007 / 08 07 “International Cotton Advisory Committee (ICAC) is an association of governments of cotton producing, consuming and trading countries. The Committee was formed in 1939, and the Secretariat was established in 1946. The ICAC currently has 42 members.

The world cotton industry is being transformed by the development of new technologies and wider adoption of existing technologies. As a result, cotton yields are increasing, leading to an expansion in cotton supplies, and marketing is becoming more efficient. World cotton production is estimated at approximately 27 million tons during 2008/09 (August 2008 through July 2009), while consumption is estimated at a record of 27.5 million tons. Prices are rising to the highest level since the mid-1990s in 2007/08, and a further increase in prices to an average of around 80 cents per pound is forecast for 2008/09. Thereafter, higher prices are expected to lead to a surplus of production over Terry Townsend, consumption, resulting in a decline in average price levels by 2009/10. Executive Director, Secretariat of the ICAC, The world cotton yield rose from 400 kilograms per hectare in 1980/81 to 775 Washington DC, during the current season, and a further increase to 790 kilograms is forecast for 2008/09. Biotechnology is the most visible of the new technologies push- www.icac.org ing yields higher and leading to reduced use of insecticides. Commercial use of biotech cotton varieties was introduced in 1996, and biotechnology has been the most rapidly adopted new technology in the history of agriculture. In the current season, an estimated 44% of world cotton area accounting for more than half of world cotton production has been planted to biotech varieties. In addition to biotechnology, better management of water, precision application of inputs, more precise management of soil fertility, use of narrow-spectrum pesticides targeted to specific insects rather than the use of all-kill products, and advances in conventional seed breeding are leading to expanded yields in both developed and developing countries.

Technology is also affecting the marketing, handling, transportation and stor- age of cotton. An estimated 50% of world cotton production is now tested at the producer level using instrument testing systems, and the cotton industry is moving away from a myriad of parochial national systems of grades and standards and toward commercial standardization of instrument testing based on the Universal Cotton Classification Standards. Computerized management of inventories and scheduling of deliveries, combined with integrated intermo- dal logistics, is reducing time in transit and improving just-in-time performance in the cotton industry.”

08 The Fiber Year 2007/ 08 2.2 Wool

World wool production fell again in 2007, down 2.5% to 1.2 million tonnes clean weight, continuing the decline seen since the peak in 1990.

The decline in total wool production 2007 was entirely due to a decline in the production of wool used in clothing (apparel wool). Apparel wool production fell by 4.3% in 2007 to 573,000 tonnes, while production of wool used in interior textiles rose by 1.2% to 507,000 tonnes. The latest forecasts presented at the International Wool Textile Organisation’s Annual Congress, held in Beijing in April 2008, suggest that world wool production will fall by 1.6% in 2008 to 1.18 million tonnes, the lowest level since the 1940s.

The world’s largest producer of wool, Australia, saw its production fall by 8% in 2007 compared with 2006 to 300,500 tonnes. Wool production in Australia has been hit hard by drought in much of the country, which has reduced the amount of wool each sheep produces. The drought has also combined with high prices for sheep and lambs for meat resulting in a sell-off of sheep for slaughter. This has pushed sheep numbers down to around 86 million head, the lowest since the mid-1920s. As 90% of Australia’s wool is used in clothing, it is the world’s largest supplier of apparel wool, accounting for around 50% of world production. The fall in Australia’s production is the reason for the strong decline in world production of apparel wool in 2007. Current forecasts are for Australia’s production to fall again in 2008, by 4.8% to 286,000 tonnes clean. While the drought has broken in some parts of Australia, it will at best allow the decline in production to cease, not be reversed, in the near future.

Production in the second largest wool producing country, PR China, rose marginally (up 1%) in 2007 to 177,000 tonnes. Production is expected to remain static in 2008 and beyond as the Chinese Government implements reforms to encourage a move away from sheep and other small- hoofed animals and towards larger hoofed animals (beef and dairy cattle) to reduce land degrada- tion in the Inner Mongolia and Xinjiang Provinces (where most of China’s sheep are kept).

The world’s third largest wool producing country and largest producer of wool for interior textiles, New Zealand, also saw a drop in production in 2007. There was a 3.8% decline to 165,000 tonnes clean as drought in that country and competition for land from the booming dairy industry reduced sheep numbers. Production is expected to dip again in 2008 by 1.3%.

The Fiber Year 2007 / 08 09 World demand for wool at spinning in 2007 is estimated at 1.202 million tonnes, down 2.8% on the 2006 level. Volume demand for wool at spinning has been declining steadily in the past 17 years since wool production peaked. In particular, the volume of demand has fallen by almost 20% since 2000 which has coincided with a large fall in the supply of wool due to lower production and the sell-off of a stockpile (in 2001) which had been held since the start of the 1990s.

PR China is the world’s largest wool processing country. In 2007, PR China accounted for 33% of the world’s use of wool at spinning, up from around 31% in 2006. PR China processed around 422,000 tonnes of wool in 2007, up by 8% compared with 2006. Over 60% of Australia’s wool is exported to PR China, with around a third of New Zealand’s and Uruguay’s wool also exported to PR China. Around half of the wool that China consumes at spinning is finally consumed at retail within PR China, while the remainder is exported as finished clothing, carpets and other home textiles to Japan, the US and Western Europe. China has lifted its use since 2000 as investment into PR China from Europe and Japan boosts its wool spinning capacity.

The second largest wool consuming country at spinning, India, maintained its share of global use at 10% in 2007. Its consumption in 2007 was 128,000 tonnes, the same as in 2006. However, it has lifted its use since 2000 from 102,000 tonnes as more processors look to locate their spinning capacity in India. Some of the world’s largest wool spinners are located in India. While India and PR China have lifted their consumption of wool at spinning over the past seven years and grown their share of world use, the major processing countries in Western Europe have seen their wool use drop sharply as competition from the low labour cost countries have taken their toll. Western Europe’s share of wool use at spinning has fallen from over 25% in 2000 to just 15% in 2007.

In 2000, Italy was the second largest wool spinning country in the world, using 177,000 tonnes (a share of 12% of world use). In 2007 that had fallen by more than half to just 81,000 tonnes. Its spinning industry is shifting away from Italy due to higher labour costs to other countries, notably in Central Europe (Czech Republic, Bulgaria, Poland etc). Compared with 2007, Italy’s consumption of wool at spinning fell by 14% and had a 6% share of world wool consumption. If drought in Australia and New Zealand recedes, the continuous fall in global wool production may be arrested and wool production flatten out at a much lower level than in 1990. The global industry acknowledges it must try to boost demand at retail and the IWTO and individual country organisations (such as Australian Wool Innovation) are embarking on targeted marketing campaigns at retail.

10 The Fiber Year 2007/ 08 “International Wool Textile Organisation (IWTO) is the international body representing the interests of the world’s wool-textile trade and industry. IWTO membership covers woolgrowers, traders, primary processors, spinners, weavers, garment makers and retailers of wool and allied fibres in its member- countries, as well as all kind of organizations related to wool products and the wool business in general.

Climate change is still the word to open all doors in politics and economy in the moment. This subject, with all its related aspects and catchphrases like ‘health’, ‘sustainability’, ‘organic’, ‘green’, “eco”, recyclable”, ‘clean’, ‘biologi- cal’, ‘authentic’, ‘life quality’, etc. are at the forefront in practically all industry sectors around the world, in industrialist countries as well as in developing countries. The hype around this subject is steadily growing.

As a result, a new target group of consumers has been created in all relevant Henrik Kuffner, Director industrial markets, called “Lifestyle of Health and Sustainability (LOHAS)”, General, IWTO, Belgium, as it is now becoming known in the economic world, generating a sales volume of more than US$750 billion, calculated by the well-known sociologist www.iwto.org Paul Ray. ‘Green lifestyle’ is conquering the markets at a breathtaking tempo, and one third of the world’s consumers are thought to already be part of this phenomena, and in only a few years it will be the majority, according to a study from ‘Kelkheim Institute’ in Germany. This current hype about sustainable technologies and products is not only a short-term mood, but a long-term trend, the study predicts. Wool, with its natural attributes, being probably the best material for this target group, is having the chance to be back in every consumer’s mind through this line, generating a huge market opportunity.”

The Fiber Year 2007 / 08 11 2.3 Polyester Fiber Intermediates

Crude oil prices closed 2007 at over US$95, after starting at the beginning of the year with slightly over US$60 per barrel. This level gives oil producing nations an enormous profitability. According to the Bank of Kuwait, the costs of extracting one barrel of oil in the GCC region was US$38 in 2006/07 with the lowest costs in UAE at US$25, the Kingdom of Saudi Arabia and Qatar at US$30 each. Did surging oil prices affect its oil derivatives like e.g. polyester fiber intermediates in a similar way? Surprisingly at first sight, it was only mono ethylene glycol with prices nearly doubling in the second half of 2007. Meanwhile, prices of paraxylene and purified terephthalic acid were rather flat. This may call for other reasons than just the price of the primary material.

PX: Dynamics in the expansion of paraxylene (PX) capacity accelerated, but demand was again out stripping supply. Last year’s rise in global capacity was 9% at 29.8 million tonnes, while the increase of consumption accounted for 10% to 26.7 million tonnes. Debottlenecking was realized in Mexico and in the Netherlands, while significant capacity additions came on-stream in Asia – PR China, India, Indonesia, Iran, South Korea, Taiwan and Thailand totalling at 2.7 million tonnes. The capacity in the Middle East will triple within the next three to four years. As most projects are export oriented, it will add to regional oversupply in Asia and Europe. Despite lower inventory levels as compared to 2006, prices of PX were hardly on the upswing.

PTA: The purified terephthalic acid (PTA) industry has experienced an exceptional year with 3.8 million tonnes growth in capacity. On the other hand, Taiwanese Capco has shut down its 700,000-tonne line and idled its two 500,000-tonne lines due to depressed demand. Further on, Advansa has closed its 150,000 t/y plant in the United Kingdom. Furthermore, expansions were put in operation in the United States (Voridian), Mexico (Petrocel) and South Korea (Taekwang). Chinese capacity expansion is believed to have skyrocketed by about 4 million tonnes. However, its booming downstream industry is being reflected by 14% higher imports at 8.0 million tonnes despite surging PTA investments. Ongoing PTA investments in PR China will increase its self-sufficiency rate, posing a real threat to the industries in South Korea, Taiwan and Thailand. Each country ships about 60% of its annual output to this market. This makes the countries most vulnerable to any changes in Chinese PTA balance. The more as domestic consumption in South Korea and Taiwan is predicted to steadily decline and Thailand’s growth will be static.

MEG: The mono ethylene glycol (MEG) market has witnessed a net increase of nameplate capacity of about 1.6 million tonnes in 2007 with an unpredictable increase of supply in Iran included. No- ticeable for this industry is that quite a number of new plants has been delayed and expansions are solely focused on the Middle East and Asia. The Middle East will emerge as major supplier, doubling capacity to 10 million tonnes over the next five years. Moderate investments in PR Chi- na result in steadily rising imports, last year’s foreign supply rose 18% to 4.8 million tonnes. Some 80% of imports came from the Kingdom of Saudi Arabia, Canada and Taiwan. Any additional Middle East capacity is expected to address this high-growth market in future. In particular, the United States will suffer from the unbeatable cost position in the Middle East. As a consequence, the United States has lost its leading position in installed MEG capacity to the Kingdom of Saudi Arabia in 2007.

12 The Fiber Year 2007/ 08 3. World Fiber Consumption in 2007

Once again, PR China has revised its last year’s fiber output. Although the 2006 total output volume was nearly unchanged at 19.3 million tonnes, the structure has changed due to partly significant revisions per fiber type. Cellulosic fibers were downwardly revised by 15.8% and polyester staple fibers upwardly by 5.9%.

The table below summarizes the original and revised Chinese production figures:

in 1,000 t/y PES-FY PES-SF Polyamide Acrylic Cellulosic 2006 (original) 10,224.5 5,821.6 852.2 839.1 1,434.6 2006 (revised) 9,972.4 6,164.2 827.6 816.3 1,207.3 2007 (original) 12,177.2 6,999.5 951.2 821.7 1,542.9

The world fiber market has enjoyed growth in cotton, cellulosics, polyesters and small-scale fiber types like spandex, aramid and carbon fibers. Established fibers like polyamide, polypropylene and acrylic were down in volumes. While the usage of cotton, wool and silk increased by 1.2% to 28.5 million tonnes, manmade fibers rose by 8.0% to 44.1 million tonnes. The third section with kapok, ramie, flax, hemp, jute, sisal and coir is anticipated to have stagnated at 5.8 million tonnes. This segment is only mentioned for the sake of completeness, it will not be included in any further comments.

Manmade fibers improved their relative market position at 60.7%, while cotton, wool and silk hold a market shares to 39.3% of the world textile market. A world population of 6.64 billion corresponds to an average per capita consumption of 10.9 kg.

The Fiber Year 2007 / 08 13 On a world basis, fiber demand of cotton, wool, silk and manmade fiber has increased by 5.2% to 72.6 million tonnes, clearly above the average annual long-term growth rate of 3.4% (1980-2007).

The chart above shows the long-term inter-fiber competition. Since the beginning of the 1990’s manmade fibers have been the most important fiber type in terms of volume. The average annual growth rate since 1980 for manmade fibers accounts for 4.3%, for natural fibers it amounts to 2.3%.

Filament yarns rose by 10.0% to 24.3 million tonnes, mainly driven by the growth in polyesters that managed to jump up by 14.1% to 18.3 million tonnes. Staple fibers, the input material for spun yarn and nonwovens, rose by 3.0% to 48.3 million tonnes. This segment benefited deci- sively from the growing demand for viscose (+12.9%) and polyester (+8.3%) staple fibers as well as cotton (+1.4%).

14 The Fiber Year 2007/ 08 4. Development of Manmade Fibers

The cellulosic fiber market again showed a stronger growth rate than synthetic fibers. While cellulosic fibers rose 9.0% to 3.7 million tonnes, synthetic fibers managed to grow 7.9% to 40.4 million tonnes. The favourable development in cellulosics was predominantly linked to viscose staple fibers. The growth in the synthetic fiber segment was mainly driven by polyester fibers while the established polymers like polyamide, polypropylene and acrylics declined.

The manmade fiber spinning business has further declined in Europe, Japan and the United States, while Asia continued to gain market shares. The Asian manufacturing volume of about 34 million tonnes corresponds to a global 77% market share, of which two thirds are being manufactured in PR China. The Chinese industry succeeded in lifting output by 17.4% to 22.7 million tonnes, equal to the world manmade fiber production volume in 1994 – deeply symbolic, as it was the year before the Agreement on Textiles and Clothing came into effect to provide developing nations a better access to industrialized countries during a ten-year phasing out period of quotas. The table below summarizes the output of major manmade fibers:

2007 in 1,000 t/y Filament Yarn Staple Fiber TOTAL ± in % vs 2005 Cellulosics 440 3,273 3,712 +9.0% Synthetics 23,848 16,526 40,374 +7.9% - Polyester 18,253 12,416 30,670 +11.7% - Polyamide 3,633 353 3,986 -1.1% - Polypropylene 1,543 1,315 2,858 -4.4% - Acrylics 2,376 2,376 -4.9% - Others 420 66 486 +12.6% TOTAL 24,288 19,799 44,087 +8.0%

The chart below illustrates the relative strength and previous year’s growth rate of manmade fibers spiltted-up by application. The only segment suffering from a downturn was carpet yarn due to the U.S. subprime crisis and increasing competition from hard surface floorcovering. Polyester, although small in carpet yarn volumes, continued its growth. Generally, polyester has pushed up output in all end-uses. Polyester has performed with above-average growth rates in all applications. With regard to the growth rates, it was just once runner-up to viscose staple fibers.

The Fiber Year 2007 / 08 15 While the final textile consumption is sufficiently known, the chart below itemizes the per capita production of manmade fibers of the leading nations, accounting for almost 80% of all manufactured manmade fibers in 2007.

The world manmade fiber production per capita has increased on an average annual growth rate of 3.5% to 6.7 kilogram during the last ten years. While the Chinese increase from 3.5 kilogram in 1997 to 17.2 kilogram in 2007 appears to be insignificant, it is the multiplier effect of the 1.3 billion population that has turned the manmade fiber industry upside down. Assuming static conditions and consistent market shares over the previous decade, the countries’ contribution would be on a par with the following pattern:

Easy to read that PR China has successfully skimmed the market for an additional manufacturing volume of nearly 16 million tonnes. The biggest loser is the United States not realizing the theo- retical volume of 4 million tonnes, followed by Taiwan and Korea with each 2.5 million tonnes. It does not seem to be necessary to add, that the industries in Europe and Latin America have also severely suffered from the 5 million tonnes gap.

16 The Fiber Year 2007/ 08 4.1 Polyester

The global polyester industry achieved a staggering growth rate of 11.7% at 30.7 million tonnes. That was the highest growth rate in the last ten years, when production in 1997 jumped 17% after adding 2.2 million tonnes. All segments increased above-average with filament yarn up 14.1% to 18.3 million tonnes and staple fibers up 8.3% to 12.4 million tonnes. The fundamental change of the polyester business is easy to read from the chart below.

The Chinese polyester industry further gained market shares following its increasing output of filament yarn by 22.1% to 12.2 million tonnes and staple fiber by 13.6% to 7.0 million tonnes. The total volume of 19.2 million tonnes corresponds to a world market share of 62.5%. The filament segment enjoyed a rise in the average profit margin to 2.1% after an accelerated growth in production and mill consumption. As excess capacity still prevents higher margins, Chinese manufacturers exported more yarns and fibers in an attempt to slightly lift up operating rates to avoid a drop under 70% utilization as the domestic downstream demand steadily slumped from March/April. Yarn exports surged by 58% to 633,000 tonnes while imports decreased by 7% to 253,000 tonnes. A similar development was observed in the staple fiber business with exports rising 42% to 418,000 tonnes and imports declining 24% to 201,000 tonnes.

