From the Sector

• Sales Volume rose 3% QoQ and 2% YoY to 3.55MT
• Adjusted EBITDA of $366M, a rise of 32% QoQ and a decline of 2% YoY
• Operating cash flows of $184M
• Net Operating Debt to Equity of 1.12
• Reported EPS of THB0.17

Indorama Ventures Public Company Limited (IVL) reported an improved quarterly performance as the prolonged destocking trend showed further signs of easing. During the quarter, the company progressed its IVL 2.0 evolved strategy to enhance earnings quality and transform its business to emerge stronger from the downturn in global chemical markets.

Indorama Ventures’ reported Adjusted EBITDA1  of $366 million in 1Q24, a 32% increase QoQ and a 2% decline YoY. Sales volume grew 3% QoQ as the widespread customer destocking that sapped demand through 2023 shows signs of a gradual recovery across all sectors, partially offset by a winter freeze in the U.S. The result was supported by lower utilities costs in Europe, Red Sea-related supply chain disruptions that benefited the company’s import parity advantages, and favorable shale gas economics that bolstered profitability in the U.S.

Indorama Ventures expects the recovery in volumes to continue through 2024, albeit at a gradual pace as destocking normalizes and the approaching summer supports demand. However, the overall landscape for the global chemical industry remains challenging due to excess capacity builds, as well due to persistent inflation and high interest rates which weigh on industry spreads and continue to impair profitability, especially across the polyester value chain. Our HVA segment ‘Indovinya’ is progressing well into the second quarter post the easing of destocking and anticipating a healthy 2024.

The company’s experienced management remains intensely focused on managing costs, optimizing competitiveness, and maintaining high liquidity. Indorama Ventures’ diverse geographical footprint is a key advantage in the current low-margin environment, allowing its businesses to maintain their strong market premium, supported by protection from trade and non-trade barriers.

In 1Q, the company made headway with its IVL 2.0 three-year plan to leverage its global leadership position and forge a new era of opportunity amid significant structural changes in chemical markets. Under the evolved strategy, which the company outlined at its annual Capital Markets Day in March, Indorama Ventures is optimizing assets, reducing debt, and focusing on generating free cash flow to deliver enhanced shareholder returns. Today, 70% of the company's revenue has deployed the SAPS/4HANA ERP and is using the infrastructure to enhance digital procurement, sales excellence, and integration of supply chains across the business. The company believes these AI tools will improve productivity and costs, as well as release working capital in line with its modernization strategy.

As part of IVL 2.0, the company is optimizing 7 sites, including the ongoing evaluation of its PTA/PET operation in the Netherlands. It has also made significant progress in its program to refinance $1.1 billion of debt within the first half of 2024 to ensure ample liquidity. Recent capital raisings include a $255 million ‘Ninja loan’, a THB 10 billion debenture, a $100M bi-lateral loan, and this week’s successful close of a $500 million syndicated loan – achieved at lower-than-average spreads compared to previous issuances.

To unlock value, Indorama Ventures is preparing its packaging and surfactants businesses for IPOs. From 1Q24, the Indovinya segment (previously named ‘Integrated Oxides and Derivatives’) is focused on developing its attractive downstream surfactants operations as a separate segment. The segment’s Intermediate Chemicals business, consisting of shale base integrated Ethylene MEG, MTBE and merchant Purified EO assets, have been moved under the Combined PET (CPET) segment where they are a natural fit.

Segment Performances
In 1Q24, CPET segment (including Intermediate Chemicals) posted Adjusted EBITDA of $249 million, a 34% gain QoQ and 4% YoY as supply chain disruptions and a consequent spike in global ocean freight rates supported high prices and margins, and as Western markets benefited from lower energy costs. The Indovinya segment reported a stable Adjusted EBITDA of $70 million, impacted by the winter freeze in the U.S and a mini turnaround at a PO/PG plant. The Fibers segment achieved a remarkable 73% increase in Adjusted EBITDA to $39 million QoQ, and 2% YoY, as destocking waned across all three business verticals and drove an 8% QoQ increase in volume.

