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    2019 State of the Industry

    Feature, State of the Industry | March 1, 2019 | By:

    Economic growth in 2018 increased in the United States: Gross Domestic Product (GDP) reached 3.0 percent for the first time since 2005. Unfortunately, growth has been down in other advanced economies such as Canada, Japan and Europe. Growth in the emerging economy of China was also down in 2018—reaching 6.6 percent. China’s GDP is projected to decline to 6.2 percent in 2019.

    Global growth (GDP) was 3.7 percent in 2017 and 2018; it is projected to be 3.7 percent again in 2019. In the United States, momentum from 2018 is still strong as fiscal stimulus continues to increase, but the forecast for year-end 2019 is expected to be down somewhat due to trade measures announced in 2018. The economic protectionist banter in the spring of 2018 has turned into action, with the U.S. imposing tariffs on a variety of imports, including on $200 billion of imports from China, and other trading partners promising retaliatory protective measures.

    In 2018, weaker than expected economic production led to a decrease in GDP compared to 2017 for the Euro Area (Germany, France, Italy, Spain) and the United Kingdom. China and a number of Asian economies are projected to experience somewhat weaker growth in 2019 in the aftermath of the announced trade measures in 2018.

    The U.S. economy is above full employment—reaching an average unemployment rate of 3.9 percent in 2018. Consumer confidence in the U.S. is at a 17-year high. Entering 2019, consumers see a stronger economy than do businesses, although both sectors indicate that the economy has room to grow. Business executives perceive a riskier environment defined by cost pressures and higher interest rates. However, elevated confidence and tight labor market conditions are expected to unleash strong consumer demand. In terms of value, worldwide growth in the specialty fabrics market in 2019 is projected to reach 2.8 percent. Growth in the 2019 U.S. specialty fabrics market will be very similar to worldwide growth—also coming in at 2.8 percent.

    The scope of this article covers the U.S. and Canadian specialty fabrics marketplace—with an emphasis on the United States—with brief summaries for each of the eleven U.S. and Canadian specialty fabrics market segments served by IFAI.

    Awnings and canopies

    In 2018, growth in the awning market was up in the low single-digit range. Contributing to the growth was an approximate 5.5 percent increase in housing values in 2018; a 4.5 percent increase in home values is expected in 2019.

    Many homeowners used their rising home equity to remodel their homes in 2018. According to the National Association of Home Builders Remodeling Market Index (RMI), the RMI figure for fourth quarter 2018 was 57. (An RMI above 50 indicates that more remodelers report that market activity is increasing than those reporting that it is declining.) Remodelers across the U.S. experienced increased demand for residential repairs in 2018 and expect to be busy well into 2019—especially in North and South Carolina and Florida, due to damage caused by hurricanes.

    U.S. construction activity increased 4.5 percent in 2018 over 2017; residential construction was up 3.8 percent in 2018, and nonresidential construction was up 4.9 percent in 2018. Nonresidential construction is the aggregate of individual construction market segments such as lodging, office space and commercial enterprises.

    In 2018, the U.S. had warm weather conditions in May through August. September, again was warm but also very wet. The result was a good selling season for awnings in 2018—especially the residential awning and solar shade business. The strong U.S. economy in 2018 also helped to boost awning sales in 2018 over 2017.

    The outlook for awning and canopy businesses in 2019 is expected to be similar to 2018 figures. This year, a 4.5 percent increase in home values, unemployment holding at 3.5 percent and (weather permitting) an earlier start to the awning selling season should lead to a moderate increase in sales in the U.S./Canadian awning and canopy market.

    Marine

    Several developments in 2018 helped to support growth in the marine fabric market:

    • A sunny and warm summer, which helped to bolster boat sales.

    • A stronger job market—an average unemployment rate of 3.9 percent in 2018 compared to 4.4 percent in 2017.

    • A consumer confidence index averaging 130.2 in 2018. In general, a consumer confidence index above 90 correlates to increased consumer spending in the marine fabric industry.

    • Consumer spending increased 2.7 percent; consumer spending is expected to be 3.0 percent in 2019.

    • Higher oil and gas prices in 2018 didn’t deter consumer spending on boating.

    The Conference Board’s consumer confidence index, a key barometer for growth in the marine fabric market, averaged 130.2 in 2018, which was almost 10 points higher than the 120.4 figure in 2017. Growth is expected to continue into 2019—aided by a projected 16 percent decrease in oil and gas prices compared to 2018.