India, the second largest polyester producer, has enjoyed an approximately 15% boost in both sectors, amounting to a total manufacturing volume of 2.3 million tonnes. In contrast, Taiwanese polyester industry performed uneven with a marginal 3.3% increase of filaments at 1.2 million tonnes and a 10.2% drop in staple fibers. The country’s exports of staple fibers suffered a double- digit decline in 2007 due to reduced sales to PR China and Vietnam as well as anti-dumping duties imposed by the European Union that were in operation until June. Asia in total increased its share in the polyester industry to 89%, accounting for an output of 27.4 million tonnes. Although still small in absolute volume, but strongly growing, is Vietnam that almost doubled its production volume. While Greater Europe managed to marginally grow by 1.3% to 1.4 million tonnes, the Americas further declined by 4.5% to 1.6 million tonnes.

The filament market is mainly producing yarns for textile and industrial applications. Although demand for polyester and PTT carpet yarns has continued growing, the volume still is quite small. Polyester textile yarns soared 14.7% to 17.1 million tonnes and industrial filaments enjoyed a robust growth of 8.8% to almost 1.2 million tonnes.

Growth in the polyester textile yarn output just occurred in Asia, lifting output by 16.0% to 16.1 million tonnes. This corresponds to a global market share of 94%. The two textile powerhouses, PR China and India, both were able to achieve double-digit growth rates to a joint output of 13.2 million tonnes.

The Fiber Year 2007 / 08 17 What are your views on current polyester POY, FDY, Texturised yarn market and downstream demand?

“Earlier cotton was considered to be a poor man’s fibre and hence enjoyed several concessions like lower duties taxes etc, on the other hand polyester was considered to be a rich man’s fabric and consequently was taxed heavily. However, in the last few years with a lot of advancements in technology etc the scenario has completely changed. Today polyester is the common man’s fabric. Although late, the government has also realized this situation and is now cor- recting the taxation for this fabric as well. Coupled with the rapid growth in the economy and the availability of more disposable income the demand for polyester has increased significantly in the last few years and will continue to increase even more rapidly in the future. Wellknown has been selling textured yarn since the last 20 years. Our philosophy of backward integration has al- Mr. Anil Gupta, ways been to produce all the POY that we need for our textured yarn produc- Managing Director, tion. The final product will always be textured yarn. We have never ever faced Wellknown Polyester Ltd., any lack in demand. My personal view is that the polyester yarn consumption India should go up at least 10 times or more in the near future. If one considers our production as compared to China, it is ¼ and the population of China is al- www.wellknown.net.in most the same as India. This indicated a huge untapped potential for further growth.”

Considering the current scenario what has been the company’s policy to deal with such high volatility in the market?

“To mitigate risk of volatile textile market, the company is going for backward integration. From PTA/MEG to final texturised yarn, we would capture value at each stage of the polyester chain and hence have better control over our margins. The prices of PTA/MEG are determined normally once a month and are available at international prices in India. So that means there would be a maximum of twelve volatilities in a year. Again these are determined on the basis of landed cost. Such strategy would reduce our vulnerability to market volatility to the minimum.Furthermore our company operates in a niche segment and quality and innovation is our main strength. We do not focus much on the commodity market, about 80% - 90% of the products that we manufacture are specialty products. In this segment the volatility is not so pro- nounced, and secondly an increase of 5-10 rupees/kg is generally acceptable to the customer. Till date we have been able to pass on the increase in cost to the customers and hope to do so in future as well. We operate in a niche market and are basically catering these value added items to upholstery, home textiles, and dress materials. 10% are commodity products so as to keep in touch with the market. The idea is to make available to the customer all products that he may need.”

What are the machine or product lines the company is focussing for its expansion plans?

“After our expansion our product line will be: Chips, DTY, ATY, Twisted yarn and FDY. We intend to be the one-stop centre for high quality, specialty products catering to our highly demanding down streams customers.Our vision is to be the first totally integrated project in the country starting from PTA/MEG upto a finished yarn ready for weaving, this finished yarn can be either a DTY, ATY or FDY yarn.”

18 The Fiber Year 2007/ 08 What were the decisive factors that went in the process of selection of technology?

“As I have already explained; right from our inception it has been our vision to make products that are high quality, are differentiated and we always strive to offer new products to our customers. In order to implement this vision the selection of equipment is critical. This is a very capital intensive business. It is also a continuous process industry. This meant that the equipment has to be, first and foremost, extremely reliable. Secondly our partner also needs to be an innovator and should have the capability to deliver equipment which is state- of-the-art and we should also be able to rely on him for offering solutions that will keep help us to offer OUR customers innovative products. It was clear to us that we had to partner with a company which has a long tradition and also is committed to India. What I liked about Oerlikon Barmag, being a German company is that they are very honest and straight forward in the way they do business. That is the big plus point which helped me decided to go for Oerlikon Barmag. Of course, Oerlikon Barmag is also an international company with the latest technology continuously supported by R&D. The first machine that I bought in 2003 and now what I’m getting today from Oerlikon Barmag, there are so many changes incorporated and I am getting much better machines. Apart from that other factors like scalability, upgradation capability at lower costs, low maintenance costs etc were looked into.”

Can you tell us which product line you are exactly taking from Oerlikon Barmag?

“Broadly all the POY and FDY equipment that we have is procured from Oerlikon Barmag. Our new expansion which involves additional POY machines as well as a continuous polymerisation plant is also from Oerlikon Barmag. We are also evaluating purchase of texturising machine from Oerlikon Barmag as well.”

You are also going in for Automation. What is the reason behind it?

“We always believe that in order to produce a high quality speciality product we not only need good equipment but we also need good systems and processes in place. After our expansion our capacity will significantly increase and we need to think about the logistics and handling more seriously. We need good but cost effective solutions and we are discussing various concepts with Autefa; again a group company of Oerlikon Barmag.”

What is your impression of Oerlikon Barmag local sales & service set up in India?

“This was the major factor in favouring Oerlikon Barmag over the competitor. First of all, the erection team that you have in Baroda, Gujarat is very good. It is the biggest advantage to customers in India. This team goes out of their way to help us and rectify the problems faced by us. Problems will arise where machinery erection is concerned. The other competitors do not have an Indian team to deal with the problems. Our relationship with Oerlikon Barmag is so good and I have also interacted with them. Secondly since they also travel all over the world for erection and commissioning we also benefit from their international knowledge and experience.”

The Fiber Year 2007 / 08 19 What do you think about the mid to long term prospects for POY industry in India?

“The industry is likely to witness a lot of consolidation and integration in the POY industry. Since the demand for finished and value added products like PTY/ ATY/ FDY are likely to remain bullish, POY demand is likely to grow proportionately in the future. POY industry is likely to do very well in the foreseeable future.

Besides, more captive POY projects with integrated manufacturing from CP to texturised yarn, are likely to come, primarily to hedge against market volatility in terms of prices and supplies. Lastly textile production in countries like Indonesia, Taiwan and Thailand are decelerating as of late. So there is great scope for India to chip in. India can easily become 2nd to China in textiles. On a more optimistic note we can even try to compete with China. We have better entrepreneurship skills and R&D efforts going in India as compared to China. We are much better positioned in the category of value added items. China may be way ahead of us in mass manufacturing but we make much wider variety and that is where our core strength lies.”

How your company is poised in the present market. How do you see your company positioned in the coming years?

“Our company is one of the largest and leading players in the field of air texturised and draw texturised yarn apart from being the only producer of widest range of specialty yarn. The company has enjoyed an annual growth of 35-40% since its inception. Most heartening part is that our customers are also growing with the same momentum. As of now the demand, domestic as well as export is so strong that we face supply constraints. But once the project comes up in a year’s time we would be very well placed. After commissioning of the continuous polymerization plant, the company would enjoy the privilege of having the first integrated plant (PTA/MEG to texturised yarn) in the country. The company would be able to take advantage of the entire value chain. The company would have total control over the quality of its product as entire manufacturing process would be covered in-house. We intend to become one of the top 3 players in India in the next couple of years. We will continue to consolidate our position in the market as a supplier of specialty products. In order to remain competitive and to maintain and improve our status in the industry we will need to ensure following: Attract the best people in the industry, procure the best equipment possible and on top of all this we also need to have access to sufficient finance at competitive rates in order to fund or ambitious expansion plans. In this regard the company has been appraised by the leading credit rating agencies in India. CRISIL, one of the most respected rating agencies in India, has rated us as SME 1 the highest category in small to medium enterprises.”

20 The Fiber Year 2007/ 08 On the other hand, Greater Europe and the Americas both suffered from declines by 1.9% and 4.9% respectively. The dynamics in this segment and the relocating of facilities towards Asia are shown in the chart below, illustrating the polyester textile filament output over the previous two decades. At first, Asia succeeded in raising its market share. However, following the Asian financial crisis in 1997, growth was nearly exclusively restricted to PR China, also at the expense of most Asian manufacturers.

The only growth region for the industrial yarn production was Asia, lifting output by 18.9% to about 715,000 tonnes. Here, PR China was again the most dynamic country, accounting for almost half the Asian production. A certain portion is for example addressing the extension and upgrade of Chinese roads. In 2007, the country has built 8,300 kilometres of highway and the plan for 2008 is to further add another 5,000 kilometres of highway. Higher manufacturing levels also came from Korea, Taiwan and Thailand while the situation in Indonesia and Japan was rather flat. New entrants to this market in India – Reliance and SRF - and Vietnam – Hyosung – together with further capacity additions in PR China and Taiwan will probably not be instrumental in raising utilization rates. The global operating rate has been well below 75% since 2001, quite a low standard when comparing to historical levels, as shown below.

The Fiber Year 2007 / 08 21 From a manufacturer’s point of view, it seems to result in a more intense competition of the two majors, Performance Fibers and Hyosung. Performance Fibers is by far the largest producer of polyester industrial filament in the world with an estimated 300,000 t/y capacity and operations in the United States, France, Germany and PR China. Hyosung, the second largest producer with an estimated 130,000 t/y capacity, runs spinning facilities in Korea and PR China. Furthermore, it is planning to establish a spinning unit in Vietnam. Following the fire in its Korean plant in February 2008, the original operating schedule may advance more quickly.

Several companies in the U.S. and Western Europe have been running near full capacity. Good news at first sight, but it needs to be kept in mind, that both regions hardly did not participate in the market growth over the recent couple of years. In many cases, manufacturers are operating on outdated equipment what necessarily is not competitive to new installations in Asia, mainly in PR China. From that aspect, the booming Chinese export performance is not surprising, as shown below.

The staple business witnessed strong growth in Asia at 9.6%, now accounting for a 85% market share, due to soaring production in PR China, India and Vietnam. The Americas, still the second largest region, further lost ground following the continuing contraction by 3.9%. This decline was particularly influenced by lower output levels in the United States. Greater Europe managed to grow by 5.0%, exclusively driven by higher manufacturing rates in Eastern Europe.

22 The Fiber Year 2007/ 08 4.2 Polyamide

Polyamide fibers have marginally declined 1.1% to 4.0 million tonnes in 2007. All sub-sectors have confirmed the individual mid-term trend as shown in the chart below.

Steadily increasing caprolactam and polymer prices as well as a depressed housing market in the United States have put a strain on the industry. Latest estimates from the International Monetary Fund assume financial losses deriving from the U.S. mortgage crisis might reach US$945 billion. According to the National Association of Realtors, home prices fell for the first time in at least four decades and 2007 had the largest drop in existing home sales in 25 years. This issue has been strongly affecting the carpet yarn industry. Capacity additions continued particularly in PR China for textile and industrial filament as well as in Europe for textile end-uses. The story of interest in the American nylon industry was the announcement from Solutia Inc. to emerge from Chapter 11 bankruptcy protection. The company was under Chapter 11 protection since end of 2003 and finally emerged from Chapter 11 reorganization end of February 2008. In Europe, Rhodia confirmed the sale of its nylon industrial yarn and staple fiber business to Butler Capital Partners, a global investment fund. The new operation was named Nexis Fibers and runs operations in Ger- many, Latvia, Poland, Slovakia and Switzerland.

The nylon filament business supplies yarns for textile, industrial and carpet applications. A growing demand was noticeable for industrial end-uses while textile and carpet yarn applications declined. The total volume produced was stagnant at 3.6 million tonnes. Reductions in the manufacturing activity in the Americas and Europe were offest by higher production in Asia, to be more precise, in PR China, India and Thailand.

Almost 90% of nylon yarn production for textile end-uses is located in Asia and Greater Europe. The global supply in 2007 accounted for 1.5 million tonnes, down 0.5%. While capacity in the U.S. and Mexico continued to decrease, investments were made in Europe and PR China. In Western Europe, a new 10,000 t/y capacity from Fulgar started up. As the company still needs to buy the same amount of POY for their downstream texturing operation, a doubling of upstream POY capacity is most likely in future. An announcement to further expand by 5,000 t/y was already made end of 2007. Additionally, Aquafil announced a US$45 million investment to add 10,000 t/y textile filament capacity in Slovenia and Atateks in Turkey is planning to install 5,000 t/y nylon 66 POY. In contrast to that, Nylstar has closed its German and Italian spinning plants and downsized the Slovakian unit. Although the Chinese industry has been enjoying strong growth rates in production, the Asian textile filament market continues to suffer from excess capacity. The strong build-up of Chinese capacity is continuously replacing polyamide-related products from Taiwan. Despite the existing oversupply, investments for more than 100,000 tonnes new capacity in PR China went on-stream. The list of local manufacturers expanding capacity comprises Jiangsu Wujiang Fushen, Hangzhou Hongtu, Brother Group in Fujian province, the Liheng and Liyuan plants in Fujian province, Xinhui Maeda in Guangzhou province, Fujian Creator Group, Yantai Hualun, Xiamen Donglun, Hangzhou Yongchang and Shanghai Rongyang

The Fiber Year 2007 / 08 23 totalling at about 100,000 t/y. Large-scale projects to be commissioned in 2008 have already been announced from Ronghua, Brother Group and Yongchang in Xiaoshan.

The nylon industrial yarn industry still is a little more balanced, although at present Asia holds a 62% market share compared to 50% in 2000. While Greater Europe even managed to slightly increase its output over that period to defend its position, the Americas were the persistent loser in this industry with about a quarter of the manufacturing volume from the year 2000 lost during the last seven years. World production remained on expansion path, lifting output by 6.0% to 1.2 million tonnes. One reason for increasing demand is the growing airbag market due to continuously higher installation rates and a further upswing in car production. According to VDA, production of passenger cars and commercial vehicles rose 5.6% to 71.9 million with double-digit growth rates in Brazil and PR China. In addition to that, curtain airbags are mandated by a federal law for all new light vehicles sold in the United States. The regulation will be phased in during a three-year period through August 2013.

The regional change in manufacturing pattern, similar to what we have seen already since the 1990’s in the clothing chain, is likewise being supported by shifting of downstream facilities at first. Autoliv Inc., the leading supplier of airbags, is actively embarking on its in 2004 initiated strategy to increase its sourcing volume in low cost countries. Sourcing was less than 15% of total direct material costs in 2004 and rose to nearly 30% in 2007. The target for 2010 is to achieve a ratio of 50%. A multiplicity of other examples could easily be cited that support a further widen- ing regional gap between supply and demand. Questionable whether corresponding investments will help reducing the carbon footprint.

The U.S. nylon carpet yarn market remained depressed as a result of the subprime crisis, increasing competition from hard surface floorcovering and continued growth in polyester carpet yarn. The total U.S. output dropped 5.2% to 616,000 tonnes with final consumption even stronger on the decline, negatively impacting exports from Western Europe to the United States. As a consequence, European production was down 3.5% to 180,000 tonnes. The global nylon carpet yarn supply decreased by 6.1% to 940,000 tonnes.

The production of staple fibers has further slumped by 10.1% to 353,000 tonnes, largely driven by strong cutbacks in the United States. The U.S. industry still is the main center of production with a global share of nearly 60%, although output dropped by about 75,000 tonnes in the last two years. Last year’s decrease amounted to 16.5%, equal to a loss of almost 40,000 tonnes. The sustained Chinese development of nonwovens further boosted the staple market, up by about 10%. The development in other countries was slow without any significant changes.

4.3 Polypropylene

The world polyproyplene market is believed to have decreased by 4.4% to 2.9 million tonnes showing signs of saturation of consumer demand. While staple fiber applications slightly decreased by 2.2% to 1.3 million tonnes, output of filament yarns dropped by 6.2% to 1.5 million tonnes. The industry was facing ongoing margin pressure due to high raw material costs and the upstream industry could not pass these price hikes on. This pressure has further supported the substitution of polypropylene by low-cost polyester yarns. As low margins have forced producers to switch to niches, this could not compensate big-volume end-uses. On top of that, the slump in carpet yarn demand was particularly responsible for lower polypropylene spinning activities. The market has witnessed modest activities for fine denier textile and high-tenacity yarns.

24 The Fiber Year 2007/ 08 4.4 Acrylic

The acrylic fibers market has continued its downswing, declining by 4.9% to 2.4 million tonnes. This has resulted in a dramatic slump in world utilization rate to 74% from almost 90% in 2003/04. The industry around the globe continued suffering from squeezed margins and further increased raw material prices. The chart below shows major suppliers with Asia accounting for a 60% share of world output followed by Greater Europe (32%) and the Americas (6%).

Through the second half of 2007, Chinese acrylic fiber manufacturers have cut down their operating rates or shut down their facilities due to record highs of acrylonitrile prices, minimal margins and weak downstream demand. The crisis came to a head in September/October when margins reached lows.

Last year’s Chinese consumption of acrylic fibers declined by almost 50,000 tonnes to 1.0 million tonnes, negatively affecting the main foreign suppliers in Japan, Taiwan, South Korea and Thai- land, accounting for a cumulative 85% share of acrylic fiber imports. Turkey, the second biggest single market in production, has felt new competition from Alexandria Fiber Co. in Egypt. While output in Turkey is believed to have dropped 13%, the Egyptian operation was running at capacity. The contribution from Western Europe declined by 10%, mainly due to heavy losses in Italy, while Spain and Portugal did reasonably well. A nearly cut in half level in Italy will remain as Montefibre has decided to cut capacity. In the Americas, three acrylic fiber manufacturers are still left. Cydsa’s 98,000-tonne acrylic fiber manufacturing facilities in Guadalajara, Mexico, which have been idled since January 2006, were acquired by Zoltek Companies, Inc. with the intention to modify the unit for low-cost precursor, acrylic filament for subsequent processing into carbon fibers.

