Carpet Fiber Market Update: Raw material volatility returns to the market - March 2017

By Darius Helm

Following two years of low oil and a fairly stable synthetic fiber market, conditions grew much more dynamic toward the end of last year, when OPEC along with some other major oil exporters-most notably, Russia-agreed to production cuts. The impact on prices for benzene and other key fossil fuel derivates, coupled with other developments in the market, like Asian butadiene instability, have driven up carpet face fiber costs substantially.

In December, U.S. carpet mills announced price increases of 3% to 5%, to be rolled out in stages starting last month. However, the announcements came before the bulk of raw material escalation, and it looks like those increases may not be sufficient. There’s already talk of a new round of increases this summer.

Low oil has been a boon for carpet mills, which have seen carpet volumes dropping, and average residential carpet prices dropping even faster. The lower raw material costs have at least offered healthier margins. But now that those costs are climbing, mills are feeling the heat.

In terms of crude oil, prices had been kept artificially low for two years or so because OPEC countries, along with Russia, were deliberately over-producing to keep the cost of crude higher than the $40 break-even point for North American shale oil. Shale oil costs more to refine that Saudi crude, so this was an effort to break the back of U.S. producers in response to huge domestic investments, most notably in the Bakken region, which had helped North Dakota develop just about the strongest economy in the U.S. And in many ways it worked. Crude oil fell from over $100 a barrel down to less than $30. Drilling in the Bakken eventually came to a standstill. The oil boom stalled out. Along the way, the move took out an already weakened Venezuela, whose oil also has a higher break-even.

Last November, OPEC members, along with non-OPEC countries like Russia, hammered out an agreement to reduce production in order to bolster prices. And the move has helped drive prices up 20% to over $55 a barrel. And since the U.S. is not part of the deal, it has been increasing its output to take advantage of the rising prices. However, that agreement is starting to look more fragile. For one thing, increased U.S. production counteracts these efforts to reduce the global glut and threatens to stall the rising crude oil prices, making the agreement ineffective. If prices don’t rise, the deal may fall apart.

Meanwhile, nylon prices have been rising faster than PET prices, despite some limitations in capacity for paraxylene, a PET precursor. This has opened up the delta between the two fiber systems and, if protracted, could accelerate the shift from nylon to PET-though a lot of that depends on how nylon carpet producers respond, as well as consumer preferences. A precursor for caprolactam, benzene jumped 20% from November to January, pushing up nylon 6 prices by similar amounts and also impacting nylon 6,6. And butadiene, a precursor for nylon 6,6, has recently skyrocketed in Asia. Butadiene’s price, on the demand side, is driven by tire sales, and China has been using tax incentives to increase small vehicle sales in its 28-million-car market, the largest in the world. The good news is that butadiene is likely to come down this year, both because of production coming back online and likely reduced demand in China, where the auto incentives are being scaled back.

CARPET FIBER CHALLENGES
Last year, carpet U.S. carpet shipments were down marginally in volume and down over 2% in value-value fell further largely because of growth in low-end residential carpet, led by PET products. While PET does not have the performance attributes to compete in the contract commercial arena, it’s likely to make huge gains in mainstreet commercial in the years to come. In mainstreet, there’s a lot of carpet made of polypropylene, a fiber that in some ways is inferior to PET-for instance, it has a lower melting point and it is naturally more oleophilic, which translates to more soiling, if the fiber is untreated.

It’s worth noting that carpet fiber is under more pressure than carpet itself because of reduced fiber use per square yard. Much of that is due to the shift from broadloom to carpet tile in the commercial market-carpet tile has lighter face weights.

Carpet is not only struggling with the commoditization of lower end PET products, but it’s steadily losing marketshare to hard surface flooring, a trend that shows no signs of slowing.

Over the last few years, the carpet industry has worked hard to combat the movement toward lower priced product. Its first attempt, with the ultra-soft fibers that hit the market five years ago, ended up falling short. The second wave came in the form of higher performance solution-dyed nylons and specialized backings targeting households with pets, led by Stainmaster’s PetProtect program. By most accounts, that effort has paid some dividends. Solution-dyed products have made large gains in the residential market, not just with PET, which is all solution-dyed, but with solution-dyed nylons. By some accounts, solution-dyed carpet has grown to a 30% share of residential carpet. On the commercial side, solution-dyed fiber dominates with a share of around 85%.

