The balance in the market for the man-made fiber continues to tilt eastward. China is the main producer and consumer
Demand for nylon is recovering from the global economic downturn, but the cost differential with competing polymers continues to suppress growth, particularly in the market for nylon fibers, which is steadily shifting toward Asia.
The trend is decades old, says Darrel Collier, business manager at Tecnon OrbiChem, a UK-based petrochemicals consultancy. In 1980, nylon accounted for more than 10% of global fiber production, but by 2000, nylon's share had fallen to 7.4%, and by 2009 to only 5.4%.
At half the cost of nylon, polyester now dominates the market for synthetic fibers. However, Collier notes, nylon fiber remains strong in certain technical niches. "If you look at airbags in cars - nylon can handle the heat of explosion, but polyester cannot," he says. Tire cord and mechanical rubber goods are other nylon strongholds. Nylon is preferred over polyester in women's hosiery and intimate apparel, as well, because of its smooth feel and the fine deniers, dark colors and durable textures that can be obtained.
Fortunately, demand for fibers has expanded so rapidly over the same period that nylon has lost no ground in absolute terms. From 3m tonnes in 1980, global production of nylon fiber grew to 3.7m tonnes in 2009, and Tecnon OrbiChem projects that it will continue growing at just under 2%/year to 4.4m tonnes in 2020. Additionally, nylon's displacement by polyester is unlikely to proceed much further anytime soon.
However, the geographic distribution of both demand and production has changed significantly, and the trend will continue. Nylon filament yarn production in North America has fallen at an average rate of 5.2%/year since 2005, says Tecnon Orbichem. The decline has been slower in Europe, just 2.5%/year.
CHINA: CENTER OF GRAVITY
The largest textile-producing, consuming, and exporting country in the world - China - has been taking up the slack. In 2009, the country produced 1.4m tonnes of nylon filament yarn, according to data from the Taiwan Man-Made Fiber Industries Association (TMMFA).
"People have been saying that the nylon industry is a sunset industry for the past 20 years, but look at China - they are huge on nylon now," observes a Taiwan-based producer of nylon chips.
Downstream demand growth for nylon is gradually concentrating in China. "China will be the only location where any meaningful capacity additions can occur," says an Asian nylon chips producer.
Industry veterans estimate that nylon demand in China will grow in line with the country's GDP, possibly more than 10%/year over the next two to three years. Tecnon Orbichem projects that production of nylon 6 fiber in China will grow at about 8%/year over the next decade, while nylon 6,6 will hold steady.
China is not only the largest producer of nylon filament yarn in the world, it also imports more than any other country - 24% of the global total, says Tecnon Orbichem. However, that share is likely to fall as domestic capacity builds, and Taiwan - a major supplier to the mainland market - may have to find other customers.
The third-largest producer of nylon filament yarn in the world is Taiwan, accounting for 11% of world production, says the TMMFA. It is the leading exporter, responsible for 20% of the global total, according to Tecnon OrbiChem, which estimates that more than 80% of this volume is destined for China.
With China dominating the global nylon textile market both as producer and consumer, some industry participants express concern that Taiwan's nylon industry cannot carry on "business as usual," and that it may require a fundamental change in outlook.
Other sources take a more bullish position. They note that China relies heavily on Taiwan's production capacity, currently importing more than 70% of the nylon chips consumed by its domestic nylon yarn market. Also, labor contributes very little to the cost of producing fiber.
"People have been saying that the nylon industry is a sunset industry for the past 20 years, but look at China"
Taiwan-based producer of nylon chips
Indeed, the major nylon chips maker in the region, Li Peng Enterprise, in Changhua, Taiwan, completed the expansion of its nylon chips capacity from 800 tonnes/day to 1,000 tonnes/day in February this year, bringing its production to around 400,000 tonnes/year.
"Taiwan has always been the technology leader in this field," says a company source, "and we will still have a slight advantage over the next two to three years."
VIETNAM TO TAKE A SLICE OF THE
Taiwanese producers are nonetheless developing new markets. Vietnam, for example, is becoming an important outlet for Taiwan's synthetic fiber exports. China remains by far the main market for Taiwan's synthetic fibers, but in recent years Taiwanese textile manufacturers have invested increasing amounts in setting up or expanding their operations in Vietnam.
Taiwan's Formosa Chemicals & Fibre Corp. has new nylon chips and textile yarn lines that are expected to come on stream at the end of the year, a source close to the company says. Utilizing the Uhde Inventa-Fischer technology, the company's nylon chips and textile yarn lines will have a capacity of 5,000 tonnes/month and 4,000 tonnes/month, respectively, according to the Li Peng Enterprise source.
The transfer of Formosa's textile production operations from Taiwan to its Nhon Trach textile complex in Dong Nai Province, Vietnam, is aimed at taking advantage of the country's lower labor costs, he explains.
"We can also be in a more competitive position [in the future]," he says, noting that there is no need to pay anti-dumping duties (ADD) when exporting from Vietnam to China. By contrast, most major Taiwan-based nylon chips producers must pay an ADD rate of 4-4.3% when they export to China.
Additional reporting by Clay Boswell in New York.
Junie Lin is an ICIS pricing markets editor in Singapore, covering the Asian markets for nylon, caprolactam (capro), methyl methacrylate (MMA) and polymethyl methacrylate (PMMA). She holds a bachelor's degree in chemical engineering.