The Fiber Year 2007 / 08 25 4.5 Cellulosic

The cellulosic fiber market has confirmed its long-term growth trend and even gained momentum. The production soared 9.0% to 3.7 million tonnes. Staple fibers continued to increase by 10.5% to 3.3 million tonnes while filament yarns were stagnant at 440,000 tonnes. As in previous issues, data on the production of TENCEL®, the third-generation cellulosic fiber, is included in this survey.

The main centre of cellulosics production has been Asia, which managed to further enlarge its market position. The current market share accounts for 70% after extending output by 13.7% to 2.6 million tonnes. Almost all Asian nations succeeded in lifting output, whereas double-digit increases were realized in PR China, India, Indonesia and Thailand. The manufacturing activity in Greater Europe slightly decreased by 1.1% to 0.8 million tonnes, while the American contribution stagnated at 335,000 tonnes.

The filament business nearly remained at last year’s level, but producing structural changes in favor of viscose textile yarn and at the expense of acetate and cupro filament. Industrial yarn, already running at full capacity, continued to enjoy strong demand.

The viscose staple fiber market gained momentum, boosting production by 12.9% to 2.6 million tonnes. Almost 80% of output comes from Asia with every country achieving higher volumes. The strongest increases were in PR China, India and Indonesia, countries which has the leading Austrian viscose staple fiber manufacturer Lenzing AG on its radar screen for recent and current investments. The production in the western hemisphere was unchanged with a small decline in Greater Europe and a marginal increase in the Americas. Demand for viscose staple fibers not only increased for nonwovens but was exceptionally good for textile applications. Demand for flame retardant fibers has also picked up, additionally supported by an U.S. national open-flame mat- tress flammability standard, which went into effect in July 2007. TENCEL®, the new age cellulose fiber, has successfully continued to gain market shares in a range of applications in the home textiles and clothing sector as well as the nonwovens industry. As a result of the persistent strong demand, Lenzing AG has announced to expand capacity by 25% to 50,000 tonnes per year in its Austrian facility. Nonwovens made up of Lenzing’s staple fiber types, viscose and TENCEL®, have been certified as compostable materials as they are fully biodegradable.

Acetate tows, used in the manufacturing of cigarette filters, rose by 2.6% to 720,000 tonnes. The slowdown in growth may be result of the global efforts to restrict smoking. Although the continuous trend towards production in Asia moves forward, this industry is comparatively balanced in regional terms. The Americas take in a 37% market share, Asia accounts for 35% and Greater Europe captures 28%.

26 The Fiber Year 2007/ 08 4.6 Carbon Fibers

The success story of this technologically advanced fiber continues with global production of carbon fibers surging more than 20% to about 34,500 tonnes. All the major manufacturers enjoyed higher revenues and operating income. Projecting further soaring demand has already resulted in substantial investments from all established manufacturers to expand capacity around the world. The seven industrial groups have increased capacity by more than 20% in 2007, with the three leading Japanese majors accounting for more than 60% world market share. Furthermore, a considerable number of newcomers has at least expressed its willingness to enter this industry. Re- portedly, construction of the largest carbon fiber manufacturing facility has started in PR China. Despite current technological shortcomings, the US$415 million project is targeting a mid-term annual capacity of 10,000 tonnes. Chinese carbon fiber mill demand will rapidly rise, mainly as a consequence of the aviation industry sourcing more parts locally, sporting goods manufacturing and the country’s target to manufacture large commercial Chinese aircraft by 2020.

However, booming carbon fiber investments have just started, lifting world nameplate capacity from 45,000 tonnes in 2006 to more than 110,000 tonnes by 2010. The superior carbon fiber properties will branch out into new markets and increasingly substitute traditional materials. In the past, restricted to strategic applications like aviation, space and defence, new end-uses have emerged due to improved technical knowledge and higher availability. This has already brought down carbon fiber prices and further declines will boost the emergence of new end-uses. Addi- tional support for a widespread use will come from low-cost precursors.

Most exciting and trend-setting for the entire industry may be Toray’s plan to create an Automotive & Aircraft Center at its Nagoya plant. This investment bases on proprietary technology to speed up the resin molding process enabling carbon fiber to be mass-produced for automotive use. Further- more, Toho Tenax and Mitsubishi have both just recently announced to start supplying carbon fiber-parts to carmakers by 2010 as well. Today’s consumption for automotive use is still in its infancy, mainly addressing motorsports and luxury “super cars” with limited production runs.

The reduction of fuel consumption and carbon dioxide emission is being vehemently discussed and this could be achieved by reducing the vehicle weight by means of materials lighter than any metals. As carbon fiber composites are the lightest material available for making primary automotive structures, the automotive segment may have the biggest potential for carbon fiber demand in future.

Despite the disappointments of the new aircraft delays – Airbus A380 and Boeing B787 – commercial aviation will shortly evolve into the biggest consumer of carbon fibers. This industry was slow in the early 2000’s, mainly as a result of declining aircraft deliveries in the aftermath of 9/11. The annual deliveries of Airbus and Boeing, dominating the market for planes of more than 100 seats, is shown below.

The Fiber Year 2007 / 08 27 The new aircraft generation (B787 and A350) will change the industry as they both contain more than 50% of composites. In addition to new aircraft models, the aerospace industry will be driven by Asian traffic growth, the rising number of low cost carriers and more retrofitting. Airbus and Boeing, dominating the market for planes of more than 100 seats, predict aircraft deliveries until 2026 of between 24,300 to 28,600.

In addition to that, Japan is making an effort to revive the production of locally built planes. Kawasaki Heavy Industries Ltd. is considering to develop a commercial version of a cargo plane being designed for Japan’s military. Mitsubishi Heavy, Asia’s biggest aerospace company, is developing a 70-to-90-seat plane that is scheduled for first flight in 2012. The company plans to use carbon fiber composite material similar to what it uses in the wings it produces for Boeing’s new B787 aircraft.

Wind power has continued its surging capacity additions, extending its attractiveness for carbon fibers due to increasing replacement of traditional blades made of glass-reinforced polyester. Ac- cording to the Global Wind Energy Council, global wind power installations increased by 27% in 2007 to 94,112 megawatts (MW). More than half of the new capacity was installed in the United States, Spain and PR China. The chart below shows the global cumulative installed capacity.

PR China now ranks fifth in installed wind energy capacity with over 6,000 MW at the end of 2007. The Chinese Renewable Energy Industry Association forecasts a capacity of about 50,000 MW by 2015. The Shanghai Daily even reports a wind capacity of 120,000 MW by 2020, subject to the condition that the government gives “wind power larger premiums over coal”. Germany’s Ministry of Environment, for example, predicts wind power may generate about a third of elec- tricity by 2030. Nevertheless, this technology will be challenged as the next phase of development will be off-shore due to limitations in space. On top of that, advances in solar, wave and geother- mal technology may eventually make these sources more attractive.

Meanwhile, the recreation segment with sporting goods like golf shafts, racquets, skis, fishing rods and bicycles has been continuously losing market shares. In the mid-1990’s, this industry consumed more than half the carbon fiber output. Currently, it is less than a quarter and expected to further decline.

28 The Fiber Year 2007/ 08 4.7 Spandex Yarns

The already tightened supply in 2006 has continued through 2007 as the spandex industry has enjoyed strong demand around the world. The total production volume was about 385,000 tonnes in 2007. While the U.S. spandex producers were running near full capacity, the demand in Greater Europe remained robust above 45,000 tonnes. The European industry has witnessed some changes as the 6,000-tonne Invista operation in the Netherlands was closed and the Fillattice facility in Italy was downsized. That opens up a new opportunity for Hyosung Corp., currently the second largest producer of spandex in the world, following its US$130 million investment in a new spandex unit in Turkey to meet the European demand. This plant with an annual capacity of 15,000 tonnes will be operational in the first quarter of 2008.

On top of that, Hyosung’s purchase of Tongkook’s 2004-built facility has added another 6,000 tonnes to its spandex capacity. Additional investments in PR China and Korea as well as setting up a new unit with 15,000 tonnes in Vietnam, scheduled to come on-stream in the second half of 2008, at costs of US$100 million will raise the company’s capacity from 54,000 tonnes in 2005 to 92,000 tonnes by the end of 2008.

Invista, the world’s biggest spandex manufacturer, is also in the process of global expansions. It will expand its Waynesboro unit in the United States, invest US$100 million in its joint-venture spandex facility in PR China to add 12,500 tonnes and further on search for new production sites in Asia.

Asia, fuelled by strong demand in PR China, has produced more than half the global amount with a Chinese contribution of about 190,000 tonnes, of which nearly 30,000 tonnes were destined for exports with main destinations to India and Turkey.

Due to strong investments from the both industry leaders and effective new spandex capacity in PR China expected to come on-stream in 2008, the capacity will again outstrip demand. This may worsen the manufacturer’s margins or, to be more confident, help to penetrate into new end-uses and market segments.

The Fiber Year 2007 / 08 29 5. Spun Yarn

The 2007 world output of yarns has continued rising to 63.5 million tonnes, equal to a 5.6% growth over 2006. Spun yarns still dominate the world market with a 61.7% share compared to 64.0% in 2000. However, filament yarns have been producing higher dynamics. The average annual growth rate over the period 1995 until 2007 accounts for 6.5% in the filament business and 3.5% in the spun yarn industry. In 2007, production of filaments amounted to 24.3 million tonnes (+10.2%) and spun yarns increased by 2.9% to 39.2 million tonnes. The chart below shows the long-term development of filament and spun yarns.

The unequal dynamics in yarn production can be seen below. However, long staple yarns account for almost 12% of the market and may face a revival. Long staple yarns mainly use acrylic and wool. Notably, much higher wool prices implicate financial disadvantages in inter-fiber competition. However, the marketing efforts from IWTO seem instrumental in lifting demand for wool in apparel. Additionally, a new high-speed spinning technology in the long staple sector offers huge advantages in manufacturing costs and flexibility. As mostly outdated long-staple equipment is in operation around the world, first movers may expect prospering business. When marketing and innovation come together, it finally requires leadership to make things happen.

30 The Fiber Year 2007/ 08 Major materials for the spun yarn industry have been cotton, accounting for 59%, and polyester with a 26% share. The remaining fibers have marginally lost volumes in recent years with the only exception for viscose fibers. The chart below illustrates the individual market positions.

Taking into consideration the entire market for yarns, polyester is taking the lead with 28.4 million tonnes, accounting for a 44.5% market share.

5.1 NAFTA

For the current season 2007/08, the NAFTA region is expected to have reductions in cotton output and use as well as higher trading activities.

vs 2007/08 Production Imports Use Exports End. Stocks NAFTA -10% +8% -5% +11% +1%

United States The U.S. textile industry continues to shrink but at a much slower pace. The combined textile and garment mill output amounted to about US$99 billion and is forecast to further decrease to US$95 billion in 2008. The shrinkage in production on top of the industry’s productivity gains have led to an even tightened cutback in employment at about 550,000 in 2007 with the projection for 2008 at about 510,000. However, there is a feeling of relative stability despite further reductions in the number of machinery in operation in 2007. The installation of short staple ring spindles decreased by 7.8% to 1.2 million, while the number of long staple ring spindles was down 30.3% at 230,000. The capacity of open end rotors declined 3.5% to 433,000. How long will the trend continue that the installed base of rotor spinning machines is aging and most customers are choosing to continue running their old machines or shut them down rather than investing in replacements? Such is the case with certain large, publicly held apparel and underwear makers. Sales yarn producers are investing and adding some capacity to offset reductions elsewhere in the industry. The very significant drop in air jet spinning capacity by 34.8% in the U.S. has resulted from weaving operations moving off-shore and no replacement is expected.

U.S. manufacturing and processing of yarn and fabric in 2007 fell by 12%, the largest annual decline in more than 30 years. However, the spun yarn business has been quite stable as increasing portions are destined for exports to the CAFTA-DR region. The chart below shows the U.S. world yarn exports.

The Fiber Year 2007 / 08 31 Additionally, production of goods from purchased fabric, such as curtains, sheets, towels, canvas products, and carpets and rugs, fell by 5%; and apparel production dropped by nearly 3%. Cotton demand continues to decline locally, especially for clothing. There are just a few manufacturers of denim fabric left in the U.S., but there is still a good T-shirt manufacturing base on the West Coast. There may not be much cut and sew for denim jeans in the U.S., but still a lot of fabric is made here. The longtime contraction of the textile industry has been affecting the upstream raw material industry, but more important, acreage has been lost to corn and soy beans for alternative fuels. The demand for ethanol has placed a better return for growing corn and soy beans today instead of cotton for the farmer. Strong declines in the cultivated area are expected to lead to a loss of about 0.5 million tonnes of cotton in the current season. The U.S. Farm Policy is still being discussed in Congress, but should continue to support producers and consumers of cotton. If approved, there could be some incentives to encourage investments. At the end of 2007, the Senate has approved a US$286 billion farm bill that expands subsidies for wheat, barley, oat, soybeans and several other crops. However, U.S. farmers have already switched crop production in favour of corn to make ethanol. The area for corn production is forecast to actually surge by more than 20% in the U.S. A new polymer, branded DuPont Cerenol, is made with corn instead of petroleum. DuPont has launched its second range of polymers made from renewable sources for end-uses including running shoes, ski boots and spandex fibers.

According to the U.S. Department of Commerce data, textile and apparel imports have gone up by 3.4% to US$96.4 billion in 2007 with 34% of shipments from PR China. Total U.S. exports declined by 4.5% to US$16.0 billion with the half of shipments to Mexico and Canada. The chart below shows the long-term development of the US textile and apparel trade.

32 The Fiber Year 2007/ 08 The final consumer demand has grown continuously, but supply from local production has steadily declined. The U.S. textile and apparel trade deficit is further rising, with last year’s shortfall of US$80.5 billion. Chinese exports to the U.S. topped US$32 billion in 2007 while US shipments to PR China went up to almost US$490 million, of which nearly three quarters in fabrics. PR China’s surplus accounted for 40% of the U.S. trade deficit in textiles and clothing.

As shown in the chart below, the largest import category (338/339) comprises cotton knit shirts and blouses. Imports rose by 4.6% to US$14.5 billion. The local market size has exceeded a volume of about 460 million dozen, the domestic share of production decreased from above 50% in the mid-1990s to about 6% last year.

This market segment is representative for a number of other end-uses. The second ranked US import category (347/348) for cotton trousers, slacks and shorts, amounted to US$12.6 billion (+1.1%) in 2007. Likewise, the local share of production decreased from above 50% in mid-1990s to about 5% in 2007. Other segments like coats, skirts, sweaters, night- and underwear have simi- larly developed.

The chart below represents the ten leading textile and apparel importing nations into the United States. Last year’s volume of this group increased by 11.4% to US$65.4 billion, accounting for a 67.8% share in imports. Some Asian countries have clearly benefited from quota-free trade, such as PR China, Vietnam and Cambodia. Surprisingly, Italy made its way back to the top ten, after a double-digit reduction in exports from Canada and Hong Kong. Two thirds of Italian shipments were high-quality cotton and wool products.

The Fiber Year 2007 / 08 33 However, the United States still is significantly involved in the global textile industry as it is the largest exporter of raw cotton. In the current 2007/08 season, 3.2 million tonnes of cotton are designed for exports, that accounts for 40% of world cotton exports. Moreover, it is the biggest textile and apparel consuming single country. On top of that, it is strongly impacting worldwide flow of machinery and equipment. The reduction of domestic capacity has led to increased sales of used machines to Asia, mainly Pakistan, and Africa. Although used equipment has lower purchase costs, outdated technology will not guarantee a successful export production, which is necessary to earn foreign exchange.

Mexico Mexico’s economic growth will slow to 2.8% in 2008 after an estimated 3.2% expansion in the previous year as the expected U.S. slowdown will negatively affect the local economy. As a result of the long-term contraction in the textile industry, cotton consumption is forecast to decline by 4.8% to 435,000 tonnes. Cotton and other natural fibers have gained market shares in the Mexi- can textile and garment production over the last few years. During the 1990s, manmade fibers were the preferred material. Their continuous reduction is being reflected by last year’s output of manmade fibers that further decreased to 300,000 tonnes accompanied by company closures and downsizing.

An ongoing concentration in the denim industry was concluded after Mexico’s GFM Textiles and Italy’s Calitri Denim Industry have set up a joint venture to strengthen global coverage. Furthermore, Spanish denim manufacturer Tavex Algodonera has acquired two plants in Mexico for US$62 million. On top of that, investments to double capacity of protective clothing maker Lakeland Industries Inc in Mexico are good news. The company will make specialty woven items that are not sourced in Asia due to high tariffs or quota restrictions on shipments to the Ameri- cas, and do not incur duties if made in Mexico under the NAFTA and other Latin American trade treaties. Wal-Mart de Mexico SAB, the nation’s largest retailer, plans to increase investment by 11% to US$1.2 billion in 2008 and to add 21,000 jobs after hiring 15,728 people in 2007. Good to see, that not all Mexican textile and clothing companies follow the general downward trend. Although Mexico is no longer a cheap production country, it still has comparative advantages like its proximity to the U.S. and a large domestic market.

In Mexico, half the 109 million population is under the age of 25, which represents a potential for considerable demographic and economic growth for the decades to come. About half of the population lives on less than US$2 a day, consuming very cheap Chinese clothing. But there is also a considerable number of consumers buying luxury apparel from Europe. CNIV, the National Chamber of the Mexican Clothing Industry, estimates the national clothing market at US$18 billion annually with almost 60% illegal sales of smuggled, stolen, counterfeited and second hand clothing.

In the light of those disturbances, the textile and apparel exports to the United States fell from a record US$9.6 billion in 2000 down to US$5.6 billion in 2007. In the last year, trade surplus with the United States further declined by 11% to US$1.8 billion as a result of the Central America- Dominican Republic free trade agreement and the strong dependance on cotton knit shirts and trousers that are still protected by US quotas on Chinese products. On top of that, Mexico’s textile and apparel industry is losing domestic market share to low-cost production countries such as PR China. Probably the proximity to the big U.S. market size has prevented so far serious attempts of most Mexican manufacturers of textiles and clothing to export their products to the EU or to South America. However, not the biggest, but only the fastest will survive. Maybe a joint adoption of necessary measures between the government, associations, consultants and manufacturers to create a strategic textile roadmap will be promising.