Most recently, there has been a drive to create better looking products, with more intricate fiber systems, like Pharr’s Opulence HD and Mohawk’s SmartStrand Silk Reserve, among others, and more patterned and textured goods. The trend is driving a lot of innovation and bulking up higher end offerings, though it’s too early to gauge its success.

PRODUCER HIGHLIGHTS
The big news at Aquafil, the Italian nylon 6 producer best known for its 100% recycled solution-dyed Econyl fiber, is the introduction of Econyl Natural, a white dyeable nylon 6 with the same recycled content story as regular Econyl-at least 50% post-consumer content and the balance from post-industrial content. The firm has made huge strides in its ability to process waste fiber. The key breakthroughs have taken place at the firm’s depolymerization plant in Slovenia, which can now eliminate 100% of contaminants, including pigments.

While solution-dyed fibers dominate the commercial sector and continue to gain marketshare in the residential sector, space-dyed and piece-dyed products have a strong niche-as do differential-dyed products. And the market has seen more printed product of late, a process that uses white dyeable fiber.

Econyl Natural also improves Aquafil’s position in the garment and swimwear market, where it has licensing agreements with dozens of brands, including Gucci, Adidas, Levi’s and Speedo-and more recently with Stella McCartney, with products likely to launch next year. In all, the firm has licensing contracts with 75 brands around the world.

Aquafil recaptures most of its nylon through reclaimed carpet and commercial fishnets. Those fishnets are coated in copper, which is antimicrobial and prevents fouling of the nets, accounting for up to 25% of the weight of the fishnet, according to the firm. A recently approved process allows Aquafil to use a system that yields a pure, high-value copper waste stream.

In other big news at Aquafil, the firm has signed a contract with the city of Cartersville, Georgia, where its U.S. fiber extrusion, carpet shearing and yarn processing facilities are located, to be supplied with 100% renewable energy. By the end of this month, pending completion of a dedicated substation, all of the energy used at the two Cartersville facilities will be renewable, mostly from wind and solar power.

Also, at the recent Domotex show in Germany, Aquafil introduced 900 denier Econyl metallic fiber. The firm reports that this fiber is an improvement over the metallics currently on the market because it doesn’t deteriorate through wear or washing. Rather, it comes with all the attributes of solution-dyed Econyl, including appearance retention, bleach resistance and color fastness. And with no weight restrictions, mills could theoretically make entire carpets from the metallic nylon 6 fibers.

Last year, Aquafil’s global business was on par with 2015, its strongest year to date, though U.S. business was down somewhat-largely due to a piece of business lost through carpet mill acquisitions. European business was fairly strong, but Asia-Pacific business was most robust.

Invista, which goes to the commercial market with its Antron brand and to the residential market with Stainmaster, makes all of its fibers from nylon 6,6. At Surfaces in January, the firm introduced Stainmaster LiveWell Carpet, which is designed to reduce allergen levels in the home. According to the firm, the product has been in R&D for more than four years. Carpet using the treated fiber should start hitting the market in the next quarter through products from Shaw and Dixie Home.

The topical treatment replaces the firm’s Lotus FX soil chemistry, which is used on its PetProtect fibers. The technology behind patent-pending LiveWell is Invista’s AllerShield, which yields an optimized formulation that ensures the treatment stays on the fiber and confers long-lasting effects.

Allergens fall to the floor as a matter of course. In hard surface flooring, they settle on the surface, wafting around and resettling whenever they’re disturbed. In traditional carpet, they get trapped by the fibers, which at least keeps them out of the air, but they can be hard to remove, even with vacuuming, according to Invista. However, what makes Stainmaster LiveWell different is that it inhibits the bonding of allergens to the carpet fibers. That means that allergens captured by the carpet fibers will fall to the base of the product, out of the currents of the room until they are vacuumed up.