INDA, the Association of the Nonwoven Fabrics Industry, announced the election of five new members to serve on its 2024 Board of Directors. The Board of Directors play a key role in advancing INDA’s strategic objectives, actively supporting both the industry and the membership. Their primary responsibility lies in ensuring that INDA remains responsive to the evolving needs of its members and the broader nonwovens industry, guiding the formulation of policies and programs.

The five new Board members include:

• Jaren J. Edwards, President, Stein Fibers
• Edward McNally, Sales Director Nonwoven, Oerlikon Nonwoven
• Thomas Olsen, Senior Vice President, Americas Business Area, Suominen
• Patricia A Sargeant, Vice President, Glatfelter Corporation
• Paul Wood, President, Ontex North America

The Board is comprised of elected Board Officers. One-third of the entire Board is elected each year for a three-year term by INDA’s general membership. INDA’s Executive Committee, empowered to act on behalf of the Board between meetings, consists of the Board Officers plus appointees.
The Executive Committee includes:

• Chair: Mark Thornton, Vice President, The Procter & Gamble Company
• Vice Chair: Barbara Lawless, VP of Sales and Marketing – Medical Products, Precision Fabrics Group, Inc.
• Past Chair: Bryan Haynes, Senior Technical Director for Global Nonwovens, Kimberly-Clark Corporation
• Appointee: Mike Clark, President, Filtration Solutions, Hollingsworth & Vose Company
• Appointee: Jodi Russell, Vice President R&D, Cleaning Innovation, Packaging & Sustainability, The Clorox Company
• Appointee: Jeff Stafford, Vice President of Nonwovens, Milliken & Company
• Appointee: Robert Weilminster, EVP & General Manager, US & Canada – Health, Hygiene and Specialties Division, Berry Global
• Appointee: Tom Zaiser, CEO, Indorama Ventures

The EU's planned ban on the entire group of per- and polyfluoroalkyl substances (PFAS) would endanger many industrial processes, states VDMA Textile Machinery. Textile manufacturing would be affected twice – by missing important chemicals for technical textile production and by the lack of indispensable textile machine components. The latter would affect the whole supply chain from textile machinery manufacturers and its suppliers to the textile industry in the EU.

Solid PFAS parts are widely used in textile machinery production, especially where extreme conditions prevail. Verena Thies, Managing Shareholder Thies GmbH & Co. KG, explains: “Our textile dyeing machines are world leaders and set standards in efficiency and sustainability. They work under pressure at temperatures of up to 140° C using highly acidic, highly basic and/or oxidative or even reductive chemicals. This is precisely why PFAS is needed, for example, in seals and rings, flaps as well as valves for a long-lasting and high-quality machine concept – because there are no alternatives with qualitatively equivalent properties. In addition, PTFE semi-finished products enable a sliding and gentle contact with the textile fabric in ecologically important techniques in the transformation of textile wet finishing."

PTFE and also FKM are fluoropolymers (fluoroplastics and fluoroelastomers), a group within the broad PFAS range of about 10,000 substances which would be banned for production, use and sale in the EU. They are high-tech materials, and as so-called "polymers of low concern" are not a danger to the environment, according to the OECD. Furthermore, these components are installed inside a machine and exchanged or disposed of properly. PFAS such as PTFE and FKM must be exempted from the ban, demands the VDMA in its position paper.

"In this way, the association also supports the approach taken in Great Britain. With the 10,000 substances, everything is lumped together, although the various PFAS groups are very different," warns Dr Sarah Brückner, Head of VDMA Environmental Affairs and Sustainability. "We should take our cue from the UK and look at the substance groups in a differentiated way."
Apart from several types of dyeing machines, PFAS components are indispensable in textile drying machines (e.g., conveyor dryers, tumblers and stenters) and damping machines. They are also used in fully automatic chemical dispensing systems and pressure vessels for thermochemical treatment of textile recycling material, heat recovery systems and wastewater treatment technology. This means that a lot of machines needed for a sustainable textile production would be affected by the PFAS ban.