34 The Fiber Year 2007/ 08 5.2 South America

For the current season 2007/08, South America is characterized by soaring cotton exports, rising 60% to 560,000 tonnes. Production and local consumption of cotton is rather unchanged. The cotton processing industry is mainly located in four countries, Argentina, Brazil, Colombia and Peru account for 95% of the regional cotton demand. The cotton balance is shown below:

vs 2007/08 Production Imports Use Exports End. Stocks South America -1% -21% +1% +51% +10%

Argentina Argentina’s economy grew 8.7% in 2007, marking a fifth straight year of growth above 8%. Growth has been fuelled by robust consumption and strong agricultural exports amid high prices for its top crops, such as soybeans and corn. Soybean harvest rose almost 6% from last year’s record after farmers boosted plantings in response to higher prices, while cotton production, offering comparatively lower margins, is expected to decline by 16% to 147,000 tonnes in the current season. Nevertheless, the local cotton consumption is forecast to rise by 5% to 180,000 tonnes. This proves Argentina’s strength in textiles and apparel that presumably grew as strongly as in 2006, when it reported a growth rate of 12-15%. The approximately 15 local spinners are predominantly targeting the home market. Strong economic recovery and higher purchasing power are the main factors for rising consumption supported by the industry’s focus on improving quality, reducing costs and expanding capacity. New equipment and second hand machines were installed in an almost balanced ratio. Nevertheless, high utilization rates of the spinning facilities necessitate further investments, also to modernize existing units. However the industry needs to tackle rising energy prices and stop soaring Chinese imports. Chinese apparel imports tripled in 2007 with sweaters, coats and pants coming in at large volumes. The tragedy from March 2006, when a fire at a small textile factory in Buenos Aires killed six people has apparently resulted in more intensified government inspections to curb textile sweatshops. In 2007, the government shut 700 illegal textile mills in the Buenos Aires region. Instead, it has been launching state-sponsored mills to provide legal work.

Brazil Brazil has received higher foreign direct investments in 2007, signalling sustained confidence in its economy, that grew 5.2% in 2007, the fastest pace since 2004. Investments in spinning equipment gained momentum with approximately 140,000 newly installed ring spindles. The short- term outlook is promising with capacity additions for not only short staple ring spindles, but also small expansions in long staple and open end installations. To boost growth in Latin America’s largest economy, the in January 2007 announced Accelerated Growth Program envisages private and public infrastructure spending of US$283.3 billion through 2010.

Brazilian soybean output, the world’s second biggest grower, will enjoy a record 60.5 million tonnes, as almost 80% higher prices prompted farmers to increase planting to 21.5 million hectares. Prices jumped last year after surging demand for corn to make ethanol led U.S. farmers to switch crops. Corn farmers in Brazil, the world’s third-biggest grower, will harvest 53.6 million tonnes, up 4%. Cotton production, the world’s fifth-biggest grower, will slightly increase by 1% to 1.5 million tonnes. However, usage is expected to remain at last season’s level, although the output of cellulosic and synthetic manmade fibers was lifted to about 430,000 tonnes. Meanwhile, construction of the major polyester project has started in spring 2007, comprising an annual capacity of 640,000 tonnes PTA and 215,000 tonnes POY. Furthermore, Rhodia has announced to boost its nylon intermediates business by investing US$40 million for the project that is scheduled to start up by the end of 2008.

The domestic textile industry has delivered a mixed performance. Springs Global Participacoes SA, Brazil’s biggest textile maker by market value will close nine of its 16 plants in the United States and move production to Argentina, Brazil and Mexico. The Brazil-based company was formed by the merger of Springs Industries and Cia. de Tecidos do Norte de Minas SA, or Coteminas. It will increase production 12% in 2008 because of the move and investments of US$55 million. Span- ish denim maker Tavex Algodonera, that took over Brazilian textile firm Santista Textil in March

The Fiber Year 2007 / 08 35 2006, will shut a plant in Brazil. The Aracaju plant is one of five it operates in Latin America. Brazil sharply raised its textile and clothing import tariffs in order to limit surging shipments from other nations and more precisely from China. Textile imports from the Arab countries more than doubled, exceeding US$40 million, while sales of Brazilian textiles to the Arab market rose nearly 50%. Thus, the trade balance registered a deficit, against surpluses of US$8 million in 2006. A strong increase in the local currency is partly explaining the decision taken by Mercour members, with Argentina also raising its tariffs but Uruguay and Paraguay abstaining from additional protections. The tariffs were increased from 20% to 35% on clothing and textile made ups. Textile tariffs were raised from 16-18% up to 26%.

Colombia Colombia’s economic revival has continued, the country’s economy expanded 7.8% in 2007 on strong consumer and industrial demand. Reforms to ease trade may partly take credit for this favourable development. The time for port and terminal handling activities was reduced by three days and investor protections were strengthened. An electronic tax filing system has cut the average time businesses must spend on tax compliance every year by 41%. Finally, it has progressively reduced the corporate income tax rate, from 35% to 34% in 2007 and 33% in 2008. The growing confidence in the country’s economy has also been reflected by further rising inflows of foreign direct investment, up 22% to US$7,870 million, of which most was oil-related.

The Colombian textile and clothing industry has witnessed a surprisingly strong performance in the local as well as the export markets. Although investments in new capacities remain extremely low, the both denim makers Fabricato Tejicóndor and Coltejer, Protela and Enka de Colombia as well as some others recently implemented expansion investments. In January 2008, Fabricato opened its new denim plant after investing US$40 million. The spinning unit has now a capacity of 15 tonnes of ring-spun yarn a day. Coltejer started its new denim plant at costs of US$32 million already in 2006 and intends to invest some US$25 million within a couple of years. In total, the industry managed to lift exports and, at the same time, reduced its dependance on the U.S. market. The strong growth in exports is mainly due to soaring demand from neighbouring oil- producing country Venezuela, now accounting for about half the country’s exports.

36 The Fiber Year 2007/ 08 The main reason for persistent small investments has been caused by the uncertainty around the free trade agreement with the U.S. The business sector and potential investors as well, became concerned about a likely failure of the U.S. Congress to approve another extension of the free trade agreement before end of February 2008, as Colombia was facing strong U.S. opposition to this deal. However, the U.S. Congress approved a 10-month extension of the duty-free program in a last-minute decision end of February. This uncertainty has already resulted in lower exports, with 2007 exports already down by a third from its peak in 2004. Other major reasons for slow investment are surging textile and clothing imports, the closure of some leading apparel facilities and the fall of the US Dollar against the Colombian Peso, down 11% in 2007. However, the growing economy, a 44-million population with nearly half under the age of 25 and low labour costs of about US$2.35 per hour appear to be favourable for an ongoing strengthening of the textile industry in future. A weak point is considered to be the nearly invariable export orientation on the Americas. A speculative boost of investments may result from PR China as the local Proexport has undertaken efforts to attract Chinese companies to use Colombia as a place for duty-free apparel exports to the U.S. market. So far, PR China is a rather marginal investor. Over the period 2002 to 2007, Chinese direct investments totalled at about US$5 million compared to US$5.8 billion from the U.S.

Peru Peru’s economy, one of the fastest growing in the world, grew some 8.5% last year and the Central Reserve Bank further increased its forecast for GDP growth in 2008 to 7.0%. Despite the strong macroeconomic performance, underemployment and poverty have stayed high, although employment in companies with ten or more employees grew 8.3% in 2007 and this rise in number of jobs can partly be attributed to an increase in textile companies. As growth prospects mainly depend on exports, the end of 2007 signed free trade agreement with the United States may pose an important milestone. A similar agreement with Japan is feasible in a medium-term future. However, Peru’s exports rose 18% to a record last year at US$27.6 billion, spurred by surging copper, zinc and natural gas sales, while textile exports rose 17.5% to US$1.73 billion as PR China, Japan and Canada boosted purchases. Anyway, the major destination was the US market, where last year’s exports decreased by 3.7% to US$833 million. The expectation for Peruvian exports in 2008 amounts to US$30 billion, indicating a 500% increase if compared to exports from eight years ago. In particular non-traditional products, minerals account for 75% of the total value of exports, with more added value were the ones that had grown considerably - agricultural and textile business. Those sectors are being further promoted and the free trade agreement with the United States will enable to boost exportation of new products. Thanks to continuous small investments in the textile industry for addressing the higher end of the consumer market, the local cotton use has continued to increase by approximately 5% to 114,000 tonnes. Supported by “Sierra Exportadora”, a social program begun by Peru’s president Alan Garcia to help poor people to make their way out of poverty by exporting their goods, 100 workers in Arequipa will begin to make sweaters, ponchos, hats, scarves, socks and gloves out of Alpaca in a modern textile factory which was inaugurated in September 2007.

The Fiber Year 2007 / 08 37 5.3 Asia

For the current season 2007/08, Asia is forecast to be the main centre of cotton industry. About 57% of the world output has Asian origin and 76% of cotton is being processed in Asia.

vs 2007/08 Production Imports Use Exports End. Stocks Asia +3% +11% +3% +26% -4%

Consumption of cotton is forecast to rise in Bangladesh, PR China, India, Indonesia, Malaysia and Vietnam. The growth in Bangladesh results from sustained high demand for cotton yarns to fuel downstream garmenting industry and to further increase self-sufficiency rate. The Chinese textile industry has continued its boom with higher production of clothes and rapidly rising trade in yarns. India has benefited from the higher availability of local cotton and the ongoing success of TUFS. Vietnam has taken advantage of the WTO membership and the continuous expansion of the industry. Meanwhile, demand for cotton is expected to decrease in Japan, Korea, Taiwan and Thailand. Japan, Korea and Taiwan have been further suffering from high labour costs and reductions in spindleage. At first sight, the performance of Thai industry may appear dull, but seemingly it is in transition of moving towards medium-end and high-end products.

Bangladesh Bangladesh’s textile industry employs about 4.5 million people in nearly 5,500 mills. In 2006/07, exports surged 15.7% to US$12.2 billion, but still missing the national target set at US$12.5 billion. However, textiles and clothing trading was well, amounting to about US$9.4 billion, up from US$4.9 billion in 2000/01. The Bangladesh Garment Manufacturers and Exporters Association even aims to double apparel exports to US$18 billion by 2010. Despite a remarkable growth of the industry with an upgrade into higher-end apparel production, the industry’s demand surplus for primary textile products has hardly lessened. This sizable shortfall in yarns and fabrics is still hindering an accelerated growth of apparel.

Furthermore, Bangladesh is almost entirely dependent on cotton imports to meet the rapidly growing demand. The lack of high-yielding varieties is limiting output, that just meets 3% of the demand.

An essential reason for Bangladesh’s growing position in this industry is low labour costs. In October 2006, the new monthly minimum wage for garment workers was agreed on US$25.4, below almost all Asian competitors. No surprise that nearly every major textile-manufacturing nation has been drawing its attention on this market. Pakistani are looking to set-up knitwear garment units to also benefit from duty-free access to the EU and North America. Chinese apparel maker Goldtex Garments Ltd will set up a US$9.6 million high-end apparel factory and employ 2,790 people. A Taiwan-Bangladesh joint venture company is investing US$1.8 million in a garment interlining factory and will employ 100 people. South Korea’s M/s Kosh Industrial Ltd. will invest US$8 million in a garment factory and create around 1,000 jobs. South Korea’s Youngone

38 The Fiber Year 2007/ 08 Group, the biggest textile maker in Bangladesh, is to invest US$6.5 million in expanding one of its fabric plants in the country and an extra 250 jobs will also be created. This listing could easily be extended, but the biggest sensation has not yet mentioned. According to local media, Toray is planning to invest US$200 million to relocate its Malaysia-based subsidiary, Pan Fabric Toray. Assistance could further be obtained from the International Finance Corp., member of the World Bank, to help raise the social and environmental standards of the country’s apparel manufacturing sector towards globally recognised models.

Cambodia Cambodia’s garment industry, dominated by foreign owners, generates about 80% of the country’s total foreign exchange earnings and employs an estimated 350,000 workers. Exports to the United States rose 13% to US$2.4 billion, in particular, due to gains in categories protected by U.S. quotas on shipments from China, such as in categories 338/339 (cotton knit shirts) and 347/348 (cotton trousers). Without these restricted categories, shipments would have already declined. As quotas will expire at the end of 2008, the country’s apparel industry needs to develop. Support from the U.S. to finally grant tariff-free access is most likely not coming into effect rapidly. As prohibitive energy costs prevent feasible spinning or weaving operation, the garment industry is entirely dependant on imported yarns and predominantly fabrics. So, collaboration with a strong textile industry in the neighbourhood seems to be a solution. In fact, a delegation of Cambodian textile and clothing companies has visited Vietnam on that purpose last year. Strengthening the material supply and an intensified promotion of its excellent labour conditions thanks to the monitoring system by International Labour Organization (ILO) could help safeguarding the industry’s long-term success.

PR China PR China’s economy grew 11.9% in 2007, the fastest pace in 13 years, to US$3.4 trillion. Interest rates were raised six times to cool the economy after inflation accelerated at the quickest pace since 1996 to an 11-year high of 6.9% in November. The annual inflation rate more than tripled in 2007 to 4.8%. Exports continued to outpace imports by a large number, reaching a new record high in trade surplus of US$262 billion. China’s textile industry output in 2007 is estimated at US$419 billion, up 22%. The exports in textiles and clothing increased by 19% to US$175 billion, achieving a surplus of US$156 billion.

The economy growth in 2008 is expected to slow below 10%, mainly affected by a slowdown in the global economy and the Olympic Games in August. An export-led slowdown would reveal the excess capacity, leading to an inventory buildup and aggressive price cuts in the second half. Although local demand will probably remain robust, it cannot compensate reductions in foreign shipments.

Olympics may influence manufacturing, as operations near Beijing may be closed to reduce pollution. The seriousness of the government to protect the environment may be expressed by the Feb- ruary 2008 amendment of its pollution laws whereby managers of water-polluting factories run the risk of losing half of their annual salary. Already the 11th Five-Year-Plan has placed emphasis

The Fiber Year 2007 / 08 39 on the improvement of ecology. Furthermore, the Chinese government is intensifying pressure on the textile industry by introducing plant inspections to realize the environmental care policy. Pollution remains a problem for the industry located around Lake Taihu in Jiangsu province. It is the third largest freshwater lake in PR China. As a result of rapid economic growth in the sur- rounding region, the lake collapsed.

On closer examination, the textile industry may encounter resistance as it is about to lose its traditional competitiveness in production costs. While average wages have gone up more than 50% in the past five years, the yuan currency has gained about 16% against the US Dollar since the end of a peg in 2005. The government has also cut export tax rebates and tightened lending. Produc- tion costs have increased in terms of raw material, labour, energy and environmental protection. Rising interest rates and capital shortages have also affect the industry. On top of that, increasing complaints for China-made low-quality, defective products being harmful to health (e.g. tires, textiles, toys, markers, …) may erode the retailers’ and consumers’ confidence. As a result of those unfavourable conditions, the textile industry has continuously weakened as regards to its share in total exports and trade balance.

The chart above shows the steadily declining share of textile and clothing exports in the country’s total exports, now accounting for almost 15% (red line). In addition to that, textile and clothing trade surpluses have prevented the national trade balance to turn red from 1994. This development may arrive at the conclusion that the local textile and clothing industry may lose its priority status. The grey bar represents the nation’s trade balance without textile and clothing, while the blue bar only refers to the trade surplus from textile and clothing.

40 The Fiber Year 2007/ 08 “Being a world leading textile machinery manufacturer, the Swiss Oerlikon Textile publishes a fiber research report from a global perspective every year. This report not only represents the tenet and target that the Oerlikon Group makes effort to promote the development of global fiber industry actively, but also provides valuable references and viewpoints to analyse and research the status quo and development trend of the global textile industry significantly. It is really an admirable fruit of wisdom that should be shared with the textile industrial fields around the world. As the economic globalization andnew technology revolution speed up the global textile industrial development trans- forming from its traditional way to a modernization direction, two driven factors: science & technology and brand, on the basis of transnational configura- tion, have become the main strength and foundation of the textile industrial development around the world. In the new century, Chinese textile industry, as a main supporter, keeps on promoting the national economic and social development; meanwhile, facing with the beneficial condition and resource of the Sun Huaibin, Reform & Opening Up, as well as the increasing pressure from the environment Director of the and market competition, Chinese textile industry also choose the development China Textile Economy path that oriented with the theme of technology and brand. A historic indus- Research Center, trial revolution of the Chinese textile industry is in progress, and its success or Beijing, PR China failure has a bearing on the future and destiny of the Chinese textile industry. Therefore, we should communicate with the global textile industrial fields, research and design the detailed strategy and method for the Chinese textile industrial upgrading and adjustment from a viewpoint of globalization.

Being a specialized research institution focusing on the economic development strategy and policy of the Chinese textile industry, China Textile Economy Re- search Center, while paying attention to the Report of the Fiber Year published by Swiss Oerlikon Group, publishes the Report on China Textile Industry De- velopment (which is also called China Textile White Book) annually. Based on the Chinese textile industry, this report analyses the industrial operation and development trend annually and comprehensively, besides, it also includes the contents on industrial topics research, technology and brand, raw material and capital, statistics and so on, offering a guidance to realize and comprehend the status quo and development trend of the Chinese textile industry annually. We expect that we could be together with the experts from Oerlikon Group to dis- cuss and exchange experience or views on how to make the annual industrial research report better, aiming to improve the report to a higher professional level, and provide more reference and information to promote the sustainable development of the fiber industry in China and around the world.”