The firm did a lot of testing, experimenting on everything from dust mites to pollens to cat and dog dander. And it reports that its studies concluded that every pass of the vacuum over Stainmaster LiveWell carpet was 90% more effective at releasing allergens than with regular Stainmaster.

Stainmaster LiveWell will launch as a premium product, focusing on groups like the National Floorcovering Alliance, many of whose members are also Stainmaster Flooring Centers, and the Shaw Flooring Network. But the firm thinks the market for this product is as big as PetProtect, so as it takes off, it will be expanded to more price points.

The firm is also continuing to build on its 997-denier Superia SD, which is the nylon 6,6 used in PetProtect. It added three residential colors last year-a taupe, a grey and a navy blue-taking its total color portfolio to 36, and is in the midst of developing new colors for release later this year.

Invista reports that demand for TruSoft, its 4 DPF product, flattened out in the years following its launch in 2012, with customers mostly shifting to its Luxerell fibers. Luxerell is in the 8 DPF to 10 DPF range. That’s about halfway between the original soft fibers from the turn of the century and the wave of ultra-soft fibers from a few years ago.

Universal Fibers, a major independent solution-dyed fiber producer headquartered in Bristol, Virginia, has spent a lot of the last decade growing its way across the globe. About ten years ago, having established business in the Asian market through its U.S. operations, it opened extrusion facilities in Thailand (2006) and China (2008). And a few years ago it expanded its European business, which had also been served directly from the U.S., through manufacturing partnerships in the U.K., first in Scotland and now in Wales at Abingdon Yarns, a division of Victoria Carpets, which finishes yarns to Universal’s specifications.

Now, Universal Fibers intends to start extruding product in Europe to service the market locally. The firm will begin retrofitting a brown field site in Poland, with the goal of starting production about a year from now. The initial phase will focus on extrusion for the commercial market, followed by extrusion for automotive. Like the Asian facilities, the Polish operation will extrude both nylon 6 and nylon 6,6.

Universal Fibers, which produces PET and PTT in addition to the nylons, does about 60% of its business in the commercial market, 30% in automotive and 10% in the residential market. In the last couple of years, the fastest growth has come from automotive, where revenues are growing by double digits. Commercial carpet fiber was relatively flat last year, both in the U.S. and globally. Increasing market demand for solution-dyed fiber, driven by carpet tile, has helped sustain revenues.

Another part of its growth strategy is diversification, with a focus on the residential market, augmenting the fiber programs of vertically integrated mills and developing fibers with specialized attributes in demand in that market. The development of higher end carpet programs in the residential sector has helped the firm grow residentially. The firm directs its PET capacity at the residential market, mostly with specialty and accent yarns, as it does with its PTT (triexta).

Last summer, Universal Fibers unveiled Thrive, its greenest nylon 6,6 to date, with 75% recycled content-65% post-industrial and 10% post-consumer. To back up its claim that Thrive is the greenest nylon 6,6 on the market with less than half the CO2 impact of traditional fiber, it developed a lifecycle assessment and then published a peer-reviewed environmental product declaration.

In September 2016, Marc Ammen, CEO of Universal Fiber Systems-which includes the Premier Fibers textile business and the Universal Fibers carpet business-was also named president. And Phil Harmon, an industry veteran with a 20-year background in fibers and chemistries, was named president of the carpet operation, Universal Fibers, a position vacated by Marc Ammen. In late 2015, the firm was acquired by H.I.G. Middle Market, which also owns Lexmark.

Pharr Yarns has one of the most sophisticated fiber operations, with a wide range of capabilities served from its facilities in North and South Carolina. Two years ago, Pharr acquired Phenix Flooring, and now about two thirds of its production goes into Phenix carpets, including PET that Pharr extrudes and solution-dyed Stainmaster PetProtect nylon 6,6, which comes to Pharr as a flat yarn that it then processes-along with Ascend’s Ombre white differential-dyeable nylon 6,6.

The firm no longer produces staple fiber, and it’s out of the wool business too. It has a substantial space-dyeing operation, recently updated with cutting-edge Belmont machinery that can run eight colors, and that business has been growing at a rapid pace.

