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Lenzing Halts Expansion, Cuts Jobs Over Tough Fiber Market Conditions

Leading man-made fiber manufacturer The Lenzing Group has no plans to expand its viscose fiber production capacity because of continuously challenging fiber industry conditions.

The Austria-based company said it has been working to counteract the conditions through its cost optimization program launched early this year. But according to Lenzing, “The results achieved up until now are encouraging but by far insufficient to offset the decline in viscose fiber selling prices on the international marketplace.”

Last month, the company reported that average fiber selling prices fell to 1.55 euro ($1.93) per kilogram from 1.73 euro ($2.16)/kg, a 10.4% decline in the first three quarters of 2014. Lenzing said the price dip and the “high volatility” of the fiber market continue to negatively impact its business operations. For the three quarters, consolidated sales dropped 6.2% to 1.36 billion euro ($1.7 billion), down from 1.45 billion euro ($1.8 billion) in the previous year period, and EBITDA was down 16 percent over last year.

Lenzing said it still anticipates good volume demand for man-made cellulosics, but noted that fiber selling prices on the global market are not expected to recover in coming quarters.

“This development is also attributable to the substantial decline in polyester fiber prices as a result of the massive oil price decrease, and the expected longer-lasting period of low or at least volatile cotton prices as a consequence of the surplus supply of Chinese cotton,” the company noted.

As a result, Lenzing said it would not put any new expansions projects—which would have expanded its viscose fiber production—in place now or in the foreseeable future. The company will adjust its investment volume based on the current market conditions in hopes that the move will improve the viscose supply situation on the international market.

Lenzing also completed a new TENCEL fiber plant, which began production in July, and its presence, along with the lower investment volume mean technical planning and production capacities cannot be maintained at current levels. The company said the restructuring measures will affect up to 250 jobs (including one-third of temporary staff) at the Lenzing site. The distribution of job cuts will be decided early next year within the context of a project currently underway.