However, last year’s results disclose record highs in terms of spun yarn output, up 15% at 20.0 million tonnes, and manmade fiber production, up 18% at 23.9 million tonnes. This amazing performance was again very much dependent on foreign raw materials supply to fuel the cotton and manmade fiber industry. Due to higher prices of raw materials, the appreciation of the Yuan, higher labour costs and a tight monetary policy the cotton textile industry suffered from considerable decline in profits. More than 70% of cotton textile mills were running in the red or just at breakeven. Of the 285 large and mid-size cotton textile mills, 42% suffered losses last year. According to Du Yuzhou, chairman of the China National Textile and Apparel Council, 17% of the 44,200 textile firms operated at deficit. While the average profit margin for the industry averaged 3.9%, about two-thirds of the sector recorded an average margin of just 0.7%. Cotton demand keeps on growing by 12% in the current season, predicted to amount to 12.3 million tonnes based on both solid domestic and export demand. While industry investments remain strong, although fixed asset investment growth was slower compared to the two previous years, consolidation and government pressure to focus less on exports have acted to curb the over 20% yearly growth experienced following WTO accession and elimination of textile quotas. Chinese local cotton production is forecast to fall 4% to 6.5 million tonnes, following the record crop in 2006. This may call for a 50% increase of cotton imports to 5.0 million tonnes, absorbing about 57% of the world’s exports. The booming downstream polyester industry is being reflected by 14% higher PTA imports at 8.0 million tonnes, about two thirds of world exports, despite surging PTA investments in PR China.

The Fiber Year 2007 / 08 41 India India’s economy grew at a stunning pace of 9.4% in the fiscal year ending March 2007, the fastest expansion in the last 18 years. According to a new report by Goldman Sachs, India will grow at about 8% until 2020. The new forecast would see India overtake the United States to become the largest economy in the world after PR China by 2042. With a population of 1.1 billion, it has a massive and highly-educated labour pool. Half the population is under the age of 25, which represents a potential for considerable demographic and economic growth for the decades to come. In addition, India does not face the language barrier PR China has, since English is prevalent throughout the country. However, India faces the similar developmental obstacles it did at the beginning of economic liberalization in 1991. As poor conditions of roads, railways, ports, airports, telecommunication, power and water supplies prevent a higher economic growth, investments of more than US$450 billion is to flow into India’s infrastructure by 2012.

The industry is strong in the conventional fiber-to-garment sectors with surging cotton production and the world’s largest polyester producer is domiciled in the country. This industry plays a vital role in the local economy, constituting 4% of GDP, employing in textile and allied sectors about 90 million people, and exports account for about 20% of the country’s total foreign revenues.

The chart above shows the long-term manufacturing performance of yarns and fibers, that continued increasing by 7.4% to 6.8 million tonnes. The spun yarn business, taking the lead in terms of volume, was up 8.0% at 4.0 million tonnes. Other fiber segments had an even better growth record for 2007. Polyester fibers surged 15.5% to 2.3 million tonnes following the large-scale expansions from Reliance and Indorama that both came on-stream mid-2006. Cellulosic fibers, that increased 10.4% to 342,000 tonnes, will be the next manmade fiber segment witnessing strong investments. Austrian Lenzing Group will build a new viscose fiber production facility in coop- eration with the Indian Modi Group. The capacity for textile and nonwoven end-uses of the first construction phase will be 80,000 tonnes per year. This unit is scheduled to commence operations in 2010/11. The only disappointment was to be seen in the acrylics sector with output dropping 22.3% to 79,000 tonnes.

The 2007/08 raw cotton production forecast comes to 5.4 million tonnes as a result of 3.6% higher planted area and further improved yields. This would be an unprecedented fifth consecu- tive record cotton crop. The genetically modified cotton coverage is expected to increase to 70% of the cotton area. In the last five years, the area for genetically modified cotton has been more than centupled.

42 The Fiber Year 2007/ 08 Cotton consumption is expected to increase to 4.0 million tonnes on strong domestic and export demand for textiles. The surplus of 1.4 million tonnes is for exports. The biggest customer purchasing about half is PR China, followed by Pakistan, Indonesia, Vietnam, Turkey, Thailand, Bangladesh and Taiwan.

According to the Ministry of Textiles, the number of installed spindles decreased by 1.6% to 34.9 million spindles, with 4 million spindles in the small-scale industry not included. Installations of open-end rotors were lifted by 0.5% to 456,720 at the end of last year, again small-scale installations of about 157,000 rotors not included.

The Technology Upgradation Fund Scheme (TUFS), introduced in April 1999 and extended until March 2012, is one crucial success factor for the industry’s dynamics, showing government’s willingness to support this industry and also impressively proving their strong commitment. This has positively impacted the entire value chain. Until April 2007, it has propelled investment of more than US$21.5 billion. About 70% of the beneficiaries under TUFS are from the small-scale industry sector, helping to modernize the textile sector. However, the spinning and composite segments have driven maximum benefits whereas downstream segments like processing, garmenting and powerlooms are still the weak links in the textile value chain and have not yet realized the potential for modernization. The scheme will continue to provide a reimbursement of five percentage points on the interest charged on a project sanctioned for technology upgradation. However, for spinning machinery the reimbursement has been reduced to four percentage points.

At the end of 2007, the government has cut import duties on manmade fibers to provide some relief to companies hit by the rising value of the rupee against the US Dollar. It will also provide an extra 2% interest subsidy on loans taken by textile exporters. Nevertheless, concerns are increasingly rising that major retailers could scale back orders, partly due to the appreciating rupee and weakening dollar.

Obviously, a new program requires some time until companies become familiar with the benefits. As soon as it was considered reliable and sustainable, the number of project proposals went through the roof. Very smart and promising elements of this program appear to be the bench- marking of the technology level of specified machinery and the restriction to apply for funds only on new and superior technology levels.

The Fiber Year 2007 / 08 43 The chart below shows the planned export target for 2010. The very much market driven strategy is based on growing domestic consumption and a stronger contribution from exports. The actual market size of textiles and apparel is US$47 billion, with the local market accounting for US$30 billion and exports for the remaining US$17 billion. The vision for 2010 is to target a market size of US$85 billion with exports of US$45 billion and local consumption of US$40 billion. Diversifi- cation into technical textiles and nonwovens will open up new growth potential for the domestic industry.

Indonesia Indonesia’s economy, the biggest in Southeast Asia, expanded by 6.3% as declining borrowing costs encouraged companies to invest and spurred consumer spending. Private consumption represents about 70% of the economy. The textile industry offers direct and indirect employment to 5.5 million workers and achieved a trade surplus of US$8 billion. Apparel exports continued rising in 2007 to the United States by 8% to US$4.2 billion, but were confronted with a slowdown in shipments to Europe. Sales were last year pushed by a much lower rupiah when compared with other currencies, especially the renminbi, but will now be threatened by the elimination of EU quotas on imports from PR China.

Given its large size, 4th largest ring spinning and 6th largest manmade fiber industry, and its 4th largest population of about 235 million with 90 million consumers under the age of 25, representing a potential for substantial demographic and economic growth in future, the textile and apparel prospects should be auspicious. Just the opposite is true at present, although first-time measures introduced in 2007 may pose a reversal point. It was the establishment of a promotion program, similar in its function to the Indian TUFS, and the removal of a 10% value added tax on imported cotton.

44 The Fiber Year 2007/ 08 The Ministry of Industry has introduced a US27 million fund to raise the technological profile of the textile and clothing industry. It is to encourage investments in new equipment by paying 50% of the bank loan interest rates. An extension of this program was subject to approval in the parliament in February. Maybe more important than the funds’ size is the clear commitment of government’s willingness to support the local textile industry. As Indonesia imports about 98% of cotton to fuel the textile industry, this decision of the value added tax removal will improve cash-flow and boost competitiveness. Imports are forecast to increase more than 2% to 490,000 tonnes in the actual season.

Today’s situation is characterized by smuggling of second hand clothes and a surge in illegal imports from PR China, both issues slowly deteriorating the local market. Moreover, 60% of the installed textile and garment machines are older than 15 years. Low level of investments in the textile sector in recent years has been a consequence of the banks’ reluctance to provide loans to this business.

Although the long-term growth has been rather static, last year’s output of yarns went up by 2.4% to 1.7 million tonnes and fibers increased by 3.9% to 0.8 million tonnes. Despite previous year’s investments in looms and knitting machinery, the output was nearly unchanged with 21% surging fabric imports in value terms.

The Fiber Year 2007 / 08 45 “The Indonesian Synthetic Fiber Makers Association (APSyFI) was established in 1975 with the initial number of members comprising four companies. Since then, this number of members kept on increasing and reached 18. Due to so many constraints in managing fiber industries, both from in country and outside, the number went down, now accounting for 13 companies. APSyFI supplies fibers for domestic needs with 70% of its production, which reaches about 800,000 tonnes a year, consisting of polyester and nylon filament. The remaining products are exported. The production capacity of all 13 companies is 1.2 million tonnes a year.

During its development, APSyFI got so many beats from imported fibers which were sold here at low prices. This kind of dumping action was done more and more by many companies located in some Asian countries, after realizing that there seemed to be surplus of production. The textile and textile product indus- Kus Projolalito, tries of Indonesia has grown for more than 15 years. The machinery in use has Secretary General, also been aged. Considering this, the Department of Industry of the Republic Indonesian Synthetic of Indonesia is now running a restructuring program, i.e. to help companies Fiber Makers Association, renew their machinery. The program was launched in 2007 with a budget of Jakarta around US27 million. www.fiber-indonesia.com For the year of 2008, a budget of as much as US33.5 million has been provided. While in 2007 as much as US17.9 million of total budget provided had been allocated, hopefully this year there will be more budget absorbed.

In case you wish to know more on the synthetic fiber industry of Indonesia, kindly please contact me, and I would like to describe it by pleasure.”

46 The Fiber Year 2007/ 08 Japan Japan, the world’s second largest economy, grew 2.1% in 2007. It is the second country after PR China to have foreign currency reserves worth more than US$1 trillion. Nevertheless, textile activities further declined. The manmade fiber business witnessed a 1.6% reduction to about 1 million tonnes and the spun yarn output was down 7.7% at 142,760 tonnes. The chart below shows the breakdown of the spun yarn business. An ongoing decline is predicted as the current season’s cotton imports will be again downsized.

Instead of an volume-driven growth, the Japanse strategy is rather concentrated on sophisticated end-uses, developing fibers and textiles for personal well-being, hygiene and comfort. Environ- mental concerns are also driving fiber innovations as consumers become more concerned about sustainability and damage to the environment. Two heavy weights on world stage, Teijin and Toray, have each developed techniques for recycling discarded polyester bottles into fiber for textile use. As this technology is generally available, it should be applied in every area of high population density after solving the logistics for collecting the bottles and refeeding them into the cycle.

Like several other high-cost nations, domestic textile companies have been planning to shift capacity. Repordetly, Toray is planning to invest US$200 million in Bangladesh to relocate its Malaysia-based subsidiary, Pan Fabric Toray. Able Yamauchi, protection garment manufacturer, has began building a new garment plant in Vietnam to produce protective and fire-fighting clothing for exports to Japan, Canada and U.S. Takata, Japan’s largest maker of auto safety equipment, is planning to set up its first production base for seat-belts in India.

The Fiber Year 2007 / 08 47 Korea Korea’s economy growth of 4.9% was characterized by moderate inflation, low unemployment and an export surplus in 2007. Inflation and unemployment are predicted to increase in the face of rising oil prices, as the country imports 97% of its energy needs, making it the world’s fifth- largest crude oil buyer.

Last year’s contraction in upstream spinning industry has lost momentum. The number of installed spindles was reduced by 2.5% to 1.2 million spindles, while the number of looms significantly dropped by nearly 55% to 333 at the end of 2007. However, the output of spun yarns rose 8.3% to 235,800 tonnes and the production of woven products was almost cut into half.

The sharp decline in weaving equipment is being reflected in lower cotton imports, as can be seen above. In total, the market size for cotton yarn processing has lost a volume of approximately 12,000 tonnes in 2007. Exports of polyester staple fibers were boosted thanks to European anti- dumping duties on Taiwanese products and U.S. additional tariffs on Chinese products as well as a successful developing of sales to a larger number of “new” countries. Total export revenues saw a 17.8% jump at US$822 million to a new historical high.

Textile and clothing exports rebounded in 2007 reaching US$13.5 billion, up 2.3%. To raise the overall competitiveness of the industry, closer cooperative ties with North Korea could offer access to a manufacturing base for cheaper priced textiles and clothing. The mid-2007 signed free-trade agreement between South Korea and the U.S. may stimulate Korean shipments, that were down 57% last year at US$1.3 billion from its peak at US$3.1 billion in 2000. Most sensitive products will wait for a nine-year phasing out while the large number of products got immediate duty-free access. This agreement includes the yarn-forward-provision, forcing exporters to use yarns and fabrics made in the United States and/or South Korea. However, this should not limit the benefit for Korean exporters, as it still has a strong textile industry.

48 The Fiber Year 2007/ 08 Malaysia Malaysia, Southeast Asia’s third-largest economy’s expansion may weaken to 5.4% in 2008 from an estimated 6.1% last year. The government expects export growth to quicken to as much as 6.5% in 2008 from 6.0% last year, as increased demand from PR China and Southeast Asia makes up for slower U.S. sales. Manufacturing accounts for more than 30% of its US$149 billion economy and manufactured goods comprise almost 80% of the country’s shipments abroad.

Malaysia lifted government spending, cut corporate taxes and eased some foreign investment rules to bolster economic growth. The government’s initiatives toward promoting investments were very well received, as approved manufacturing investments climbed to a record last year, jumping 39% to US$17.4 billion in 2007. The value of foreign projects, which made up more than half of total approvals, surged 75% at US$9.7 billion. Domestic investments approved rose to an all-time high of US$7.7 billion last year, up almost 10%. The biggest sensation for the local textile industry was undoubtedly the move from Indian major, Reliance Industries Ltd., to buy the assets of Malaysian polyester producer Hualon Corp. This has made Reliance the world’s biggest polyester producer with spinning facilities in India, Germany and Malaysia with a combined annual capacity of 2.0 million tonnes. In addition to this, processing plants in PR China and Vietnam enlarge the global presence. More important from the Malaysian point of view is the company’s commitment and long-term, sustainable success in the textile business. In total, 22 textile and apparel projects, valued at about US$420 million were approved.

Nevertheless, the production index for textiles and clothing has continued to decline from 90% in 2006 (2000 = 100%) to 81% in 2007. However, employment rose 3% to 67,000 in the fourth quarter of 2007 and sales accounted for US$2.3 billion. Maybe, the end of 2007 approved free trade agreement with Pakistan may stimulate the industry additionally. As Malaysia does not grow cotton locally and is expected to import 33,000 tonnes in the actual season, the removal of 23% import tariffs with Pakistan could result in favourable access to this raw material from the fourth largest cotton grower.

As is generally known, low labour costs are an essential factor for successful textile nations. In this sense, last year’s demonstrations to lift minimum monthly wages to US$258 appear to address a little the wrong direction. According to the Malaysian Trades Union Congress, basic wages for textile and garment workers in Malaysia are currently below US$115 a month. Furthermore, the EU’s decision to impose heavy anti-dumping duties, ranging from 14.7% to 23.0%, on imports of polyester staple fibers is also not helpful for the industry’s revival.

However, the government has set ambitious targets in the 3rd Industrial Master Plan (2006-2020) “to achieve global competitiveness through innovation and transformation of the manufacturing and services sectors…. Emphasis is given to technological upgrading, attracting and generating quality investments, developing innovative and creative human capital, and integrating Malaysian industries and services into the regional and global networks and supply chains.” The country’s economy is aimed to annually grow 6.3% during the entire period with exports even increasing 6.7%. In 2007, textile and clothing exports just increased 3.3% to US$3.0 billion. Among the 12 strategically important industries in the manufacturing sector is textiles and apparel. The average annual growth in exports was set at 7.8%, accounting for the most dynamic development. The total investment in this subsector was planned at US$4.0 billion with promising areas

The Fiber Year 2007 / 08 49 in industrial and home textiles, functional fabrics, high-end fabrics and garments as well as ethnic fabrics. As a considerable portion of planned investments may have foreign origin, it is informa- tive to have a look on the recent inflows. The chart below shows the promising development of foreign direct investments over the recent years.

Pakistan Pakistan’s first national textile policy was approved in August. The target is to increase local cotton production, raise value-added products, improve productivity and modernize existing plants and equipment. Quality improvements and product diversification instead of low-value yarn- based exports seem to be crucial to remain competitive. Over the period 2000 to 2005, investments worth US$6 billion were targeting the textile industry. A further US$7.7 billion in textile and clothing investments is expected over the next five years to boost exports to US$24 billion in 2013-14, up from US$10 billion in 2006/07.

In 2006/07, the budget deficit of South Asia’s second largest economy (US$146 billion) remained at 4.2% of gross domestic product, that grew 7.0%. The target is to cut the deficit to be able to spend more on infrastructure, power generation, health and education in a nation where 70% of the 165 million population lives on less than US$2 a day. Power cuts have already negatively affected the industry, e.g. reducing textile and apparel production by at least 20% in Karachi’s industrial areas, while workers have been laid off with half their wages. Foreign direct investment was at the level of US$7 billion with mere US$59.4 million (+26%) during financial year 2007 in the textile and apparel sector. Foreign direct investment in textiles and clothing significantly dropped over the period July 2007 to January 2008 by 55% to US$17 million as a result of constraints of infrastructure and skilled labour.

Pakistan’s farm sector, which accounts for a quarter of the economy, expanded 5%. The growth was spurred by a record wheat harvest, but cotton production continues do decline. The current season’s output has been sharply revised to 1.9 million tonnes due to unfavourable weather and severe crop damages. Consequently, imports for extra long and medium staple cotton are predicted to raise to process about 2.7 million tonnes, marginally less than the previous year.

50 The Fiber Year 2007/ 08 Taiwan Taiwan’s economy enjoyed a 5.5% growth in 2007. According to the Taiwan Institute of Economic Research, the country’s GDP depends on exports at more than 60%, making it vulnerable for a slowdown in world economy. The manufacturing sector just contributes some 23% as result of the increasing relocating of companies, mostly to PR China. This has had a big impact on private investments, while more than 1 million high-consumption individuals have migrated.

Taiwan’s textile industry is recovering from the impact of the 2005 removal of textile quotas, thanks to governmental support. An US$23 million fund from the Industrial Development Bu- reau has already helped many small enterprises in the textile industry. The textile industry’s annual production is expected to further increase from US$13.5 billion to US$16.3 billion by 2009 as the government aims to invest up to US$850 million in the coming three years to promote innovation in the industry. Innovation, as the key to success, has resulted for the past decade in a global recognition for its functional fibers and fabrics. Trend-setting seems to be at present a more environmentally conscious on top.