VDMA Textile Machinery will take part in the ongoing EU public consultation. The association will describe indispensable key functionalities and conditions of use in the textile machinery sector as well as the consequences for the companies and the customers in the EU if the ban is imposed. The consultation ends on September 25, 2023, and VDMA urged its members affected by the planned restriction to participate in the consultation at an early stage. This is the only way to ensure that the broad scope of the mechanical and plant engineering sector is represented.

On the occasion of EURATEX’ General Assembly held in Milan on 7 June, the European textile industry  discussed the relationship between innovation, sustainability and people in the industry of tomorrow. EURATEX members welcomed the Textiles Transition Pathway, released on 6 June by the Commission, as a valuable roadmap to ensure a successful green and digital transition. The meeting in Milan was also the occasion to strengthen links with textile machine manufacturers, gathering at ITMA 2023.

Hosted by Sistema Moda Italia (SMI), EURATEX meetings addressed the crucial issue of how to develop new competitive business models for the future, following the Industry 5.0 concept. In 2021, the European Commission launched “Industry 5.0”, which puts the wellbeing of the worker at the centre of the production process and the use of new technologies to provide prosperity beyond jobs and growth, while respecting the production limits of the planet.

The keynote speakers, Francesco Pinto (Chairman, Yamamay) and Claudio Cavacini (Director of Retail Industry Solutions & Strategy, Salesforce), presented how the digital transformation is affecting companies in the retail industry and how they should adapt to maintain their competitive edge. A panel session of textile machinery manufacturers debated how their companies can help delivering this transformation through state of the art machineries. They all agreed that it requires common efforts by all actors and stakeholders along the textile value chain and public support to make the necessary investments. According to Enzo Maurer, ITMA President, ITMA 2023 in Milan will exactly showcase excellence in innovation and new available technologies to make a leap forward in sustainability.

According to Sergio Tamborini, "we are particularly honored to host this event organized by Euratex, the association which is the voice of the European textile industry and its demands, especially those concerning the circular economy. Sistema Moda Italia wants to play its part and there are priorities, from legislation on extended producer responsibility (EPR) in Italy to eco-design, where textiles and clothing will act as a testing ground. SMI's goal will be to continue to encourage the debate on circularity  promoting it in all institutional settings aiming to a growing sustainable  supply chain.”

Alberto Paccanelli, EURATEX President added: “Today’s discussions showed that we are ready to take up new challenges. Nevertheless, this  transition towards a textiles 5.0 can only happen with the support of all actors, from policy makers to retailers. Today’s meeting was also the occasion to review the EU transition pathway for the textiles ecosystem, published yesterday by the European Commission. The pathway is the perfect example of a co-creation process between the European institutions and the stakeholders. We hope that other EU initiatives or legislative proposals will follow the same co-creative process.”

On 30 March 2022, the European Commission presented its vision for the future of the textile industry. The strategy mainly focuses on reducing the environmental footprint and promote sustainability and transparency in the value chain.

EURATEX has welcomed the publication of the strategy, as it recognises the strategic importance of the European textile industry, and its core competitive values of quality and creativity. At the same time, the association has warned that translating that vision into reality is a delicate process, as the industry needs to reconcile sustainability with competitiveness. Making the green (and digital) transition should make companies stronger; the benefits should outweigh the costs.

This premise had a serious blow by the Russian war in Ukraine, which erupted at almost the same time when the strategy was launched, and has dramatically changed the economic context. Energy prices increased by a factor of 10 (!), putting the European industry at a significant disadvantage with its global competitors, leading to company shutdowns or relocations. Extended lock downs in China and defensive trade policies in the US and elsewhere have further generated uncertainty on the market and disrupted supply chains.

Today, one year after its publication, EURATEX remains carefully optimistic about the implementation of the strategy, but needs to warn against some important pitfalls on the road ahead.

