1. ?The industry experienced its first year-over-year decline in 2001, when revenue and volume dropped 5% and 4%, respectively. This validates fundamental changes in industry structure and market dynamics brought on by geographical and regional realignment in manufacturing, and overcapacity of adhesive production.

2. ?Following the recession, margin pressures were caused by rapid escalation of raw-material and energy costs due to rising oil and natural gas prices, and shortages of key raw materials.

The Next Five Years

The U.S. adhesives industry ($11 billion and 6.5 billion dry lbs) is considered fundamentally mature due to the fact that 74% of the industry is performing at or below GDP growth. However, the remaining 26% will be the engine for future growth, with pressure-sensitive adhesives (PSA) accounting for 17% of adhesive demand based on volume, and structural adhesives (defined as load-bearing bonds in excess of 1000 psi) accounting for 9% of demand (see Table).

Six major trends are affecting the future use of PSA and structural adhesives, particularly against their prime competition-mechanical fasteners.

Higher energy costs driving for reduction in weight and fuel efficiency

Continued need for lower total applied costs (Improved productivity; Component reduction)

Standardization of quality processes such as Six Sigma - driving for more precise placement and application consistency (Elimination of process variables (reducing number of parts in assembly, inefficient processes); Elimination of product variables)

Changes in substrates and increased use of dissimilar substrates in design (Plastics and composites; Hybrid metal alloys)

Miniaturization (Components and assembly workspaces are becoming smaller; Weight reduction)

Automation (Increase use of electronics for comfort, convenience and productivity; Increasing use of robotics)

End users prefer PSAs because their key value proposition is to deliver an adhesive to a bond joint in a user-friendly, clean and efficient manner.

While the general adhesives industry will continue to grow at a 3% annual clip, these categories will gain share against their conventional counterparts. It is anticipated that PSA and structural adhesives will eventually make up 30% of the total adhesives market. More importantly, these categories also represent a more profitable mix of products to adhesive manufacturers.

Dan Murad is president and CEO of The ChemQuest Group Inc., an international strategic management consulting firm specializing in the adhesives, sealants, and coatings industries, headquartered in Cincinnati.

For more information, phone (513) 469-7555 or visit www.chemquest.com.