STRATEGIC SOLUTIONS: Global Adhesives and Sealants State of the Union
April 1, 2007
The global adhesives and sealants industry reached a record $36 billion in 2006, with nearly 4% growth over 2005, and is forecast to grow at 3.8% through 2008. Not surprisingly, the greatest advancements occurred in Asia, fueled by emerging markets in China, India, Vietnam, Korea and Malaysia. Representing nearly a quarter of global consumption, Asia is growing 2-2½ times faster than developed regions (see Figure 1).
Packaging remains the largest market sector with a 28% share, but the title for the fastest-growing market sectors belongs to the construction and pressure-sensitive tapes sectors.
Construction grew globally at 4.7%, fueled by major global construction projects. None was more evident than in China’s unquenchable infrastructure expansion and preparation for the upcoming world games and 2008 Olympics.
India is also making its mark. India’s government is investing heavily in infrastructure projects to attract foreign investment. While still in the shadows of China, India will not remain there long, recording a solid 9.2% GDP growth - one of the fastest in the region and the world.
Pressure-sensitive tapes grew at 5.1% globally. Replacement of mechanical fasteners and liquid adhesives are major drivers, fueling PSA growth as user-friendly application alternatives. Energy prices are putting a lot of pressure on fuel efficiency and financial performance within sectors such as transportation. This is driving design changes to incorporate lighter-weight alloys and composites, making it attractive to use adhesives - and specifically PSAs - to fasten dissimilar materials. Medical and electronic applications, while relatively smaller, contributed significantly to PSA tape growth as well.
Three resin families, comprised of acrylic, polyurethane and silicones/hybrids, were the greatest benefactors, reflecting growth greater than 5% per annum. Not surprisingly, these resins families, supplied both in liquid and PSA tape forms, benefited primarily from expansion in construction spending, transportation, and medical applications.
Perhaps the greatest growth has been in moisture-cure hot melts, which are used for assembly applications including engineered lumber, furniture assembly and automotive and manufactured housing.
Epoxy and styrene block copolymers (SBC) follow closely behind with greater than 4% growth. Epoxy growth is fueled by the resurgence of the consumer electronic sector and the increased use of structural adhesives for lightweight composites, e.g., the transportation sector evidenced by Boeing’s 787 Dreamliner and the Airbus A-380. SBC growth comes as a result of faster growth of hot-melt adhesives due to their distinct advantages for improved operational efficiencies.
While still negligible, the industry advanced the use of synthetic polymers from renewable bio-based materials. Faced with record energy prices, end users were eager to evaluate new technology to mitigate their dwindling margins.
The industry is bullish on 2007, even with a slowdown in construction spending due to higher interest rates in North America and Europe. First-quarter performance showed moderate revenue growth but significant improvement in margins as a result of slightly lower raw-material prices relative to first quarter 2006.
In closing, few industries are as stalwart and vibrant as the global adhesives and sealants industry. It will continue to be a good portfolio investment for the foreseeable future.
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