1. Despite these turbulent times, the Commission is moving ahead “swiftly” in translating their EU Textile Strategy into (draft) legislation. At present, at least 16 pieces of legislation are on the table, which will turn the textile industry into a strictly regulated sector. The quality of this new regulatory framework is critical to the success of the strategy: upcoming rules need to be coherent, technically feasible and enforceable, and have a minimal cost for SMEs. EURATEX calls for a realistic timetable and “competitiveness test” for each piece of legislation before it is adopted.
2. Textile companies need to be informed and supported to comply with this new framework. This requires substantial funding which should be earmarked exclusively to the sector, covering areas of innovation and digitalisation, skills development, support to start ups and internationalisation, as well as access to affordable energy. In this regard, EURATEX calls on the Commission to translate the current “good intentions” into concrete decisions.
3. The EU strategy will not work if there is no demand for sustainable textiles, both from individual consumers and public authorities (procurement). Concrete measures need to be taken to offer a competitive advantage to sustainable and high quality textile products, e.g. through a different VAT rate, strict procurement rules, closer cooperation between the brands/retailers, producers and consumers.
4. The EU strategy could also fail, if the global dimension of the textile industry is ignored. Up to 80% of clothing products are produced outside the EU; these products need to comply with the new framework, but it remains unclear how to ensure that level playing field. Market surveillance needs to be stepped up massively – also targeting on line sales – but this would require significant efforts from member states, which are not available as of today.

Despite these important challenges, EURATEX remains committed to the successful implementation of the EU Textile Strategy. Director General Dirk Vantyghem commented: “We want to be a global leader in sustainable textiles, building on the entrepreneurship, quality and creativity of nearly 150,000 European textile companies. Creating this new framework is an incredible challenge, requiring a close dialogue between the industry and the regulator. But if well designed and carefully implemented, it can set a new era for the European textile industry”.

Global leading companies from more than 15 countries in the filtration and separation industry will connect with some 1,500 industry professionals and launch their innovations at FiltXPO™ 2023, Oct. 10-12, at Navy Pier in Chicago, Illinois.

FiltXPO™, an exhibition and conference dedicated exclusively to filtration and separation, is now being held on an 18-month cycle, making it a valuable opportunity to generate new business and grow global relationships with unique exposure to the North American market, according to INDA.

FiltXPO™ will draw senior-level professionals from around the world in major market segments involved in the design, manufacture, sales, and use of filtration/separation products and services.

A feature of the event will be the technical conference – Summit for Global Change. Five panels of global industry experts will debate filtration and separation’s most compelling challenges such as indoor air quality, filtration sustainability, standards and technologies. FiltXPO™ will also offer a one-and-a-half day intensive training course on the development, testing and application of filtration and separation media.

• Potential loss of competitiveness, caused by the EU’s inaction of the energy crisis, and Chinese and US subsidies to domestic industry

Following yesterday’s European Council summit and its conclusions on the measures to tackle the energy crisis, the European textiles industry is extremely concerned about the fast loss of competitiveness of Europe and demands urgent action to save the industry.

The chain of factors determining this sharp decline in competitiveness is twofold. First, the energy cost in Europe is more than 6 times higher than in the US, China, and neighbouring countries. This factor alone has almost erased the business case for producing in the EU. At present, many textiles and clothing companies are producing at net loss or have shut down production. The industrial conditions have worsened in such a way that there is no business case to invest in Europe or buy products produced or processed in the EU. It is only the sense of responsibility of the entrepreneurs towards the European society that is keeping the plants and production running.

Secondly, while the EU is passive and extremely slow in articulating a credible and effective response to the energy crisis, the main international competitors and trade partners (China, India and the US respectively) have developed comprehensive state-aid frameworks for their domestic industry despite not being affected by this crisis at all. The latest example is the 369-billion-dollar scheme of the Inflation Reduction Act rolled out by the Biden administration.

Recent trade data  already indicate a loss of global competitiveness: imports to the EU have grown tremendously in 2022 (+35% year-to-date). It is also evident that the surge in imports goes in parallel with the surge of natural gas price. It is expected that energy prices will remain high and volatile, opening the door for imports to gain substantial market shares in the EU.

