InterviewMan-made fibres can gain market share – Lenzing CEO

07 October 2011 15:28  [Source: ICIS news]

High cotton prices, as well as a greater emphasis on sustainability, offer numerous opportunities for man-made fibre producers in the years ahead, Austria-headquartered viscose fibre producer LenzingLONDON (ICIS)--High cotton prices, as well as a greater emphasis on sustainability, offer numerous opportunities for man-made fibre producers in the years ahead, Austria-headquartered viscose fibre producer Lenzing said on Friday.

Population growth and increased incomes, particularly in emerging economies such as China and India, are exacerbating the so-called “cellulose gap” – where demand for fibres is far exceeding supply. The cotton market is coming under greater pressure, and prices have rocketed because of a weak harvest and increased competition for land. Cellulosic fibres may therefore stand to benefit in the future, Lenzing CEO Peter Untersperger said.

Man-made cellulose fibres like viscose compete in some high-end uses with cotton. Standard viscose – and its speciality fibres Modal and Tencel – represent about 90% of Lenzing’s business.

Viscose has some technical advantages over cotton, such as a uniform fibre length, and boasts different properties. Viscose, Modal and Tencel have various applications in clothing, furnishings and the automotive and medical sectors.

Cotton is a large-volume fibre and almost six times the size of the viscose market, amounting to a third of the overall fibres supply – some 25m tonnes/year. Viscose currently represents just 4m tonnes/year, Untersperger said.

Viscose fibres have traditionally held a 15–20% price premium over cotton. However, Untersperger said Lenzing was not anticipating cotton prices to return to low levels, largely because of land scarcity. He suggested cotton prices would be around 125 cents/lb ($2,750/tonne, €2,040/tonne) over the next decade, making the viscose range of 120–130 cents/lb even more viable.

“Cotton is a good fibre, but it’s an environmental disaster. It uses 20–25 times more water than viscose fibres and needs four times the high-grade arable land, so we expect that there will be a big fight between cotton and the agro-products like wheat, corn and maize,” added Untersperger.

“At the end of the day we don’t expect cotton to keep pace with demand, and whatever is missing from the supply side, it’s up to man-made cellulose fibres to take it on,” he said. “We have programs where we carve out small market shares. If we just carve out 2% of the cotton market, that means 500,000 tonnes/year, which is huge.”

Strong sales saw Lenzing’s net income for the second quarter of 2011 climb by 16%, to €78m ($105m) compared with the first quarter.

($1 = €0.74)

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By: Andy Brice
+44 20 8652 3214



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