A couple of years ago, after noting positive reactions to a fine denier PET out of India-the finer tips and higher definition drew crowds at Domotex in Germany-the firm started trialing the concept. Typical PET yarns are in the 1500 denier range with 7.5 DPF. The yarn system Pharr developed last year, Opulence HD, is a solution-dyed 1100 denier product with a higher bulk and a suede-like luster.

Phenix Flooring debuted the fiber at Surfaces 2017 in a range of patterned and textured styles. Anticipating demand, Pharr is focusing on scaling up its Opulence HD operation.

Pharr also does a lot of multicolored fibers, like barberpoles, for Phenix, and at Domotex 2017 it expanded its program to the rest of the market. It’s a refined, higher priced yarn system, which positions it well in the current market, where there’s growing competition for sophisticated, upscale looks. Pharr has a strong reputation for specialized yarn systems for innovative mills like Stanton Carpet, helping it achieve some of its most unique looks.

Ascend Performance Materials, which is headquartered in Houston, Texas, has production facilities in Texas, Alabama, Florida and South Carolina. The firm produces nylon 6,6 fiber for carpet, apparel, high-tech uses like parachutes and automotive airbags, and in heavier deniers for tires and other industrial applications. All of its products are white dyeable, though it does sell nylon polymer for solution dyeing by other fiber producers. Its commercial carpet fiber is sold under the Ultron brand. Ascend has its roots in Monsanto, which spun it off as Solutia in 1997. In 2009, Mohawk bought Solutia’s Wear-Dated brand, and Solutia reorganized as Ascend.

In addition to nylon fiber, Ascend produces a range of chemicals, nylon intermediates and nylon 6,6 resins for various uses. Ascend’s nylon 6,6 is propylene based, while Invista’s is butadiene based.

Like most of the fiber firms, last year business was about flat for Ascend.

The bulk of Ascend’s carpet fiber business targets the commercial market, which was stronger (in dollars) than the residential market in the U.S. last year. And the firm also sells its products globally.

However, Ascend has been extending its residential product portfolio, offering specialty yarns and limited-run products for the carpet mills, which are mostly vertically integrated. That includes its Ombre differential-dye fiber, which goes to both the residential and commercial markets. Currently, it’s growing faster in residential-where solution-dyed fiber has a smaller overall share.

Ombre has been on the market for about three years, and the firm continues to round out its Ombre offering to meet the demands of the market, including the higher end residential carpet market. On the commercial side, the focus is on fine tuning its offering, for instance in denier and DPF, to serve the growing carpet tile market.

Mohawk launched a new fiber at Surfaces this year called SmartStrand Silk Reserve. According to the firm, its research indicated that consumers love soft fiber, so the firm developed a fiber even softer than SmartStrand Silk while maintaining performance levels. Mohawk reports that the kinks in PTT, the fiber SmartStrand is made of, protect the fiber better than soft nylons, and that other technological processes conferred in extrusion maintain the bulk of the yarn.

Because lower DPFs mean more surface area in the yarn bundle, cleanability can be an issue. The firm addresses this with its ForeverClean soil repellent treatment, which it has used on SmartStrand products for the last four years.

The firm used to offer Stainmaster fiber on Karastan products, but has recently shifted entirely to its Wear-Dated fiber for its nylon carpet. Karastan also uses SmartStrand fiber on its products.

Zeftron came to Shaw in 2005 as part of its Honeywell acquisition as the commercial nylon 6 brand, along with the Anso residential nylon brand. Now it’s a division of Shaw dedicated to outside fiber sales, serving the smaller boutique commercial mills that aren’t vertically integrated. As such, the firm has worked hard to focus on the service side of the business.

Its personalized approach and flexibility have helped the firm sustain its client base. It’s paying particular attention to hospitality carpet mills, where color plays a huge role, and where Zeftron can offer custom colors. With new technologies like the ColorPoint machine, some hospitality mills have been shifting away from printed carpet, and Zeftron has been able to help mills that want to replicate those printed products and their colorways with solution-dyed carpet. The firm added half a dozen colors to its solution-dyed running line last year; its total offering is 120 colors.

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