The chart indicates the development of the Title Transfer Facility (TTF) until September 2022 since Eurostat data for Q4 2022 has not been published yet. Euratex is aware that the market situation has eased somewhat since in the past months, but the crisis remains because gas prices are still extremely high in comparison to last year. This suggests that the current loss of competitiveness of the EU manufacturing will not be recovered even with lower energy prices, unless measures are taken to correct the unlevel playing field on which the EU industry has to operate in the international markets. Only with an ambitious and comprehensive relaunch plan at EU level, Europe will be able to restore its credibility as a global manufacturing powerhouse and investments.

If the status quo is maintained, not only the EU will not be able to recover its competitive position on the global business stage, but it will also fail its plans to reach zero-net emissions and achieve circularity. It is evident that these ambitions - that the industry is passionately supporting - need massive capital investments. However, in the current scenario an investments diversion can only be expected to markets where governments are actively supporting those investments and energy costs are much lower – regardless of their fossil- or non-fossil origin.

The European textiles industry – the whole value chain, from fibres, nonwoven, to fabrics, clothing manufacturers - are facing unprecedented pressure deriving from the current geopolitical situation, the new macroeconomic conditions and unfair competition from third states. The situation is going to worsen if no emergency action is taken, especially because a recession is expected in the coming months.

The main structural component of the EU manufacturing are SMEs: these are economic actors that are particularly exposed to the current crisis as they do not have the financial leverage to absorb the impact of energy prices for much longer. Urgent EU action is needed to ensure their survival.

EURATEX calls on the EU political leaders in the Commission, in the European Council and in the national capitals to:

1. Raise the ambition and adopt a comprehensive approach at EU level: energy, state-aid and trade policy must be brought together in a single strategy with concrete emergency solutions and with a clear SME dimension;
    
2. Let all hesitations aside and adopt a meaningful price cap on natural gas wholesales, that should be ideally no higher than 80 euro/MWh. In parallel, it should also be ensured that electricity prices are brought to a sustainable price level;
    
3. Change the European posture on state-aid, even temporarily. An ambitious plan of investments and state-aid in green technologies to support the industrial transition should be rolled out.

Such a plan, however, should not be conceived as a retaliation against our most necessary and like-minded trade partners. Access to finance and markets must be safeguarded for all those actors who are capable and willing to invest in Europe, on the basis of reciprocity. In   these challenging times for geopolitical stability, ensuring strong trade ties with our traditional allies and partners is of utmost importance. The roll-out of an investment and state aid plan should not interfere, but rather support, the dialogue with the US (and other partners) and the deepening of our trade and investment partnership. Such a dialogue should be accelerated in the context of the TTC as well as at WTO level.

The plan of the European Commission to propose a price cap on wholesale gas price at 275€/MWh would be a bitter disappointment for the European textiles and clothing manufacturers, said EURATEX.

November 22nd, EURATEX stated in a letter to EC President, Ursula von der Leyen, that any price cap above the level of 80€euro/MWh would not help the EU industry – the textile sector in particular – to survive the current crisis. Indeed as early as July 2021, the wholesale gas price in the EU was below 30€/MWh. Now, the EU industry is facing gas and energy prices that have exceeded any coping capacity: from the record-high 320€/MWh last August, the price has reached to 127€/MWh today. Still, it is more than 300% than the business as usual prices.

The very existence of the European industry is at stake and with it the European sustainability agenda – and Europe’s capacity to implement it. Furthermore, Europe will lose its strategic autonomy, which guarantees essential goods and services are made available on the European Internal Market. If we continue on this path, the EU will soon become totally dependent on foreign imports with no leverage to implement its sustainability agenda, let alone lead the transition to a circular economy on the international stage.

At present, the EU industry is facing a dire international competition with the industry in China, India and the US working at energy prices of around 10$/MWh. In addition, these competitors are benefitting of sky-high subsidies from their own governments: the rollout of the US $369bln industrial subsidy scheme is just the latest example.

EURATEX Director General, Dirk Vantyghem, believes that “while the EU Industry is under immense, unprecedented pressure, a price cap at 275€/MWh would be meaningless: the European industry will be permanently pushed out on the market. The industry is at the heart of the European way of life and the fundament of our social market economy. The EU must save its industry to save Europe. The moment to act is now.”