    The boating industry is experiencing prosperity. Trade wars and tariffs aside, economic factors such as increased GDP, strong consumer confidence and growing disposable income are spurring domestic demand for boats. Future challenges for the U.S. marine industry include solving the “aging out” of the boating population. The average age of a boat owner in 2017 was 56, compared to 49 in 1997. The U.S. marine industry must create ways to attract a new generation of dedicated boaters to replace those aging out of the market. Some ways to do this:

    • Focus on building a pipeline of future customers such as the U.S. Hispanic population; they represent a strong emerging future force of consumers. Another market segment to focus on is young people—particularly technology-savvy millennials.

    • Make customer recruitment efforts a top priority.

    • Offer affordable products to mass segments—for example, Hispanics and millennials—that are sometimes priced out of new boats today.

    • Focus on sustainability and cutting-edge technologies, which  are important to the customer of the future.

    Fabric graphics

    The U.S./Canadian fabric graphics market grew in the low-to-mid single-digit figure range in 2018, and is projected  to do so again in 2019.

    TRENDS AND OPPORTUNITIES

    Key trends in 2018 driving opportunities:

    • Favorable economics, in terms of low unemployment and good consumer spending.

    • Digital inkjet printers for fabric are being used more, which has helped to increase growth in
    latex print and ink technology.

    • Digital graphic applications grew
    17.5 percent in 2018.

    • Demand continues to increase for printing on wider-width materials (3-5 meters).

    • Printed materials are becoming more colorful
    and lasting longer.

    • New printing technologies continue to improve—more durable, faster print heads producing brilliant colors and quality imaging.

    • The trade show and exhibition market continues to realize double-digit growth.

    • The retail segment continues to expand the soft signage market—for both indoor and outdoor signage. There continues to be more sales of high-end point-of-purchase (POP) substrates.

    CHALLENGES

    • Customers continue to demand custom quality (and individual branding) and shorter lead
    times for their projects.

    • Getting closer to the customer is becoming important to win business; social media is being used more and more to market the fabric graphics business to existing and potential customers.

    • Inexpensive imports from China continue to present a problem for U.S. fabric graphics end product manufacturers and print shops. But the increasing demand for individualized designs
    and images, with fast turnaround, may be working to the advantage of local manufacturers and print shops across the U.S. and Canada.

    Fabric structures

    U.S. GDP increased to 3.0 percent in 2018—a significant improvement over the 2.2 percent figure from 2017. It is expected to peak at 2.5 percent in 2019. Consumer confidence increased significantly in 2018. Developments like these helped fuel growth just below the mid-single-digit range in the U.S./Canadian fabric structures market in 2018. Growth is projected to be the same or slightly down in 2019.

    TRENDS AND OPPORTUNITIES

    • We continue to see good demand for residential remodeling work (2014–2018).

    • There was good demand in 2018 for temporary fabric structures used by emergency response teams in response to hurricanes in the southeast United States (North and South Carolina and Florida) and wildfires in Southern California and British Columbia, Canada.

    • Project growth continues to occur in infrastructure development such as stadiums and shade structures for schools, and for sporting events like golf and tennis.

    • Increased interest in and sales of new types of shade structures has helped propel new developments in shade structures—for example, shade sails and retractable pergolas.

    • There continues to be an increase in demand for engineered structures.

    • The quality of fabrics continues to improve. Substrates incorporate brilliant colors that last longer; fabric coating applications are providing value-added enhancements like waterproofing and fire-resistance.

    CHALLENGES

    • There remain too many manufacturers that make misleading claims about their fabrics—especially imported fabrics.

    • The cost to implement projects often increases due to inconsistent, strict, and hard-to-interpret U.S. building codes.

    • Inexpensive imports of shade structures from Asia, especially China, are affecting sales for
    U.S./Canadian manufacturers.

    Tent rental

    The U.S./Canadian tent rental market grew in the mid-single-digit figure range in 2018, and is projected
    to repeat this growth in 2019.

    TRENDS IN TENT RENTAL

    Notable trends in the tent rental market in 2018:

    • Renters are reporting more upgrades to wedding events—for example, destination weddings.

    • Corporate events are becoming more popular.

    • A shortage of skilled labor remains a challenge for event operators.

    • Increased demand for custom flooring has helped increase revenues for event operators.

    • Shorter lead times continue to be demanded by customers for their events.

    • The popularity of sailcloth tents continues to grow. Sailcloth tents are built from translucent sailcloth material that allows warm natural light to illuminate the tent during the day; at night when lights are added under the tent, they add a beautiful glow to the structure.