Last year’s industrial production index shows a stagnation for the textile industry with a 2.2% lower volume of 2.6 million manmade fibers produced and cotton locally consumed. The cotton demand is forecast to sharply drop by 18% in the actual season. In contrast, garment production has continued its long-term contraction.

This development has been reflected in the textile and clothing trade with reduced values for imports and exports. For the first time since 1990, the trade surplus declined below US$9 billion, down a third from its peak in 1997. As a consequence of the persistent downturn of the clothing production, exports of apparel dropped 10% in 2007, while textile shipments slipped 1%.

The Fiber Year 2007 / 08 51 The country’s declining position can best described by the development of the polyester industry, that accounted for a roughly 14% world market share in the 1980’s and actually takes in an approximately 6% share.

Labour cost advantages will continue to attract domestic manufacturers to expand its facilities abroad with a special focus on Vietnam. Formosa Chemicals and Fibre Corp. is planning to invest US$309 million on the expansion of its Vietnamese textile base. Tainan Spinning Co., with a decade-long experience and manufacturing facility in Vietnam, will become its leading spinning manufacturer with 520,000 spindles installed in 2008. Eclat Textile Co., one of Taiwan’s top-three garment makers, plans to invest US$35 million on expanding its Vietnamese operations and setting-up dyeing and weaving plants as well. In addition to that, textile companies have been encouraged to move operations to the Dominican Republic to take advantage of the preferential access under the CAFTA-DR agreement to the United States.

52 The Fiber Year 2007/ 08 Thailand Thailand’s economy grew 4.7% in 2007 thanks to stronger exports and manufacturing. Exports, which account for about 60% of the economy, have offset weaker domestic spending. Foreign direct investments in 2007, mainly from Japan, the U.S. and European Union countries, totalled US$14.8 billion, up 63% from the year before. Approved textile and clothing applications accounted for 15 projects worth US$90 million.

In 2007, textile and clothing exports rose 2.1% to US$7.0 billion, what sounds good at first sight. Garment shipments were down 4.9% at US$3.4 billion, falling back to the 2002 level. The main reason for this decline was the rising currency, making clothing exports less competitive. The Thai Baht already rose 20% against the US Dollar in 2007, on top of a 15% rise in 2006. Lower value added products increased by 9.5% to US$3.6 billion, mainly yarns, fibers and fabrics. While exports to the U.S. fell 3% to US$2.1 billion, there was growth in exports to Eastern Europe by 60%, with shipments to Southeast Asia up 20%, to India up 48% and to New Zealand up 17%. The implementation of the Japan Thailand Economic Partnership Agreement in August is expected to support Thai exports in future. At present, Japan imports 90% of its total garment demand from PR China, with just 1% coming from Thailand. An intensified sourcing of Japanese importers in Thailand is forecast to lift Thai apparel exports by 10% or about US$340 million. The chart below contains last year’s exports valued at US$6,975.5 million.

The general upgrading of the local industry towards high-end markets has been quite successful, but the currency rise has depressed demand from the U.S. and Europe. So far, this development has been partly compensated by moving apparel plants near the border with Myanmar to take advantage of low labour costs by employing Burmese workers. Quite recently, Thai manufacturers have started to build or at least planning to build textile and clothing facilities in Vietnam to offset the rising currency and benefit from lower labour costs in Vietnam.

As a consequence, the current season’s use of cotton consumption is expected to be down 8% at 392,000 tonnes. The local cotton production is commercially meaningless, expected to drop to its lowest level of around 3,000 tons in the current season. The acreage expansion for crops like cassava and sugarcane is more lucrative as the government does not subsidize cotton prices or production and has been allowing raw cotton to enter the country duty-free for several years.

The Fiber Year 2007 / 08 53 Vietnam Vietnam’s economy expanded at the fastest pace since 1996, led by manufacturing and services, after the Southeast Asian country joined the World Trade Organization (WTO) in January 2007. Gross domestic product increased 8.5% in 2007 after rising 8.2% the year before and foreign direct investments jumped to more than US$20 billion from US$12 billion in 2006.

After joining WTO, the U.S. was obliged to remove all quotas on textile and clothing imports from the country. This removal of quotas has boosted Vietnamese clothing exports, especially for lower-end products, surging 34% to US$4.6 billion and now accounting for about 60% of the total apparel shipments. To show again political influence, the situation was different a while ago. In 2001, Vietnamese exports to the U.S. were US$49 million and surged after a bilateral trade agreement reduced import tariffs. To control flooding Vietnamese imports, the U.S. re-imposed quotas on apparel imports.

According to Vietnam National Textile and Garment Group (Vinatex), the country’s textile and apparel exports are forecast to reach US$9.5 billion in 2008, up by 21.8%, and targeted at US12 billion in 2010. The dynamics in textiles and apparel have also been reflected in 17% higher imports of cotton, now accounting for 212,000 tonnes. The overwhelming success story of this business can best described with the long-term export performance shown below.

From the vast number of textile and apparel investments, either entering service in 2007 or announced in the last year, the following projects appear to be the most trend-setting for the industry’s further development.

Taiwan’s Formosa Chemicals and Fibre Corp, is planning to invest US$309 million to expand its Vietnamese textile base from 2009 in nylon fiber and yarn production. Tainan Spinning Co. will become the leading spinning manufacturer with 520,000 spindles installed in 2008. Eclat Textile Co., one of Taiwan’s top-three garment makers, plans to invest US$35 million on expanding its Vietnamese operations and setting-up dyeing and weaving plants.

Korean Hyosung Corp., the second largest spandex producer in the world, will invest US$100 million in a new facility to manufacture 15,000 tonnes of spandex when coming on-stream in the second half of 2008. On top of that, it has a 53,000 t/y project of polyester industrial yarn with subsequent tirecord conversion. Another Korean investor, Teachang Corp., together with Vinatex and local investors will invest US65 million to build a denim factory and a dyeing plant. International Textile Group Inc. together with Phong Phu Fabric Joint Stock Co. are building a US$80 million cotton fabric and clothing manufacturing plant and further consider investments of US$100 million in other textile and garment manufacturing operations.

Vinatex is not only building a 100,000-spindle fiber plant to fuel downstream processing industry, but also investing in a qualified industrial zone in the Nam Dinh province at costs of US$16 million. San Hoang Manufacturing has inaugurated two spinning plants worth US$56 million equipped with 48,000 spindles to annually produce 6,500 tonnes for 60% exports to Japan and the

54 The Fiber Year 2007/ 08 rest for the local industry. A number of Vietnamese investments is additionally targeting garment operations. Further dynamics arise from projects from European-headquartered companies and joint ventures between Vietnam and neighbouring partners, e.g. from Laos and Sri Lanka. Cambo- dia appears to embark on a different strategy, from its national view understandable, in an attempt to deepen relationships with Vietnamese textile firms. Whether this approach will turn out fruitful needs to be awaited as Vietnamese industry is already short of primary textile materials.

A third milestone on top of WTO accession and surging investments is considered to be Vinatex’s intention to complete its privatisation during 2008. As is generally known, an unrestricted evolvement of the market forces will eventually increase economic welfare the most, as long as a well- regulated, market driven development of this business to avoid excess capacity will be in place.

“Son Nam Textile and Garment Joint Stock Company is the biggest rotor yarn manufacturer in Vietnam with an annual turnover of more than US$16 million. The spinning mill’s annual production amounts to more than 5,000 tonnes of yarn, mainly medium-fine weaving yarns for towels. Son Nam is a model company. Several awards from the government, such as the certification with the ‘Labour Decoration Grade 3’ and with the ‘Diploma of Merit’ for the company management and a gold medal for the quality of the final products, reflect the ambitious corporate objectives. For a few years the company has registered a boom in demand for rotor yarns, in particular with regard to the high quality rotor yarns. Thus, the focus was placed on quality with regard to all expansions of production.”

Nguyen The Minh, President, Son Nam Textile and Garment Joint Stock Company, Nam Dinh City, Vietnam

The Fiber Year 2007 / 08 55 5.4 Greater Europe

For the current season 2007/08, Greater Europe is expected to have reductions in cotton output and use as well as lower trading activities. The diminishing European participation in cotton activities goes according to the ongoing decline in spinning capacity with the exception of Turkey and Uzbekistan.

vs 2007/08 Production Imports Use Exports End. Stocks Europe -4% -4% -6% -1% -4%

Turkey Turkey’s economy growth slowed to 5.1% in 2007, while the Turkish Lira rose 21% against the US Dollar, trading at a 6-year high. However, the country enjoyed a record year for foreign direct investment, which amounted to US$21.9 billion in 2007, helping finance a record current-account deficit of US$38 billion.

As the industry was unable to compete with cheap yarn imports, companies were forced to reduce or halt production completely. Yarn imports surged 75% to about 180,000 tonnes, with the highest increase in imports from India that quintupled shipments to more than 50,000 tonnes. In value terms, manmade staple fibers and yarns jumped by 13% to US$3.5 billion. Total textile and clothing imports soared 47% to US$9.1 billion, while exports increased 8.5% to US$22.0 billion. This rise in exports also reflects higher prices of Turkish production, as exporters shifted to higher- valued products and were also confronted with higher labour and energy costs. The impact on the textile and clothing trade balance is shown below.

This crisis may even gain momentum at the end of 2008, when the Law No. 5084, creating incentives for investment and employment in certain underdeveloped areas of Turkey, expires. The end of Chinese quotas to the EU end of 2007 and to the U.S. end of 2008 will also negatively affect Turkish exports.

The current season’s cotton production is expected to drop 16% to 700,000 tonnes. In line with lower imports, the local cotton use is forecast to decline 12%. Reasons for lower output and yields were adverse weather conditions with extreme heat and a lack of water. Farmers have already started planting alternative crops. The future performance will depend on the production bonus program, although the recent increase of VAT on local cotton trade from 1% to 8% has already increased costs.

56 The Fiber Year 2007/ 08 Uzbekistan Uzbekistan is the world’s sixth largest producer of cotton with a current season’s volume of 1.2 million tonnes, up 2.7%. As the area planted was almost unchanged, favourable weather has helped to lift output beyond the official production target. The local cotton consumption was nearly unchanged at about 200,000 tonnes despite an expansion in spinning capacity. In 2007, over US$87 million of foreign investments were addressing the industry with 23 new companies coming on- stream and creating some 10,000 new jobs. This brings the annual capacity to produce yarn to more than 300,000 tonnes. For 2008, 20 new manufacturing facilities at costs of US$120 million are planned. In addition to expansion, restructuring and technological upgrading continues. These investments are part of the program to develop the textile industry during the period 2007 to 2012. The program envisages the realization of 79 projects with investments of US$615 million by 2012. This program to expand and modernize the textile industry aims to create 36,200 new jobs and to produce 407,100 tonnes of cotton yarn by 2012.

The Fiber Year 2007 / 08 57 5.5 Africa

For the current season 2007/08, Africa is expected to have reductions in cotton output and as a consequence of that also lower exports.

vs 2007/08 Production Imports Use Exports End. Stocks Africa -13% -5% +1% -17% -11%

The industry is very much fragmented with the top four cotton producing countries – Benin, Burkina Faso, Egypt and Mali - just accounting for a 46% share of the continent’s total output of 1.3 million tonnes. Some 80% of this volume is being exported, enabling other industries to improve value-added production, although of vital importance for those low income cotton producing nations.

A frequently used justification for successful textile nations is low labour costs. From that aspect, African countries should be able to increase their share in the global industry. However, things seemingly do not always follow market forces and the reasons for that are quite obvious.

Egypt Egypt’s economic recovery continued with an expansion of real GDP by 7.1% in 2007, the fastest pace of growth in more than a decade. The investment-driven high growth is promising and result of reforms to ease doing business. The government cut the minimum capital required to start a business and halved the time and cost of start-up. It reduced fees for registering property and eased the bureaucracy to get construction permits. It cut the time to import by seven days and the time to export by five. Finally, it established a new private credit bureau to make it easier to secure credit. Net foreign direct investment increased from US$509 million in 2000/01 to US$11.1 billion in 2006/07. In the first half of the current fiscal year, foreign direct investments further rose to US$7.8 billion. Thus, Egypt has evolved into the leading recipient country in Africa.

As more than half the 80 million population is younger than 25, Egypt needs a sustainable growth to create jobs and lower the unemployment rate. The total cotton area in 2007/2008 is forecast to be down 13% to 214,000 hectare. Price increases for corn and rice, coupled with the decreases in cotton prices, have led farmers to replace cotton for more attractive returns. Accordingly, production of cotton is predicted to decline 11% to 160,000 tonnes. Unchanged imports and reduced exports will lead to a 3% increased cotton use of 210,000 tonnes. Reversing the downward trend of previous years is a good sign. However, this amount still is some 30% lower than the textile’s industry annual demand a couple of years ago. The loss of competitiveness, due to mostly operating on outdated equipment, and financial difficulties of textile companies are the main reasons for this under-utilization.

58 The Fiber Year 2007/ 08 Ethiopia Ethiopia’s export target for the textile and clothing industry is to achieve US$500 million by 2009 under an ambitious US$1.8 billion government plan, excluding investments in ginning facilities, to make knitted and woven clothing, accounting for 45% of the country’s total exports.

A range of investment incentives is available like tax holidays, the elimination of customs duties, grants, loans and land. All capital goods needed to establish a factory can be imported free of import tax, as can raw materials necessary for producing export products. This has already attracted local and foreign Investors, also benefiting from cheap labour power. PR China will invest US$713 million to build Ethiopia’s first industrial park with up to 80 Chinese companies involved in textiles, leather and manufacturing construction equipment are expected to invest in the industrial zone being built east of the capital Addis Ababa. Chinese investments are warmly welcome due to their no-strings-attached policy towards aid, in contrast to Western governments that usually place conditions on its donations. One of the largest Turkish textile factories, AYKA Textile In- dustry and Trade Incorporated, has started relocating its garment factory to Ethiopia beginning of 2007 with first-phase investments in spinning and knitting.

A recent study concludes that the country with a nearly 80 million population, of which almost two thirds under the age of 25, has enormous potential for the production of cotton. There is some 2.6 million hectares of land suitable for cotton production, which is in the region to that of Pakistan, the fourth largest producer of cotton in the world. Pakistan achieves about 2.0 million tonnes of cotton from a total cotton area of 2.9 million hectares. Currently the area under cotton cultivation in Ethiopia is less than 100,000 hectares, of which about a third is irrigated.

Chinese economy needs to secure long-term energy supplies and this has led it to seek oil supplies from African countries. Nigeria is the largest oil producer in Africa and the eleventh-largest producer in the world. Despite its resource wealth, more than 70% of the population lives in poverty. Angola is the second largest oil producer in sub-Saharan Africa after Nigeria, with oil production expected to reach 2 million barrels per day by 2008. The oil and gas industries, both considered highly promising, have attracted over US$20 billion in foreign direct investment since 2003. The International Monetary Fund in its latest forecast for the Angolan economy expects a GDP growth of 31.4% this year, close to the World Bank’s prognosis of 30.2%. But not only the oil sector is doing well. Further good news is that investments over the last four year exceeded US$4 billion. In the last year, 463 projects have been approved, the highest number over the last three years, with a total value of US$794 million. Sudan has proven reserves of some 563 million barrels of oil, with the potential for far more in regions of the country made inaccessible by conflict. Sudan is one of the world’s poorest countries, shipping most of its total output to PR China. Equatorial Guinea, the tiny West African country’s total proven oil reserves are estimated at 1.28 billion barrels. Gabon has proven oil reserves of roughly 2.5 billion barrels and produces about 230,000 barrels per day.

The Fiber Year 2007 / 08 59 Beyond crude oil and soaring demand for other natural resources like aluminium, copper, nickel, iron ore and others, Chinese investments have brought economic growth and improvements in the infrastructure. Advantageously, financial aid has been granted more pragmatically, whether boon or bane needs to be awaited. Chinese products are already flooding African markets, primarily textile products, that have led to drastic declines in local employment and badly hit local textile operations. The Textile Federation in South Africa estimates that 90% of locally consumed garments now have Chinese origin. PR China has identified Africa as both an excellent market for their low-cost consumer goods and a burgeoning economic opportunity as more countries priva- tize their industries and open their economies to foreign investment. Reportedly, mainly Chinese textile manufacturers have invested in African factories to get around U.S. and European quotas on Chinese textiles. Around 1,000 Chinese companies are estimated to be operational in Africa with nowadays roughly 1 million Chinese living there. The trade relations work as shown below.

The majority of African raw cotton is being exported to PR China (1) to process into yarns and fabrics. These intermediate goods are being shipped back to Africa to produce ready-made garments in Chinese-run factories (2) that afterwards will be directed to the U.S. and Europe under protection of preferential trade agreements like AGOA for example (4). Furthermore, an increasing amount of low-cost garments are being exported from PR China to Africa for final consumption (3).

60 The Fiber Year 2007/ 08 5.6 Installed Spinning Capacity

a) Short staple spindles:

China India Pakistan Indonesia Korea USA Mexico Brazil Turkey 2002 49.07 36.00 9.08 8.60 1.81 2.04 3.50 3.60 5.98 2003 57.94 33.88 9.26 8.70 1.67 1.70 3.50 3.69 6.57 2004 67.00 34.23 10.03 8.80 1.58 1.60 3.52 3.70 7.13 2005 77.47 34.07 10.78 8.20 1.27 1.43 3.54 3.74 7.34 2006 87.20 35.45 10.49 8.25 1.19 1.31 3.54 3.76 7.45 2007 99.00 34.87 10.44 8.30 1.16 1.20 3.55 3.90 7.75 Unit: million

b) Open end rotors:

China India Pakistan Indonesia Korea USA Mexico Brazil Turkey 2002 900 386 145 90 16 754 100 322 507 2003 1,040 379 148 90 15 643 101 330 530 2004 1,060 386 157 90 14 634 101 345 555 2005 1,470 391 166 90 14 560 103 360 569 2006 1,754 455 155 90 13 449 103 368 595 2007 2,035 457 153 110 13 433 102 369 610 Unit: thousand

The Fiber Year 2007 / 08 61 6. Nonwovens and other Unspun End-Uses

Last year’s output of nonwovens and unspun end-uses has continued to increase by 7% to 7.1 million tonnes. The majority of almost 6 million tonnes is nonwoven-based while the remaining portion comes from filling material for sleeping bags, anoraks, pillows, mat- tresses and insulating material in the automotive industry as well as padding material for reinforced building structures. The manufacturing activity has been almost balanced between Asia, the Americas and Europe, as shown below.

