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State of the specialty fabrics industry 2015

January 30th, 2015 / By: / Feature

U.S. fabrics markets overview

All but one of the traditional end product market segments that the Industrial Fabrics Association International (IFAI) monitors regularly achieved single-digit sales growth in 2014. (The military market was down 6 percent in 2014.) Slower growth in the first quarter was due to a harsh winter leading to a shortened selling season for specialty fabric markets like awnings and marine.

Still, marine fabrics top the list of market segments, growing a healthy 7 percent. Investing in state-of-the-art equipment, lean and quality improvement manufacturing practices, training staff and improved marketing efforts targeting the customer have helped many businesses increase sales and profit margins.

Many successful companies in 2014 invested substantial funds into ramping up their logistics/supply chain to find ways to improve the value they provide to their customers, while achieving cost savings. The result has been a savings in transaction costs for their customers. They’ve also experienced an enhancement in customer satisfaction because they’ve drastically reduced the time it takes to complete transactions by cutting down on paperwork and “red tape.”

Growth in the U.S. specialty fabrics industry was about 2.2 percent in 2014. It is expected to be 2.7 percent in 2015. The 2015 growth rate will depend on the continuation of a decreasing unemployment rate, an increase in consumer spending and a more robust GDP in the first quarter. Poor first quarters in 2013 and 2014 dampened consumer demand in the U.S. and across the world.

Despite improvements in the unemployment rate in 2014, consumers are still cautious about their spending habits. They continue to think about job security and their ability to make ends meet. Nonetheless, an increase in the release of pent-up demand in 2015 is expected, which will result in key economic figures improving.

Fabric structures

The U.S. fabric structures market experienced growth of 3 percent in 2014 and is expected to grow 4 percent in 2015. Consumer confidence and subsequent demand is expected to continue an upward climb in 2015 and beyond, propelling increased demand for fabric structures in the U.S. As of 2014, the U.S./Canadian fabric structure market was 10 million square yards at the end product level. It is expected to reach 10.2 million square yards in 2015.

In an October 2014 IFAI survey, respondents reported they think the U.S./Canadian fabric structures market will be somewhat better in 2015 than it was in 2014.
The fabric structures market continues to climb out of its market doldrums of 2008–2009. Product awareness is growing as building structure customers realize the aesthetic quality that fabric structures provides, which can’t be captured by traditional materials.

Corporations are spending more and demanding detailed engineering requirements for fabric structures that are code compliant. More U.S. fabric structure players are growing the fabric structures market by engaging in high visibility structures, such as the membrane structures used for the 2012 London Olympic Games.

Demand for structures should be high for the 2016 Rio de Janeiro Olympic Games, providing opportunities for fabric structure manufacturers worldwide.

Impediments to improved sales in 2015:

  • Unethical competitors that market and sell too many nonengineered structures
  • Companies that deliver poor quality fabric structures and poor customer service
  • U.S. building codes are much stricter than in other countries
  • Inexpensive imports of ready-made shades from Asia, particularly China
  • Not enough professional sales and marketing in the fabric structures market
  • Awnings and canopies

    In 2014, growth was up 1 percent in the U.S. end product manufacturer (EPM) market. Factors contributing to the growth included an estimated 7 percent improvement in housing starts as well as an increase of nearly 6 percent in existing home values in 2014. New home sales rose 4 percent in 2014, but they’re expected to increase 25 percent in 2015. Housing starts are expected to increase by 20 percent to 1.2 million, after an increase of 7 percent in 2014.

    The modest single-digit rise in home values (and, subsequently, home equity) has many homeowners delaying the sale of their homes. Some have chosen to remodel instead, hoping to capitalize on more robust housing prices in the future.

    According to the National Association of Home Builders Remodeling Market Index (RMI), the RMI figure for fourth quarter 2014 was 60—a record high. This is the seventh consecutive quarter a RMI reading was more than 50, which indicates more remodelers reporting an increase in market activity than those reporting a decline. Most remodelers are confident the remodeling market is improving because homeowners are undertaking renovations large and small. The consistency and longevity of positive RMI readings are in line with the gradual recovery of the housing industry.

    Construction activity increased modestly in 2014, with total U.S. construction up 6 percent over 2013. For 2014, total fabric consumed for awnings and canopies by U.S./Canadian end product manufacturers reached 28.6 million square yards, a 1 percent increase compared to 2013. For 2015, IFAI projects about a 2 percent increase in fabric consumption by U.S./Canadian awning and canopy manufacturers. Total sales are forecast to reach 29.2 million square yards.

    The unusually long, cold and wet spring in the U.S. and Canada shortened the start of the selling season for awnings and subsequently dampened awning sales in 2014. Another impediment was the accelerated growth in metal awnings sold in the U.S., representing about 18 percent of all awnings sold. Fabric awnings represented about 80 percent; the remaining 2 percent of awnings sold was from other materials.

    In a survey conducted in October 2014, 75 percent of U.S. and Canadian awning suppliers expected business in 2015 to be better than in 2014. Buttressing their improved outlook is a vastly improved consumer confidence index in 2014, averaging 86.9 in 2014, almost 14 points higher than in 2013. This marks the fourth consecutive year the index has been up since IFAI began tracking it. This is expected to continue into 2015.

    A steadily growing economy, modest increases in home values, lower unemployment and hopefully an earlier start to the selling season should lead to at least a 2 percent increase in sales in the awning market in 2015.

    Industry outlook

    Leaders in the industry, interviewed at IFAI Expo 2014, said they are optimistic about sales prospects for 2015. They feel the economy is going to be much better, with more job growth and greater consumer confidence resulting in additional consumer spending on specialty fabrics. Many plan to increase their capital expenditures in 2015.

    End product manufacturers that focus on more proprietary, high-value products and services should achieve solid growth in 2015. High value-added market segments include safety and protection, geosynthetics, smart fabrics, medical textiles and wide-format digital textile printing.

    Increased sales will be garnered by those companies that have regularly invested in resources for developing products, entering new markets and exploring ways to get closer to the customer, such as improving their logistic supply chains. Both suppliers and end product manufacturers should experience an improved operating environment as some of the obstacles to growth in the recent past begin to ease; consumer demand for their products and services increases, and there is some relief from high raw material costs.

    Global demand for OPEC oil in 2015 will be less with its weaker sales growth and the impact of the U.S. shale boom. The U.S. produced more oil in 2014 than it produced in any year in the previous three decades. Energy pundits expect the first half of 2015 to be weak in terms of oil prices. This is great news for fabric producers, who can look forward to lower energy prices and a healthy bump in consumer spending in markets like marine, geosynthetics, truck covers and awnings.

    Losing sales to foreign competition may ease a bit with a reduction in fabric imports from China, in particular. Credit is expected to loosen up more in 2015. Industry participants who actively look for opportunities and exploit them will continue to separate themselves from competitors who do not. Successful companies know they must continue to commit to annual investments such as using lean manufacturing practices, developing innovative products and actively marketing to customers and prospects through trade shows, advertising and promotions.

    Jeff Rasmussen is IFAI’s market research director. He can be reached at jcrasmussen@ifai.com or +1 651 225 6067.

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