    • Renters reported greater use of clear-top tents. The tent interior for clear-top tents is completely unobstructed, and makes for an extraordinary view from inside and outside the tent.

    • Government regulations and building code permits remained a challenge for event operators. They spend too much time obtaining permits that are inconsistent from municipality to municipality.

    2019 TENT RENTAL FORECAST

    (Reported from Special Events Magazine’s 2019 Event Planner Forecast)

    • Eighty percent of independent event planners expect to stage the same number or more special events in 2019 versus 2018.

    • Ninety percent of in-house event planners expect to produce the same number or more special events in 2019 compared to 2018.

    • The 2019 outlook for corporate events is good. Sixty-two percent of independent event professionals expect their corporate event revenue to increase in 2019.

    Leading challenges facing independent event professionals in 2019:

    • Increased competition (49 percent)

    • Shorter lead times (47 percent)

    • Reduced client budgets (45 percent)

    Steps independent event professionals plan to undertake to improve their businesses in 2019:

    • Focusing on more profitable business (57 percent)

    • Marketing more aggressively (56 percent)

    Forming partnerships with other event professionals (55 percent)

    • Broadening their client base (52 percent)

    Military

    The U.S. military market covers safety and protective products (including the use of smart technology) for troops, firefighters and law enforcement. A driving force behind product development for the firefighter, law enforcement and industrial markets, the military’s influence on the safety and protective market will remain significant in 2019 and beyond.

    In early 2018, the U.S. Congress lifted spending caps on the U.S. military for the next two years. Since 2011, spending caps on military clothing and textiles had been a strong concern of the Defense Logistics Agency (DLA)—making it a challenge sometimes to fulfill their obligation to meet the clothing needs of the U.S. armed forces.

    Growth in spending on military clothing and textiles was up 3 percent in 2018—with spending reaching $1.75 billion. Military clothing and textile spending by the DLA is expected to grow another 3 percent in 2019—reaching $1.8 billion.

    Advanced textile products

    (SAFETY AND PROTECTIVE MARKETS)

    Growth in the U.S. advanced textile products market was up 9 percent in 2018 and is expected to increase another 9 percent in 2019. Growth was supported by an improved job market in 2018—with average unemployment decreasing to 3.9 percent.

    MARKET TRENDS IN 2018

    • Increasing growth in the high-temperature thermal clothing market—especially in military, firefighter
    and police market segments.

    • Continued developments and fast growth in the e-textiles market over the next 5-10 years may propel the smart fabrics market into a position of serious competition in the apparel market.

    • Expect continued growth in the U.S. and worldwide in the protective clothing (safety) market. Developed and developing economies will increase their adoption of personal safety measures in the workplace. More companies are increasing their compliance with safety legislation such as ANSI compliant clothing.

    • There will be increasing adoption of personal safety gear in emerging markets, especially in China and India as their workforces continue to become more organized—demanding better pay and worker rights.

    • The U.S. safety and protective market was estimated to be about $6 billion in 2018. Although the economic recovery has been a slow process over the past five years, the safety and protective market is resilient and continues to grow at approximately 6 to6.5 percent per year.

    • Safety and protective measures implemented in the workforce associated with industrial operations will continue to drive growth in the U.S. protective clothing market. Aprons, chemical and hazardous material suits, clean room clothing, cut and slash-resistant clothing, gloves, footwear, reflective clothing and space suits are all widely used protective clothing that will promote growth in the U.S. market well into the future.

    Narrow fabrics

    The U.S. and Canadian narrow fabrics market grew in the low single-digit range in 2018 and is expected to decrease slightly in 2019. The main growth area over the last few years has been webbing for seat belts in the automotive market. The sales growth of new light vehicles in the U.S. increased by 6 tenths of 1 percent in 2018—reaching unit sales of 17.2 million light vehicles. Light vehicle unit sales in 2019 are projected to be down 2 percent from 2018—reaching 16.8 million light vehicles.

    Spending on military textiles and clothing by the Defense Logistics Agency (DLA) in the U.S. military market was $1.7 billion in 2017, and increased 3 percent to $1.75 billion in 2018. Spending is projected to increase another 3 percent to $1.8 billion in 2019. The U.S. military is always looking for the most technologically advanced textiles available in the marketplace. The narrow fabrics market has been and will continue to be an important supplier of military camouflage webbing and safety products, as well as medical products, to the U.S. military.

