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Synthetic fibre sector revenue to fall 1.2% in 2013
23
Oct '13
The Synthetic Fiber Manufacturing industry, which supplies fiber made from using petrochemicals to producers of apparel, plastics and other consumer goods, has endured considerable challenges in the five years to 2013. Purchases of synthetic fibers, which are inputs for products such as clothing and home furnishings, dropped as Americans drastically reduced spending on nonessential items during the recession.

According to IBISWorld Industry Analyst Leah Goddard, “As consumer spending started to regain momentum in 2010, downstream manufacturers increased production and thus purchases of synthetic fibers, allowing the Synthetic Fiber Manufacturing industry to achieve dramatic revenue growth that more than offset the previous drop.” Consequently, over the five years to 2013, revenue is anticipated to increase at an annualized rate of 1.9% to $8.5 billion.

Before the economic downturn, the Synthetic Fiber Manufacturing industry was already contracting due to its dependence on a declining consumer base as US apparel, carpet and textile mills gradually moved offshore. When the recession started in 2008 and continued into 2009, the dramatic reduction in demand from these downstream industries caused revenue to drop 14.4% in 2008 and 26.8% in 2009.

Profit also declined as input prices spiked for raw materials such as oil and wood pulp, increasing costs. “Although industry revenue grew 32.3% in 2010 and 12.2% in 2011, this growth has less to do with industry expansion and more to do with the rise in housing starts and disposable income levels, which drive demand for home furnishings and other consumer products,” says Goddard. Thus, revenue is expected to slow in the latter part of the five-year period due to decelerating production in downstream industries and rising input costs. As a result, IBISWorld estimates industry revenue to fall 1.2% in 2013.

Over the five years to 2018, the industry will stay fairly stable. Demand from carpet mills and plastics and rubber products manufacturers will modestly increase, offsetting declining demand from apparel manufacturers.

While some synthetic fiber manufacturers will offshore operations to countries with cheaper labor costs and less rigorous regulations, others plan to expand production in the United States. Exports will maintain their current share of industry revenue, and imports will retain their current portion of domestic demand. For these reasons, the Synthetic Fiber Manufacturing industry's revenue is projected to stay fairly steady in the five years to 2018.

IBIS World


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