The GoodTextiles Foundation, initiated by Dibella, has implemented a new support project in India: Each family of a small village community of organic farmers received a cow from the donations received. The herd of fifty animals helps with farming, gives milk, produces sufficient natural fertilizer and should soon provide higher crop yields and a better income.

In 2016, Dibella established the GoodTextiles Foundation with the aim of making textile value chains more sustainable. It raises funds and implements its own support projects to benefit people at all stages of the textile economy. The most recent project, "One cow for every family," has now taken the first, important intermediate step: Fifty cows arrived in the small village of Aliguda Village (Utnoor Division, Adilabad, Telangana, India) at the beginning of June 2022.

"Some of our organic cotton is grown on the farms of the village community managed by the smallholder organization Chetna Organic. During the filming of the German documentary "plan b", the farmers told us that they need more natural fertilizer to cultivate their fields ecologically and economically. The biggest wish of each family is therefore a cow. However, they cannot afford this because of the high price of the equivalent of 300 euros. That's how the idea for our next sponsorship project was born," reports Ralf Hellmann, managing director of Dibella and member of the foundation's board of directors.

In addition to the most important reason for purchase - the production of fertilizer - the cows also serve as livestock. They are harnessed in front of the plow and make the strenuous work of tilling the soil easier for the farmers. As draft animals they serve to transport heavier loads, and as milk suppliers they contribute to a family's food supply. Surplus milk that is not needed in the household also provides families with an important additional income through sale.

With its current position paper, the Industrievereinigung Chemiefaser e.V. takes a stand on the intense discussions about an embargo against Russian natural gas supplies. The association believes that Germany's economic and global political future can only be secured with a strong industrial base and therefore, weighing up all positions and influencing factors and assessing the consequences for labour and the market economy, cannot support a short-term natural gas embargo on Russia.

An interruption of the continuous supply of natural gas would result in immense losses for the chemical fibre companies, which could even lead to the destruction of the industry in Germany. The losses are made up of technical damage caused by an uncoordinated shutdown of plants on the one hand and market-related consequential damage caused by lost production and a lack of product sales on the other.

Depending on the location and size of the plants, a short-term outage due to a lack of natural gas would result in average losses of EUR 5 million/plant. In addition, an ongoing daily loss would have to be expected which could be in the order of e.g. 250 000 EUR/day/plant, depending on the location. Furthermore, restarting the plants is questionable if supply chains could no longer be serviced and customers globally look for other suppliers in the meantime. Thus, entire sites would be at risk. With China's global market share in man-made fiber production already exceeding 70 %, a scenario is more than realistic that China will also take over these supply chains, thus leading to an even greater dependence on China.

The vast majority of power plants used for the production of man-made fibers, especially the highly efficient combined gas-and-steam power plants based on the principle of cogeneration with efficiencies of 90 %, are designed exclusively for the use of natural gas. Quite often, there are no technical facilities for operating gas turbines or steam boilers with fuels other than natural gas. Only in exceptional cases could a switch be made to mineral oil. However, even in these cases, the necessary stockpiling of mineral oil is designed only for a short-term failure of the gas burners. A change to base-load supply with mineral oil could take a time window of between 3 and 56 months, depending on the type of plant and taking into account licensing requirements. The use of hydrogen as an energy source is only possible in the very long term. In the few cases where natural gas can be substituted, investment costs of EUR 250 million/plant can be incurred, depending on the emission level of the converted plant.

A natural gas embargo imposed by the European Union on the Russian Federation would not only mean the cessation of production and the end for man-made fiber producers, but also for other industries such as basic chemicals, paper, metal production and glass and ceramics manufacturing, as well as their related sectors. As the German economic institute Institut der Deutschen Wirtschaft Köln e. V. (IW Köln) concluded in its summary report 40/2022 of April 2022: "No one can accurately predict what future these businesses would then still have in Germany. That would be an unprecedented development."