    Other key markets in the U.S./Canadian narrow fabrics market include:

    • Safety products market (safety or fall-control harnesses)

    • Transportation market (tie-downs and slings)

    • Medical products market (straps, orthopedic braces, gauze and bandages)

    2018 TRENDS IN NARROW FABRIC PRODUCTS

    • Mergers and acquisitions. July 25, 2018: CNF Medical, a subsidiary of Winston-Salem-based Carolina Narrow Fabric (CNF), acquired the medical splinting and casting assets of Parker Medical Associates
    in Charlotte, N.C.

    • Labor shortages—lack of skilled employees. The main issue facing narrow fabrics companies is that the people who really know how to operate and maintain a machine are retiring. These are the people who know how the machines should sound and make adjustments when they are needed—especially for medical, military and aerospace applications. These employees spend years honing their talents. In today’s corporate world, we’ve seen this kind of employee be the first to be fired in a merger or acquisition, because of the lack of  a college degree. There are fewer and fewer people who want to learn the details of working the machines that produce narrow fabric products.

    • Inexpensive imports continue to enter the U.S. and Canada.

    • Manufacturers are seeing more flame-retardant requirements.

    • New product innovation is becoming a special point of emphasis for manufacturers. One manufacturer has announced the launch of a line of woven webbing for aerospace and aviation applications. The specialized narrow fabrics, 2-D and 3-D thermoset and thermoplastic fabrics, and innovative E-WEBBINGS narrow woven fabrics meet the necessary strength requirements for structural components in a variety of applications such as parachutes and cargo restraint systems.

    Geosynthetics

    The U.S. and Canadian geosynthetics market includes geotextiles, geomembranes, geogrids, geosynthetic clay liners, drainage materials, geocells and erosion control material. In 2018, the U.S. and Canadian geosynthetics market grew in the low single-digit range and is expected to grow somewhat higher in 2019.

    MARKET CONSOLIDATION CONTINUES

    Due to a strong U.S. dollar in 2018-2019, coupled with subdued growth in economies across the globe, U.S. geosynthetic manufacturers will likely experience stiff competition for sales due to more inexpensive imports coming into the United States.

    To better compete in this challenging global environment, some U.S./Canadian geosynthetics market players have pursued merger and acquisition moves to place them in a better position to serve their customers. There were three key mergers and acquisitions in 2017 (Solmax acquired GSE Environmental, Hanes Geo Components purchased Terrafix Geosynthetics, and Raven Industries acquired many of the assets of Colorado Lining Intl.); another occurred on March 14, 2018. Marlborough, Mass.-based Geo-Synthetics Systems LLC (a subsidiary of Babcock Power Environmental Inc.) acquired substantially all of the assets of Waukesha, Wis.- based Geo-Synthetics LLC, a leading distributor, fabricator and installer of geosynthetic materials for industries such as energy, waste disposal, agricultural and industrial applications in March 2018.

    MARKET OUTLOOK

    The U.S. and Canadian geosynthetics market is expected to see moderate growth in 2019. Roadway and bridge construction will drive a good portion of this growth. The U.S. solid waste management market is expected to grow 3.6 percent in 2019; coupled with growth in the road and bridge construction market, that should help the U.S./Canadian geosynthetics market achieve an overall growth rate of 4 percent in 2019.

    One area of uncertainty in the forecast for 2019 is the outlook for the scheduled 2020 reauthorization of the FAST Act surface transportation law and the ability of Congress to find additional revenues to support the Highway Trust Fund. If states start delaying transportation improvement projects in response to uncertainty over the future of the federal program, it may temper 2019 market growth.

    Although the U.S. transportation infrastructure market will see growth next year overall, the situation will likely vary significantly by state and region. Highway construction market activity is expected to increase in about half of the states and Washington, D.C. Market activity is expected to slow down in approximately 20 states.

    Other market risks in 2019 include uncertainty over material prices (oil and gas), increased labor costs and potential labor shortages in some regional markets.

    Tarpaulins and truck covers

    The U.S./Canadian tarpaulin and truck cover market grew in the mid-single-digit figure range in 2018, and growth is projected to be the same or slightly down in 2019. Economic trends and their impacts on the 2018 U.S. tarpaulin and truck cover market were key drivers of growth in the market in 2018, as shown below.

    MARKET OUTLOOK

    Sales will be down slightly in 2019 compared to 2018. Market developments that will influence sales in the tarpaulin and truck cover market in 2019 include:

    • Growth in the U.S. transportation infrastructure construction market is projected to increase by 4.2 percent in 2019. Growth in the U.S. construction market overall was up 4.5 percent in 2018; U.S. residential construction growth was up 3.8 percent in 2018. This growth is expected to continue into 2019, driving an increase in demand for lumber, poly and mesh tarps.

