Oil should pull resin and PP, polyester fiber costs up heading toward 2018 Uncertainty is the most persistent problem faced by nonwovens supply chain managers as they consider raw materials cost trends, but they may be about to get a dose of the most unpleasant kind of certainty: a rising trend in costs. A study just published by Nonwovens Markets owner RISI Inc. says energy costs are likely to turn upward next year and rise at an accelerated rate in 2018, pulling resin prices and some staple fiber costs up with them.

Nonwovens Raw Materials Cost Outlook predicts a relatively modest up-trend in energy costs next year, with West Texas Intermediate crude averaging 14% higher in 2017 than in 2016. But then in 2018, with world economies on the mend, the recent under-investment in new energy capacity, coinciding with rising demand, should cause crude oil prices in particular to spike.

Nonwovens costs will be affected. As that jump in underlying costs flows through the supply chain, the petrochemical complex will see higher prices in every sector. Polypropylene and polyester will be affected, just as much as other products, in the view of study authors Rod Young, RISI's Chief Economic Advisor, and David Allan, Editor, Nonwovens. As a result, prices for both PP and polyester staple fiber and resin will trend up at that time.

The study examines the major raw materials used to produce nonwovens: polyester, polypropylene, viscose, fluff pulp and cotton. Looking at the structure and supply/demand trends in each market, as well as the competition among materials, the study forecasts price benchmarks for these key materials by quarter through 2018.

Much of the forecast is based on the company's views of the evolution of GDP in different regions of the world, as well as currency trends and energy prices.

Numbers from INDA and EDANA show the global nonwovens industry in 2014 consumed 9.7 million tonnes of resin and staple fiber, with PP and polyester being by far the largest in volume terms. Prices for both are influenced by the internal dynamics of these markets, including under- or over-investment in processing capacity at various stages of the supply chain, competition with other materials for customers, and changes in product parameters required by customers.

Spike in cotton. The spike in world cotton prices early in this decade sent ripples through markets for polyester fiber as well as smaller-volumesectors such as viscose, which have only recently begun to settle down as the Chinese government, with its colossal overstock position, has demonstrated the ability to manage its inventories down slowly.

Other recent dynamics affecting markets for raw materials used to manufacture nonwovens have included the rise of shale gas, dramatic new investments in propane dehydrogenation capacity in several areas of the world, and speculative investments in many petrochemical technologies – at a time when upstream investments in oil and gas were being shelved because of weak pricing. It is this conflict between investments downstream and under-investment upstream that, together with an expected rebound in demand as economic activity picks up, is likely to cause industry executives to start losing sleep in the next couple of years.

To learn more about this study, see: www.risi.com/nonwovenstudy.