The man-made fibre industry in Asia is set to grow sharply in the period up to 2005, despite the financial crisis which is afflicting the region, according to Natural and Man-Made Fibres in Asia: Forecasts to 2005, a new report from Textiles Intelligence.

China and India are already showing spectacular growth in their capacity to produce man-made fibres. China's output of polyester staple fibre increased by more than 90% between 1990 and 1997, while in India production of acrylic staple fibre was up by 116%.

For the future, the report predicts rapid growth in polyester industrial filament yarn production (up 65% between 1997 and 2005), as well as polyamide textile filament yarn (up 50%), polyester textile filament yarn (up 45%) and polyester staple (also forecast to rise by 45%).

Even faster growth will be seen in polypropylene staple where production across the region is expected to increase by 151% over the nine year period to 2005. Reliance Industries in India will make a significant contribution to the increase in capacity with the opening of a new 100,000 tons polypropylene fibres and yarn plant.

Rapid expansion in Asian man-made fibre production will be essential if the industry is to meet future demand growth -- both for exports to Western nations and for the Asian domestic market. Growth in demand is expected to be particularly high in China, given that domestic demand has been suppressed for several decades.

Demand for Asian fibres will also be boosted as quotas restricting textiles and clothing trade are phased out between now and 2005. Only a handful of Asian fibre producers will be affected directly by the quota phase-out, but exports are likely to be boosted indirectly as the liberalisation of world trade leads to growth in the world market for fibres, textiles and clothing.

It is unlikely that the extra demand can be satisfied by natural fibres. Although Asia accounts for more than 45% of the world's production of cotton, output will grow by only 9.3% between 1996/97 and 2004/05. Similarly, wool production will rise by a mere 10.4%, according to the report.

Most of the major man-made fibre producers in Asia are highly competitive. The majority of the region's man-made fibre manufacturing plants are less than seven years old, or have recently been modernised. Polyester staple productive capacity in Asia now exceeds 5 million tons -- which is nine times more than in Western Europe, where capacity is just 560,000 tons.

A key factor in the success of Asian fibre companies has been the increasing trend towards offshore processing and delocalisation of production. Japan was the first to move its manufacturing operations abroad, pushed out by high costs at home. In 1998 Japan's hourly labour cost was as high as US$20.70, compared with a mere US$0.24 per hour in Indonesia. Other countries in the region have followed Japan's lead, including Taiwan, South Korea and India.

However, this trend can not continue indefinitely. As each country moves down the path of industrialisation, costs will increase and the number of low-cost producers will diminish. Furthermore, as automation develops in the sector, low labour costs will become less important. This could lead to some investments being diverted away from Asia and back towards the post-industrial nations of Western Europe and North America.

Future growth of Asian man-made fibres will depend to a large extent on the supply of raw materials. Asia aims to become self-sufficient in the production of fibre intermediates by 2005 -- which will provide a major boost to the industry. Domestic production of pure terephthalic acid (PTA) and mono ethylene glycol (MEG), used in the production of polyester, is already well established and the region's plans for self-sufficiency are looking good.

However, international competition is intensifying. Companies throughout the region are therefore looking at alternative strategies for the future. Some are engaged in backward or forward integration. Others are forming joint ventures with multinational companies in an attempt to increase their presence in the global market.

For example the Texmaco Group, based in Indonesia, has acquired a majority share of Trevira in Germany (formerly Hoechst) and has joined forces with SPIC and JCT in India, in a bid to improve its global reach in polyester staple and polyester textile filament. In Indonesia and Singapore the group is investing upstream in its own production of PTA, polyester chips and MEG. Downstream, the Texmaco Group is already involved in the manufacture of its own textiles and textile machinery.

The financial crisis which began in 1997 has tested the strength of Asian fibre producing companies. Some of the weaker producers have been forced out of business, while remaining companies are racing to re-establish themselves in the region's changing economy. The Asian man-made fibre industry has huge potential for growth, but domestic and worldwide competition will continue to be tough. The next few years will see the survival of the fittest.