    • Tarpaulin and truck cover businesses continued to experience a shortage of skilled truck drivers in 2018; this trend is expected to continue in 2019.

    • Imports of tarpaulins and truck covers, especially from China and Korea, will remain an issue for U.S. manufacturers.

    • Although tarpaulin and truck cover sales will likely be down slightly from 2018, U.S. manufacturers are optimistic that the 2019 market will still experience good growth.

    • The stagnant housing market has been a boon for the remodeling industry for the past few years as more homeowners stayed put, adding footage and upgrading features to their houses. The pace of spending on renovations is expected to begin declining in 2019, according to a report from the Joint Center for Housing Studies of Harvard University. Harvard’s Leading Indicator of Remodeling Activity reached a decade high of 7.7 percent in 2018. But annual increases in remodeling expenditures are projected to drift down to a 6.6 percent annual increase in 2019. This could lead to somewhat slower growth in the truck cover and tarpaulin market in 2020.

    Equipment

    The U.S. and Canadian industrial fabric equipment manufacturer market includes fabric equipment for a wide variety of purposes, including:

    • Cutting

    • Heat sealing and welding

    • Labeling and marking

    • Grommeting

    • Pattern-making

    • Printing

    • Sewing

    • Slitting

    • Testing and tables for cutting and sewing

    MARKET OUTLOOK

    The industrial fabric equipment market will remain unchanged in 2019 compared to 2018. In terms of value, the U.S. and Canadian equipment manufacturer market grew in the low single-digit range in 2018. Below are market developments that influenced sales in 2018 and will continue to affect sales in the equipment market in 2019.

    • Equipment companies continue to reshore their operations from overseas back to the
    United States.

    • The U.S. industrial fabric equipment market has become more competitive in recent years. Imports of equipment, especially from Europe and China, are increasing and will continue to affect sales from U.S./Canadian equipment manufacturers in 2019.

    • The industrial fabric equipment market is growing, but the growth has become bogged down in the low single-digit percentage range over the past few years.

    • Companies recognize the need for updated labor-saving equipment, but seem to be reluctant to spend the money required to acquire such equipment—despite a proven short-term payback period. Unless this mindset changes, equipment sales will remain stuck in the low single-digit percentage range.


    The Future

    In 2018, economic momentum—low unemployment, strong consumer spending of 2.7 percent, and record consumer confidence—carried the United States to a GDP of 3.0 for the first time in thirteen years. Many other economies across the world struggled in 2018. In recent years, slow economic growth in both advanced economies and emerging economies around the world has been a roadblock to stronger growth in the specialty fabrics industry worldwide.

    Market participants in the specialty fabrics industry are well acquainted with the economic obstacles to advancing the ongoing development. Recent developments affecting the industry include:

    • The rising cost of raw materials (oil/gas and resulting polymers);

    • Increased labor costs; and

    • Trade wars and the resulting tariffs.

    Some of the defenses employed by market players to combat these developments include hedge funds, and locating facilities in overseas markets such as Europe and China. To reduce the risks of competing in today’s specialty fabrics market, some companies have engaged in scenario planning as to how key markets across the globe might evolve in 2019 and beyond.

    To win sales and market share in today’s specialty fabrics industry, market participants know they must maintain a business climate centered on a continual pursuit of innovation. Innovation exists in every phase of a business—new technologies, new markets served, new and/or better products and services created and delivered (faster) to increasingly demanding customers. Market leaders invest a lot of money and time educating the consumer on the benefits of their products, especially their newest releases to the marketplace. They also invest a lot of time and money in educating market participants—suppliers, distributors and manufacturers—about the benefits of their latest products, especially the innovations they’ve developed and are using to make their products and services distinctive.

    The innovative applications incorporated into new and existing products, processes and services are the most important market drivers specialty fabrics companies can employ to expand business and bolster industry growth over the long run.

    Examples include alternatives to shade products like awnings: shade innovations on the market today include shade sails, retractable pergolas that incorporate a waterproof composite textile, solar shades, zipper screens and metal awnings. Another example: awning sun shades that use a polyester-vinyl blend that incorporates fire-resistant properties into the fabric.

    Successful fabric suppliers and fabric product manufacturers are incorporating innovation into every aspect of their businesses, staying focused on advancing their place in the industry—as well as improving the outlook for the specialty fabrics industry for years to come.

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