Dominating subjects apart from growing consumption along most applications were the addition of new capacity and restructuring measures around the world. The following paragraph summarizes in extracts new capacity from leading industry representatives that already went on-stream in 2007 or is scheduled to be commissioned in the medium term.

In 2007, Ahlstrom Corporation has invested about €140 million in growing nonwovens segments and €125 million in nonwovens acquisitions to take over the Orlandi’s Group spunlace operations in Italy and Fiberweb’s hygiene wipes business with facilities in the United States, Italy and Spain. A new line started-up in the United States and further capacity additions will come on-stream in Italy, Scotland, Brazil, the United States and India.

Polymer Group Inc. with 2007 nonwovens sales of US$886 million has more focused on the Ameri- can market with spunbond investments in Argentina, Mexico and the United States. Furthermore, PGI has closed one facility in Germany and two units in the United States, whereas the equipment was transferred to operations nearby.

Different markets have been in the focus of Kimberly-Clark Corporation with its first manufacturing facility in Russia scheduled for early 2009, an US$60 million investment in Peru and considera- tions to open a factory in a South Korean-built industrial zone in North Korea.

Those three majors have mainly concentrated restructuring measures on their U.S. plants like the Freudenberg Group that has decided to close two manufacturing lines for automotive products in Kentucky. However, investments in Germany, PR China and Latin America, where it has manufac turing plants in Argentina, Brazil, Chile, Colombia, Guatemala, Mexico and Venezuela will further extend the groups’ leading market position, especially in bicomponent technology.

62 The Fiber Year 2007/ 08 India’s textile industry is strong in the conventional fiber to fabric sectors, but the nonwovens segment is still at infancy. India‘s output is estimated at some 35,000 tonnes with needlepunching accounting for over 50% of the capacity. Taking into consideration trade flows, the average per capita consumption comes up to only 35 grams. While local textile majors are considering to enter this prosperous business, Ginni Filaments has commissioned its first 12,000 t/y spunlace line to produce medical fabrics, coating substrates and wet wipes. Fiberweb, the U.K. nonwovens maker for diapers that is in preliminary talks with Avgol Industries on a possible takeover bid, will set up a joint venture to manufacture geotextile products in India. Furthermore, Ahlstrom has announced to invest €38 million in a new medical spunlaid nonwovens plant in India that is expected to start production by the end of 2009.

The dynamic growth in PR China has continued, raising the nonwovens output by 23.3% to 1.7 million tonnes. Part is of this success story are foreign investments, e.g. Fiberweb will invest into a polyester spunbond joint venture with Tianjin Hengguan Nonwoven Co. Ltd., the Korean Toray Saehan Inc. has commissioned its spunbond facility in Nantong in the first quarter of 2008 to serve the growing hygiene market, Taiwanese Nan Liu Group has expanded into PR China and Johns Manville has begun operating its new spunbond line in Henan province in March 2007.

In the Middle East, today‘s centres of activity are located in Israel and the Kingdom of Saudi Arabia, while nonwovens industries in Egypt, Iran, Kuwait and UAE are emerging. Israel-headquartered Avgol Industries has heavily invested in the past. Its production facilities in Israel, the United States and PR China have generated sales in 2007 of about US$225 million. A new 10,000 t/y spunbond manufacturing line for hygiene products began operations in 2008 in Russia and an expansion in the United States will soon start-up. The pre-mentioned talks to buy Fiberweb would grant Avgol, whose sole technology is spunbond nonwovens, access to a number of technologies including airlaid, thermal bonded and chemical bonded.

In the Kingdom of Saudi Arabia, Mada Nonwovens has invested in a new 8,000 t/y polyester bicomponent spunbond. A newcomer, Bahrain Nonwovens plans to build spunbond lines for industrial, agricultural and hygienic applications using the technology from Galileo Group, a new spunbond equipment supplier. Pantex International’s new subsidiary, Pantex-MENA located in UAE, will produce feminine hygiene topsheets. Swedish SCA AB will establish a joint venture with Jordan-based Nuqul to produce feminine hygiene products. In addition to that, SCA has undertaken several investments like for example acquiring Procter & Gamble’s European tissue operations at a price of €512 million. Moreover, SCA opened its €48 million production unit in Russia and will boost capacity of its European adult incontinence business by investing €36.5 million in two new lines in the Netherlands and expanding its tissue business in Latin America.

The Fiber Year 2007 / 08 63 The number of further projects either on-stream in 2007 or expected to start-up in 2008/09 would be numerous, in particular targeting Greater Europe, the United States, Brazil and PR China.

Carded nonwovens still take the quantitative lead in the web forming process, although this technology has been continuously losing market shares. Last year’s output has grown by 5% to about 2.4 million tonnes. The chart below illustrates changes in this segment in favour of the spunlace process.

The spunlaced technology has continued to benefit from rapid growth in hygiene and household wipes in Western Europe and North America. Further on, growth opportunities may even pick up pace by offering more value added functionality. New requirements in interior automotive products and filtration have been triggering new investments around the globe. PR China, increasingly producing nonwovens for export markets, is facing two levels of equipment quality. Standard quality can be met with local sourcing while high end products for Western markets seemingly necessitate Western technology. Persistent dynamics in this segment result from the short abstract of investments. Ahlstrom’s new spunlace line at its Green Bay, USA, facility went into service beginning of 2007. Lentex, Poland, has built its second spunlace line that went on-stream at the end of 2007. The €125 million in sales German Sandler AG has added a second spunlace nonwovens line at costs of €20 million to make materials mainly targeted at the hygiene, automotive and filtration market. Textilgruppe Hof has launched a new spunlace line in Germany to mainly target automotive and filtration uses. RKW AG, Germany, is in the process of building a 5,000 t/y spunlace line at its Gronau site that is scheduled to start operating in the second quarter of 2008. Taiwanese Nan Liu Group decided to invest in the widest hydroentanglement line ever installed in all Asia. This line will produce spunlace fabrics dedicated to wipes and surgical markets. The line is scheduled to come on-stream in the second quarter of 2008 in Pinghu, PR China.

64 The Fiber Year 2007/ 08 “The nonwoven industry has seen a continuous growth over the last years on a global basis. Being well established in the European and American market Asia is following confirmed by growth rates in the double digit area. A continuous improvement in the standard of living in these rapidly developing economies is creating the need for products making lives more convenient, nonwovens providing the ideal solution for areas from automotive to personal hygiene.

Lenzing as a key supplier of cellulosic fibers to the nonwoven industry has been following this development. The Asian production basis South Pacific Viscose in Indonesia, having established a strong customer basis both in the textile and nonwoven markets, was strengthened by the startup of Lenzing Nanjing Fibers in 2007. With this setup Lenzing is the only global producer of cellulosic fibers on 3 continents and by this able to fully support the needs of global customers.

The nonwoven industry is set for further growth offering solutions both for Robert Gregan, commodity and high tech applications. Production will be set in industrial as General Manager and well as developing countries. Europe and the American market being the lead- Vice President, er both in production and development with Asia and here especially China Business Unit catching up quickly with a background of economies growing at high speed. Nonwoven Fibers, Further to this the potential of the remaining members of the BRIC countries Lenzing Group must not be forgotten. Brazil, Russia and India are at the start of a development where the rest of Asia had been some years ago. www.lenzing.com

Overall with a continuing growth in the demand for manmade fibers the outlook for the fiber industry will remain a very positive one. The challenge will be to supply flexible solutions to the industry based on continuous innovation across the full supply chain.”

While needlepunched products have been experiencing a steady growth over the last decade, thermal and resin bonded applications have developed below average. The largest market for carded thermal bonded polypropylene nonwovens was cover stock. The shift from carded fabrics towards spunbonded materials due to more cost-effective production for low weight materials could not be compensated by developing new markets.

Investments in this drylaid technology have been announced from Fibertex to start operations at its new needlepunched line in Denmark by mid-2008. Kasbar National Industries has added an additional carding machine by mid-2007 and has commissioned its third needlepunched line to its Columbia, Tennessee facility. This expenditure in new equipment has almost doubled capacity to 8,200 t/y. Thrace Plastics Group has started-up its new nonwovens geotextile line in Greece in early 2007 and is in the process of lifting its U.S. capacity for light and medium nonwovens by more than 7,000 t/y.

The Fiber Year 2007 / 08 65 In Belarus, Svetlogorsk Production Association Khimvolokno has started its new 2,000 t/y nonwovens line for thermal bonded and flooring needlepunched fabrics used as padding for roofing, padding and stuffing material in automotive, furniture and garment industries. Welspun, an In- dian US$1 billion group, will expand its thermal bonded wadding capacity at its Mexican plant.

The spunlaid market, as a consequence of persistent strong investments, has produced nearly 2.4 million tonnes with spunbond – mainly polypropylene and polyester – and SMS as the most important technologies. This output level refers to a 7% growth over 2006. The current market share of polypropylene in spunbonds accounts for about 80%. Bi-component materials will continue to witness above-average growth rates. The reason for this sustainable growth is that spunlaid technology offers the advantage, which makes it the benchmark for efficiency, of skipping a pro duction stage. From polymers in the beginning it delivers finished fabrics. The other technologies start from raw material to fiber and then to a finished fabric.

The ongoing growth in this sector is being expressed by Lenko, Poland, that has just started its new spunbond nonwovens line to produce mono and bicomponent light to medium weight materials. Zavod Elastik, a Russian newcomer to this industry, will commission its new line end of 2008 targeting the medical and hygiene markets. In Italy, Albis SpA, will expand its spunbond capacity by installing a second spunbond plant. Fitesa in Brazil will commission its second spunbond line in the second half of 2008, bringing the company’s capacity to more than 55,000 t/y. The manufacturing facility of First Quality Nonwovens Inc., located in Pennsylvania, will be expanded by its eighth polypropylene spunbond line that is scheduled to start production in the first quarter of 2009. Furthermore, the company strengthened its absorbent hygiene business following the US$335 million acquisition of Covidien’s Retail Products business, now possessing a full range of adult incontinence, feminine hygiene, wet and dry wipes and baby diaper products.

Japanese Toyobo Co. Ltd. raised its polyester spunbond output by 2,000 t/y to 16,000 t/y to meet increasing demand for automotive and building materials. Unitika Ltd. has expanded capacity of its polyester spunbond facility in Thailand by 10% in early 2008. United Nonwovens LLC has started full-scale operations at its Mobile, Alabama polyester spunbond facility.

The demand for airlaid nonwovens mainly used in wipes, hygiene products and absorber pads for the food industry was solid, amounting to about 480,000 tonnes in 2007. Although the industry has suffered from undamped capacity additions in the early 2000s, it has currently enjoyed a growth in profitability as well. Despite a downsizing of Buckeye Technologies at its Canadian facility near Vancouver, some new capacity came on-stream or is about to start-up. New capacity coming on-stream in 2007/08 has been announced from Italian Main SpA, Fiberweb adding a second airlaid (10,000 t/y) manufacturing line at its Tianjin facility in PR China, McAirlaid’s Vliesstoffe GmbH in Germany, Danish Airlaid Technology A/S, Danish Fibertex to invest in a new airlaid line in the Czech Republic and Carolina Nonwovens Corporation that commissioned its first nonwovens line in mid-2007.

Investments in the highly concentrated segment of wetlaids were less. The big players in this industry are Ahlstrom Corporation and Hollingsworth & Vose Company (H&V), accounting for about half the world production. The output just marginally increased to about 230,000 tonnes in 2007. The main products are tea bag and filter materials, medical barrier fabrics, speciality wipes, battery separators and several other applications on a small scale. As the technology is fairly mature, some end-uses have been substituted by other nonwoven technologies. H&V has installed a wetlaid microglass manufacturing facility in PR China for the production of filtration and battery separators. Hirose Paper, producer of special separators for alkali dry cell batteris, increased its wetlaid nonwovens capacity of vinylon fibers by 50% after commisioning its new plant in mid- 2007.

66 The Fiber Year 2007/ 08 8. Summary and Trends in Global Textile Industry

Previous year’s performance has confirmed the long-term trend of further shifting manufacturing to Asia, in particular to PR China. The share of Asian manmade fiber production has advanced to 77.5%, up 3.6 million tonnes in 2007. An impressive 11.7% boost of the global polyester production to 30.7 million tonnes has sustainably proven the fiber’s ultral- arge standing, now accounting for 70% of the global manmade fiber market.

While Asia managed to increase its output of manmade fibers by 11.9% and its consumption of wool and cotton by 2.5%, further declines occurred in Greater Europe and the Americas totaling at nearly 4.5% each. However, growth in today’s booming markets will not be endless, but con- strained by shortages in energy and raw materials.

PR China succeeded in lifting its manmade fiber output by 17.4% to 22.7 million tonnes and continued to lift its cotton demand by 6.0% to 11.5 million tonnes. The Indian elephant is further accelerating with higher output in raw materials for cotton and manmade fibers as well as higher production of spun yarns, cellulosic and synthetic fibers. Other countries like e.g. Egypt, Thailand and Vietnam are increasingly gaining importance. Other high potential nations like Cambodia, Indonesia and Uzbekistan did not yet attract the necessary investments to tap the full potential.

The charming aspect of textiles is its sustainable growth that is forecast to pick up dynamic because of income gains mainly in PR China and India. For the period until 2020, an additional demand of 30 million tonnes of fibers and yarns is forecast, raising the annual per capita consumption from 10.9 kg to 13.5 kg by 2020. The manufacturing contribution from Western Europe and the United States will continue to be subject to changes in favour of sophisticated and innovative solutions. This strategy means serving small-size markets with ambitious requirements providing above-average margins.

Prosperous expectations are assigned to cotton, thanks to increasing GM cotton planting, polyester and cellulosics. A future without manmade fibers is unimaginable to meet consumers’ demand. Polyester will continue to dominate due to its favourable cost/benefit ratio, further spinning expansions and an ongoing broadening of the raw material base in Asia and the Middle East. Cellulosics, solely staple fibers, will go on with growth rates due to increased use in nonwovens and textile applications. Meanwhile, polyamide and acrylic fibers are anticipated to be subject to further relocations and mergers. Small niche markets like aramid and carbon fibers will continue its fast-paced growth.

Dominating topics continue to be imbalanced trade flows, compliance with social regulations and labour laws, smuggling of ready-made garments and counterfeited clothing. This may increasingly fuel trade tensions. Although an unrestricted evolvement of the market forces will eventually increase economic welfare the most, it is indispensable to stick to globally acknowledged rules of trade practice and intellectual property rights. Otherwise, trade frictions and punitive tariff duty may come into operation.

The Fiber Year 2007 / 08 67 Will the current trend of globalization in clothing manufacturing continue? The increasing importance to save resources and to protect the environment might lead to a rethinking towards “localization”, a thought already raised by Professor Pietra Rivoli in last year’s issue. Taking into consideration the carbon footprint of today’s clothing production with raw materials and ready- made garments being shipped halfway around the world, this actual system of international di- vision of labour does not appear to be the way to success for environmentally sound efforts. In contrast, “green” clothing requires a change in the retailers’ sourcing, distribution and marketing strategy that would lead to a more balanced industry’s structure. The year 2008 will show what priorities will remain for the above mentioned issues while a lot of textile producers will face heavy economical pressure.

Finally, global investments according to market needs are essential. In fact, a short-term increase of market shares appears to be tempting to a manufacturer, but in the long-run it will solely lead to depressed margins and to cut-throat competition. Complying with those aspects in line with a company’s spirit and its management’s leadership to make changes happen, will result in sustainable success for responsible manufacturers. This seems to be an essential accomplishment for a further changing textile scenario. The transition period is anything but over, just lost a little momentum. Mergers and acquisitions, closures and relocation of manufacturing operations will continue. Only today’s strongest companies, steadily enriching its scope of supply and international presence, will be in the position to lead tomorrow’s way. Industrial groups winning recognition in this respect are Indorama, Lenzing, Performance Fibers, Reliance and Toray to mention a few majors of the manmade fiber industry.

