Asia Fiber Industry Cutting Output

Asia Fiber Industry Cutting Output

News Release

November 26, 2001 — Fiber industries in Asian countries like Korea, Japan and Taiwan are slashing production as a way of dealing with the prolonged slump in the sector worldwide, industry sources said yesterday.

According to major local companies and the Korea Chemical Fiber Association (KCFA), Korea fiber manufacturers have already cut production by 30 percent this year and will most likely reduce similar amount next year to match dipping demand.

Japan and Taiwan are also said to be in a similar situation.

According to reports, Taiwanese fiber sector recently began decreasing production by 20-30 percent to match falling demand and the plunging prices in China, the country's biggest export destination.

China, the biggest consumer of fiber products in the world, has been less receptive to the import this year due to over-surplus, dumping of the products by many of the neighboring exporters and the slow global economy.

The only way for Taiwan's fiber industry to survive would be to develop an alternative export destination, sources say.

“Accordingly, the trend of falling prices, and thus contacting production, will likely continue or worsen in the future,” a KCFA official said.

In case of Japan, a company called Kuraray - manufacturer of polyester material sports apparel - recently lowered production to 35 percent, thus going from 20,000 tons to 13,000 tons.

Another Japanese firm Teijin announced that it will reduce polyester production by 40 percent by 2004.

Korean companies are also planning on controlling manufacturing by ridding of old equipment, cutting production by 30 percent and moving facilities overseas.

This will be the latest blow to the industry, which has been boggled with problems from combined factors like delays in restructuring, export decrease, trailing profitability and uncertain future.

In restructuring, companies like Kohap, Saehan, Tongkook Trading and Kum Kang Trading are currently either in a debt-workout program or are seeing no changes in operation whatsoever.

Losses, too, is becoming more apparent. In the case of polyester, for example, average profit from sales is 5-6 percent, but financial expenses and export costs are about 12 percent, meaning the industry is seeing at least 7 percent trade deficit.

Furthermore, export itself is shrinking noticeably, with polyester selling a mere $650 million through end of September, 18.5 percent less than the same period last year.

Affected by continuing economic slump, many companies have even started dumping their products at below manufacturing price to control their stock, according to reports.

“Adding to this is uncertain future, leaving the sector with nothing immediate to look forward to,” the KCFA said.

Source: Korea Herald