As the first quarter 2022 ends, the world is beginning to experience some reduction in Covid-19 cases and its variants while isolated spikes continue to arise. At the same time, the world is left with Covid impacts on world economics explicitly in supply chain disruptions and high inflation. Still further, the invasion of Ukraine by Russia creates short- and long-term impacts on global trade and economics. Against this backdrop, the global spunbonded and spunmelt polypropylene business continues to expand alongside market corrections and volatility in nearly all global markets.

The impact of Covid on the global spunlaid polypropylene nonwoven market in 2020 was dramatic, and it was followed by a market correction which lowered demand in the second half of 2021 as Covid subsided. Just as supply chain disruptions and Covid-related surge demand began to normalize in early 2022, Russia invaded Ukraine bringing concern to the global population. This added impetus to smoldering inflation and other latent threats to the global economic system. Russia’s action will impact energy, raw materials, and global economics for some time.

The global spunbonded/spunmelt polypropylene market now faces a period of both opportunities and challenges. In addition to the near-term economic disruptions caused by Russia’s invasion of Ukraine, falling birthrates across most global regions, mounting inflation, rising interest rates, and simmering geopolitical tensions could result in further downward pressure on global demand. Remarkable progress has and continues to be made to adopt sustainable raw materials in the manufacture of nonwovens, but this may face headwinds as societies address war and economic concerns over environmental care. While there are uncertainties, the industry is resilient and able to successfully react to challenges and needs as witnessed during the onset and tenure of the Covid crisis.

Global Capacity/Demand

In 2022, rising capacity is entering the market brought about by the installation of new highly advanced technology and reaction to Covid surge demand. We estimate that about 159,000 tons of new capacity were commissioned in 2021, much of which was Reicofil 5 technology. This capacity, ordered in advance of the pandemic, quickly achieved full capacity utilization. We estimate that about 192,000 tons of new capacity will be commissioned in 2022 bringing capacity to about 5,308.8 kilotons. Much of this capacity was ordered in late 2020 as Covid infections raged. Some of this capacity, which may have otherwise been commissioned in 2021, faced delays in being commissioned due to supply chain disruptions, travel restrictions hindering technicians to make installations and the sheer volume of new equipment ordered awaiting to be installed.

In 2023, we estimate another 128,000 tons of new capacity will be commissioned. In total, we judge that about 502,000 tons of spunlaid capacity will be commissioned during the period 2021 - 2025. This would represent an increase in capacity of just over 10% over that present in 2020.

The spunlaid polypropylene nonwoven business has made great strides in developing new, highly productive, and reliable manufacturing technology and a variety of product innovations attractive to end-use consumers. Producers of this technology around the world continue to install the most modern generation of technology to gain product and productivity benefits, notwithstanding the impact that these large increments of new capacity have on market capacity utilization.

Demand began to decline in late third quarter 2021 and more sharply in fourth quarter 2021. We expect demand to continue to decline moderately through 2022 as compared to that in 2021. We expect demand and year-over-year growth to normalize in 2023 and return to being driven by normal demand drivers. In that context, we expect that low birth rates in nearly all global regions will weigh on baby diaper demand. We expect year-over-year annual adult incontinence demand growth to range from 5-6% during the period.

At present, we expect average annual global demand growth in tonnes from 2021 - 2026 to be around 5% annually. This outlook is sensitive to macroeconomic factors, disease shocks and global unrest. Demand growth will be the highest in Southern Asia (India) and Africa followed by that in Asia-Pacific and China. Demand growth will be more moderate in North & South America, Greater Europe, and the Middle East.

Oversupply can be expected to arise in selective global regions by 2024 as the full effect of new capacity becomes fully present in the market. Offsetting this increase in capacity will be the likely shutdown of earlier generation technology recommissioned during the pandemic surge. As is always the case, new capacity will be operated in favor of older generation technology. Raw material costs will remain volatile and disproportionate among regions. In general, we expect raw material costs to favor the upside.

Against this backdrop, we think investment in plant and equipment could slow once the next round of investment occurs in 2024 due to uncertainty and rising investment costs. This expectation could be impacted by the decommissioning of earlier generation capacity. We also expect that upgrades to existing capacity may occur to enhance the capability of existing machines.