68 The Fiber Year 2007/ 08 The Fiber Year 2007 / 08 69 70 The Fiber Year 2007/ 08 The Fiber Year 2007 / 08 71 World Fiber Use

Population Consumption Year Natural * Manmade TOTAL billion kg / capita 2007 28,502 44,086 72,588 6.64 10.9

2006 28,157 40,817 68,974 6.57 10.5

2005 26,603 39,547 66,150 6.49 10.2

2004 25,005 37,464 62,469 6.41 9.7

2003 22,672 35,230 57,902 6.34 9.1

2002 22,761 33,477 56,238 6.23 9.0

2001 21,941 31,595 53,536 6.15 8.7

2000 21,496 31,147 52,643 6.08 8.7

1999 21,266 29,400 50,666 6.00 8.4

1998 19,990 28,296 48,286 5.92 8.2

1997 20,189 27,523 47,712 5.85 8.2

1996 20,237 24,680 44,917 5.77 7.8

1995 19,600 23,594 43,194 5.69 7.6

1994 19,461 22,613 42,074 5.61 7.5

1993 19,631 20,765 40,396 5.53 7.3

1992 19,673 20,481 40,154 5.45 7.4

1991 19,740 19,738 39,478 5.37 7.4

1990 21,460 19,380 40,840 5.28 7.7

1989 21,409 18,944 40,353 5.20 7.8

1988 21,072 18,543 39,615 5.11 7.8

1987 20,638 17,864 38,502 5.02 7.7

1986 20,743 16,886 37,629 4.94 7.6

1985 17,732 16,259 33,991 4.85 7.0

1984 16,240 15,764 32,004 4.77 6.7

1983 15,705 14,850 30,555 4.69 6.5

1982 15,469 13,597 29,066 4.61 6.3

1981 15,189 14,631 29,820 4.53 6.6

1980 15,227 14,301 29,528 4.46 6.6

1975 13,349 10,677 24,026 4.09 5.9

1970 13,484 8,394 21,878 3.71 5.9

1965 13,401 5,486 18,887 3.35 5.6

1960 11,607 3,367 14,974 3.04 4.9

1950 7,723 1,681 9,404 2.56 3.7

Unit: ‘000 tonnes * cotton, wool and silk included

72 The Fiber Year 2007/ 08 Consumption of Natural Fibers

Year Cotton Wool Silk TOTAL ± in %

2007 27,203 1,201 98 28,502 1.2%

2006 26,827 1,232 98 28,157 5.8%

2005 25,290 1,216 97 26,603 6.4%

2004 23,693 1,214 98 25,005 10.3%

2003 21,344 1,231 97 22,672 -0.4%

2002 21,398 1,271 92 22,761 3.7%

2001 20,536 1,317 88 21,941 2.1%

2000 20,067 1,343 86 21,496 1.1%

1999 19,820 1,363 83 21,266 6.4%

1998 18,527 1,386 77 19,990 -1.0%

1997 18,690 1,424 75 20,189 -0.2%

1996 18,727 1,439 71 20,237 3.3%

1995 17,998 1,510 92 19,600 0.7%

1994 17,774 1,618 69 19,461 -0.9%

1993 17,885 1,678 68 19,631 -0.2%

1992 17,870 1,736 67 19,673 -0.3%

1991 17,745 1,928 67 19,740 -8.0%

1990 19,406 1,988 66 21,460 0.2%

1989 19,388 1,955 66 21,409 1.6%

1988 19,122 1,886 64 21,072 2.1%

1987 18,743 1,832 63 20,638 -0.5%

1986 18,891 1,789 63 20,743 17.0%

1985 15,929 1,744 59 17,732 9.2%

1984 14,440 1,744 56 16,240 3.4%

1983 13,993 1,657 55 15,705 1.5%

1982 13,782 1,632 55 15,469 1.8%

1981 13,516 1,616 57 15,189 -0.2%

1980 13,575 1,599 53 15,227 2.7%

1975 11,723 1,578 48 13,349 -0.2%

1970 11,784 1,659 41 13,484 0.1%

1965 11,884 1,484 33 13,401 2.9%

1960 10,113 1,463 31 11,607 4.2%

1950 6,647 1,057 19 7,723 n/a

Unit: ‘000 tonnes

The Fiber Year 2007 / 08 73 Production of Manmade Fibers

Year Cellulosics * Synthetics TOTAL

2007 3,712 9.1% 40,374 7.9% 44,086 8.0%

2006 3,404 4.7% 37,413 3.1% 40,817 3.2%

2005 3,251 0.9% 36,296 6.0% 39,547 5.6%

2004 3,221 9.0% 34,243 6.1% 37,464 6.3%

2003 2,955 6.2% 32,275 5.2% 35,230 5.2%

2002 2,783 4.6% 30,694 6.1% 33,477 6.0%

2001 2,661 -3.5% 28,934 1.9% 31,595 1.4%

2000 2,758 6.9% 28,389 5.8% 31,147 5.9%

1999 2,579 -7.1% 26,821 5.1% 29,400 3.9%

1998 2,775 -3.6% 25,521 3.6% 28,296 2.8%

1997 2,879 0.3% 24,644 13.0% 27,523 11.5%

1996 2,870 -3.5% 21,810 5.8% 24,680 4.6%

1995 2,973 4.9% 20,621 4.3% 23,594 4.3%

1994 2,834 3.3% 19,779 9.7% 22,613 8.9%

1993 2,743 -1.6% 18,022 1.9% 20,765 1.4%

1992 2,788 -4.7% 17,693 5.2% 20,481 3.8%

1991 2,924 -8.3% 16,814 3.8% 19,738 1.8%

1990 3,189 -4.6% 16,191 3.8% 19,380 2.3%

1989 3,342 -0.9% 15,602 2.8% 18,944 2.2%

1988 3,371 2.6% 15,172 4.1% 18,543 3.8%

1987 3,286 1.4% 14,578 6.8% 17,864 5.8%

1986 3,241 0.2% 13,645 4.8% 16,886 3.9%

1985 3,234 -4.5% 13,025 5.2% 16,259 3.1%

1984 3,387 2.3% 12,377 7.3% 15,764 6.2%

1983 3,310 3.6% 11,540 10.9% 14,850 9.2%

1982 3,194 -7.8% 10,403 -6.8% 13,597 -7.1%

1981 3,464 -1.6% 11,167 3.6% 14,631 2.3%

1980 3,522 1.8% 10,779 7.7% 14,301 6.0%

1975 3,216 -2.2% 7,461 9.2% 10,677 4.9%

1970 3,585 1.0% 4,809 18.7% 8,394 8.9%

1965 3,446 5.3% 2,040 23.7% 5,486 10.3%

1960 2,664 5.2% 703 58.6% 3,367 14.9%

1950 1.611 n/a 70 n/a 1.681 n/a

Unit: ‘000 tonnes * since 2002 with Tencel® included

74 The Fiber Year 2007/ 08 Global Fiber Consumption

Year Cotton Wool Synthetics Cellulosics TOTAL

1960 68% 10% 5% 18% 14,974

1970 54% 8% 22% 16% 21,878

1975 49% 7% 31% 13% 24,026

1980 46% 5% 37% 12% 29,528

1985 47% 5% 38% 10% 33,991

1986 50% 5% 36% 9% 37,629

1987 49% 5% 38% 9% 38,502

1988 48% 5% 38% 9% 39,615

1989 48% 5% 39% 8% 40,353

1990 48% 5% 40% 8% 40,840

1991 45% 5% 43% 7% 39,478

1992 45% 4% 44% 7% 40,154

1993 44% 4% 45% 7% 40,396

1994 42% 4% 47% 7% 42,074

1995 42% 3% 48% 7% 43,194

1996 42% 3% 49% 6% 44,917

1997 39% 3% 52% 6% 47,712

1998 38% 3% 53% 6% 48,286

1999 39% 3% 53% 5% 50,666

2000 38% 3% 54% 5% 52,643

2001 38% 2% 54% 5% 53,536

2002 38% 2% 55% 5% 56,238

2003 37% 2% 56% 5% 57,902

2004 38% 2% 55% 5% 62,469

2005 38% 2% 55% 5% 66,150

2006 39% 2% 54% 5% 68,674

2007 37% 2% 56% 5% 72,588

Unit: ‘000 tonnes

The Fiber Year 2007 / 08 75 Production of Manmade Fibers

Cellulosics * Synthetics

Year Filament Staple TOTAL Filament Staple TOTAL

2007 440 3,273 3,712 23,848 16,526 40,374

2006 442 2,962 3,404 21,646 15,767 37,413

2005 456 2,795 3,251 20,876 15,420 36,296

2004 483 2,738 3,221 19,639 14,604 34,243

2003 476 2,479 2,955 18,393 13,882 32,275

2002 463 2,320 2,783 17,368 13,326 30,694

2001 480 2,181 2,661 16,334 12,600 28,934

2000 533 2,225 2,758 15,995 12,394 28,389

1999 527 2,052 2,579 15,040 11,781 26,821

1998 581 2,194 2,775 14,141 11,380 25,521

1997 611 2,268 2,879 13,235 11,409 24,644

1996 640 2,230 2,870 11,594 10,216 21,810

1995 654 2,319 2,973 10,903 9,718 20,621

1994 630 2,204 2,834 9,957 9,822 19,779

1993 652 2,091 2,743 8,925 9,097 18,022

1992 695 2,093 2,788 8,577 9,116 17,693

1991 759 2,165 2,924 8,025 8,789 16,814

1990 837 2,352 3,189 7,637 8,554 16,191

1989 927 2,415 3,342 7,156 8,446 15,602

1988 950 2,421 3,371 6,855 8,317 15,172

1987 915 2,371 3,286 6,436 8,142 14,578

1986 934 2,307 3,241 6,026 7,619 13,645

1985 933 2,301 3,234 5,792 7,233 13,025

1984 959 2,428 3,387 5,444 6,933 12,377

1983 983 2,327 3,310 5,065 6,475 11,540

1982 967 2,227 3,194 4,612 5,791 10,403

1981 1,053 2,411 3,464 4,986 6,181 11,167

1980 1,130 2,392 3,522 4,854 5,925 10,779

1975 1,148 2,068 3,216 3,790 3,671 7,461

1970 1,391 2,194 3,585 2,398 2,411 4,809

1965 1,372 2,074 3,446 1,124 916 2,040

1960 1,131 1,533 2,664 417 286 703

1950 872 739 1,611 54 16 70

Unit: ‘000 tonnes * since 2002 with Tencel® included

76 The Fiber Year 2007/ 08 World Production of Synthetic Fibers

Year Polyester Polyamide Acrylics Others TOTAL

1970 34% 40% 21% 5% 4,809

1975 45% 33% 19% 3% 7,461

1980 47% 30% 19% 4% 10,779

1985 50% 26% 18% 6% 13,025

1986 50% 26% 18% 6% 13,645

1987 52% 25% 17% 6% 14,578

1988 53% 25% 16% 6% 15,172

1989 54% 24% 15% 7% 15,602

1990 53% 24% 14% 9% 16,191

1991 54% 22% 14% 10% 16,814

1992 56% 21% 13% 10% 17,693

1993 57% 20% 13% 10% 18,022

1994 58% 18% 13% 11% 19,779

1995 60% 19% 12% 9% 20,621

1996 61% 18% 12% 9% 21,810

1997 63% 16% 11% 10% 24,644

1998 65% 15% 10% 10% 25,521

1999 66% 15% 9% 10% 26,821

2000 66% 14% 9% 11% 28,389

2001 67% 13% 9% 11% 28,934

2002 68% 13% 9% 10% 30,694

2003 69% 12% 8% 10% 32,275

2004 70% 12% 8% 10% 34,243

2005 72% 11% 7% 9% 36,296

2006 73% 11% 7% 9% 37,413

2007 76% 10% 6% 8% 40,374

Unit: ‘000 tonnes

The Fiber Year 2007 / 08 77 Production of Manmade Fibers

mill. tonnes 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

PR China 5.2 5.8 6.7 8.2 9.9 11.7 13.7 17.3 19.3 22.7

USA 4.3 4.1 4.2 3.6 3.8 3.8 3.7 3.4 3.1 3.0

India 1.6 1.8 1.9 1.9 2.0 2.0 2.2 2.2 2.5 2.8

Taiwan 3.3 3.1 3.2 3.1 3.2 3.2 3.2 2.8 2.6 2.6

South Korea 2.5 2.7 2.8 2.4 2.3 2.2 2.1 1.7 1.5 1.5

Indonesia 1.1 1.2 1.4 1.5 1.4 1.3 1.2 1.2 1.2 1.2

Japan 1.7 1.5 1.5 1.5 1.3 1.2 1.2 1.2 1.1 1.1

SUBTOTAL 19.7 20.3 21.7 22.1 23.9 25.5 27.3 29.7 31.4 34.9

ROW 8.6 9.1 9.4 9.5 9.6 9.7 10.2 9.9 9.4 9.1

TOTAL 28.3 29.4 31.1 31.6 33.5 35.2 37.5 39.5 40.8 44.1

mill. tonnes 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

PES FY 9.4 10.1 10.7 11.2 12.0 12.9 13.8 15.3 16.0 18.3

PES SF 7.0 7.6 8.1 8.3 8.8 9.4 10.1 11.0 11.5 12.4

PA FY 3.4 3.4 3.6 3.3 3.5 3.5 3.7 3.6 3.6 3.6

PA SF 0.6 0.5 0.5 0.4 0.5 0.5 0.4 0.4 0.4 0.4

PP 2.5 2.6 2.8 2.9 3.0 3.0 3.1 3.0 3.0 2.9

PAN 2.5 2.5 2.6 2.6 2.7 2.7 2.7 2.6 2.5 2.4

Cellulosics * 2.8 2.6 2.8 2.7 2.8 3.0 3.2 3.2 3.4 3.7

Others 0.2 0.2 0.2 0.3 0.3 0.3 0.4 0.4 0.4 0.5

TOTAL 28.3 29.4 31.1 31.6 33.5 35.2 37.5 39.5 40.8 44.1

* since 2002 with Tencel® included

78 The Fiber Year 2007/ 08 Top 3 Producing Countries

PES FY 2007 share 2005 share 2000 share 1995 share

PR China 12,117 66.4% 8,903 58.3% 3,152 29.5% 1,022 15.7%

India 1,393 7.6% 1,039 6.8% 829 7.8% 344 5.3%

Taiwan 1,223 6.7% 1,275 8.4% 1,525 14.3% 1,225 18.8%

SUBTOTAL 14,733 80.7% 11,217 73.5% 5,506 51.6% 2,591 39.8%

PES SF 2007 share 2005 share 2000 share 1995 share

PR China 7,000 56.4% 5,509 50.1% 1,815 22.5% 922 16.5%

India 869 7.0% 615 5.6% 561 7.0% 230 4.1%

USA 782 6.3% 916 8.3% 1,041 12.9% 1,039 18.6%

SUBTOTAL 8,651 69.7% 7,040 64.0% 3,417 42.4% 2,191 39.2%

PA FY 2007 share 2005 share 2000 share 1995 share

PR China 905 24.9% 679 19.0% 333 9.3% 252 8.0%

USA 738 20.3% 811 22.7% 851 23.8% 830 26.2%

Taiwan 454 12.5% 466 13.0% 421 11.8% 294 9.3%

SUBTOTAL 2,097 57.7% 1,956 54.7% 1,605 44.9% 1,376 43.5%

PAN SF 2007 share 2005 share 2000 share 1995 share

PR China 822 34.6% 784 30.1% 475 18.5% 234 9.7%

W. Europe * 677 28.5% 767 29.5% 780 30.4% 883 36.4%

Japan 236 9.9% 261 10.0% 377 14.7% 374 15.4%

SUBTOTAL 1,735 73.0% 1,812 69.6% 1,632 63.6% 1,491 61.5%

Unit: ‘000 tonnes * Turkey included

The Fiber Year 2007 / 08 79 Manmade Fiber Industry

Polyester Textile Yarn Industrial Yarn Staple Fiber TOTAL

2007 2006 2007 2006 2007 2006 2007 2006

Europe 463 472 232 240 738 698 1,433 1,410

NAFTA 327 346 165 181 815 877 1,307 1,404

South America 115 111 24 22 174 143 313 276

PR China 11,825 9,719 352 253 7,000 6,164 19,177 16,136

India 1,392 1,209 2 1 869 752 2,263 1,962

Japan 179 186 83 84 204 213 466 483

Korea 524 551 185 180 556 536 1,265 1,267

Taiwan 1,155 1,124 69 61 570 633 1,794 1,818

ROW 1,113 1,211 49 45 1,490 1,452 2,652 2,708

SUBTOTAL 17,093 14,929 1,161 1,067 12,416 11,468 30,670 27,464

Polyamide Textile Yarn Industrial Yarn Carpet Yarn TOTAL

2007 2006 2007 2006 2007 2006 2007 2006

Europe 235 235 232 241 181 187 648 663

NAFTA 75 85 136 134 706 761 917 980

South America 55 58 40 45 1 1 96 104

PR China 485 413 395 350 25 23 905 786

India 27 34 68 55 0 0 95 89

Japan 44 47 65 64 8 7 117 118

Korea 105 86 60 58 6 6 171 150

Taiwan 414 384 70 65 0 0 484 449

ROW 83 189 103 91 14 17 200 297 Unit: ‘000 tonnes SUBTOTAL 1,523 1,531 1,169 1,103 940 1,002 3,632 3,636

Unit: ‘000 tonnes

80 The Fiber Year 2007/ 08 Manmade Fiber Industry

Staple Fiber Acrylics Polyamide Cellulosics TOTAL

2007 2006 2007 2006 2007 2006 2007 2006

Europe 763 863 94 97 654 661 1,511 1,621

NAFTA 66 66 195 234 276 276 537 576

South America 67 65 2 2 66 60 135 127

PR China 822 816 45 42 1,300 1,110 2,167 1,968

India 79 102 0 0 276 244 355 346

Japan 236 243 5 6 129 119 370 368

Korea 52 47 0 0 8 8 60 55

Taiwan 137 149 11 11 136 132 284 292

ROW 161 159 1 1 423 352 585 512

SUBTOTAL 2,383 2,510 353 392 3,268 2,962 6,004 5,865

Unit: ‘000 tonnes

The Fiber Year 2007 / 08 81 Global Yarn Production

Yarn 2007 share 2005 share 2000 share 1995 share

Filament 24,288 38.3% 21,332 36.9% 16,528 36.0% 11,557 30.9%

Spun 39,208 61.7% 36,424 63.1% 29,368 64.0% 25,895 69.1%

TOTAL 63,496 57,756 45,896 37,452

Unit: ‘000 tonnes

Dynamics in Yarn Production

Yarn 2007 AAGR 2005 AAGR 2000 AAGR 1995 AAGR

Filament 24,288 6.7% 21,332 5.2% 16,528 7.4% 11,557 6.4%

Spun 39,208 3.8% 36,424 4.4% 29,368 2.5% 25,895 -0.6%

TOTAL 63,496 4.9% 57,756 4.7% 45,896 4.2% 37,452 1.2%

Unit: ‘000 tonnes

Fiber Types in Spun Yarn Production

Yarn 2007 AAGR 2005 AAGR 2000 AAGR 1995 AAGR

Cotton 23,193 3.7% 21,562 4.7% 17,109 2.2% 15,345 -1.5%

Polyester 10,124 6.2% 8,979 6.4% 6,573 7.3% 4,629 3.7%

Acrylics 2,259 -4.5% 2,475 0.4% 2,440 1.9% 2,225 0.6%

Cellulosics 2,082 8.2% 1,780 4.6% 1,417 -1.7% 1,545 -1.4%

Wool 1,086 -0.1% 1,089 -1.7% 1,185 -4.1% 1,460 -5.4%

Others 464 -7.2% 539 -3.4% 644 -1.4% 691 2.8%

TOTAL 39,208 3.8% 36,424 4.4% 29,368 2.5% 25,895 -0.6%

Unit: ‘000 tonnes

82 The Fiber Year 2007/ 08 Imprint

Oerlikon Textile GmbH & Co. KG Leverkuser Strasse 65 42897 Remscheid Germany www.oerlikontextile.com

Editor and responsible for content Andreas Engelhardt Tel. + 41 - 71 - 447 51 89

Editors Andreas Engelhardt

D e s i g n & L a y o u t mo' advertising, devoti & künne gbr www.devoti-kuenne.com www.oerlikontextile.com