Adhesives and Sealants
SIC 2891
NAICS 325520
Adhesive and sealant makers produce such diverse bonding compounds as caulking, glues, epoxies, rubber cements, and related products for household and commercial use.
The adhesives and sealants industry was increasingly competitive during the mid-2000s. Chemical Week, an industry magazine, placed the 2003 world market for adhesives and sealants at US$18.5 billion with a market growth of 3 percent over 2002 despite an economic recession affecting North American, Japanese and Western European markets. A study done by the Freedonia Group projected global demand of these products to rise 4.2 percent per year to 16.6 million metric tons by 2004. Projections for the industrialized market through the year 2006 were 4 to 5 percent, slightly above Gross Domestic Product (GDP) and additional demand of 845,000 metric tons, with emerging markets forecast at 4 to 7 percent growth per year. Plagued by high raw materials and energy costs, in addition to still uncertain auto and construction markets, companies in the industry were adapting products and expanding product lines to serve new market trends.
While adhesive prices rose substantially in 2003 and 2004, the cost of raw materials had, in many cases, increased even more, offsetting revenue gains. This was one of the factors prompting expectations that mergers and acquisitions (M&A) were set to increase rapidly. According to Chem Quest Group Inc., the top companies in the industry command less than half of the market worldwide.
In 2003 and early 2004, sales of adhesives and sealants had increased in North America, Latin America, Europe, and Asia. According to Chem Quest, North America and Western Europe held a 54 percent market share of the global adhesives industry in 2001. The fastest growing non-pressure-sensitive adhesive markets in North America in 2001 were auto interior, electronic, and film lamination, while the fastest growing markets in Western Europe were furniture manufacturing, auto exterior, and film lamination. In contrast, developing countries such as India and China were growing at three times the U.S. rate in the mid-2000s. The Americas accounted for 36 percent of market share in this sector, followed by Europe at 34 percent, the Asia-Pacific region with 27 percent, and the rest of the world making up the remaining 3 percent. Excluding Japan, Asia had 61 percent of the market total in developing regions for 2003. Asia and Latin America, which had 23 percent of the market for developing countries in 2003, promised to provide continuing sales growth for makers of adhesives and sealants.
In the U.S., forecasted figures for 2006 gave non-rigid bonding adhesives a commanding 23 percent share of the market. Packaging adhesives were close behind with 22 percent, followed by construction with 17 percent. The remaining percentages were expected to be distributed among all other adhesive segments, according to Market Share Reporter.
Makers of adhesives and sealants have historically located their production facilities at sites that combined three factors: ready availability of raw materials, customers' production facilities nearby, and a skilled workforce. For this reason, both the largest producers and consumers of adhesives and sealants are located in the most heavily industrialized countries of the world, notably Western Europe, the United States, and Japan.
The market is centered around several industries that use large amounts of adhesives and sealants: automobiles, housing, aircraft, and packaging. The United Nations' commodity export statistics on several categories of natural and man-made adhesives reported US$6.5 billion in exports in 1991. With the exception of Europe, where a lingering recession led to continued sluggish sales through the mid-1990s, the market overall grew steadily toward the year 2000.
By 1995, almost all of the major consumers of adhesives and sealants showed signs of recovery from the recession of the early part of the decade. Most producers of sealants and adhesives, particularly those not heavily tied to Europe's markets, experienced a very healthy 1994. Europeans and makers of bulk chemicals experienced overcapacity and subsequent low prices that hurt some companies and helped others.
Car sales boomed in the mid-1990s in the United States, as recovery from the recession of the early 1990s released pent-up demand and low interest rates gave consumers the ability to buy. U.S. auto sales in 1994 were 15.4 million units, and analysts projected 16.1 million units to be sold in America in 1995, with the trend rising. Globally, auto sales were expected to move upward as improved economies in Latin America, the North American Free Trade Agreement (NAFTA), and growth in Southeast Asia boosted demand in those areas. Volkswagen AG of Germany, France's Peugeot-Citroën, and U.S.-based Chrysler Corporation and General Motors set up joint ventures in China to take advantage of lower labor costs and the expectation of rising demand in Asia for vehicles.
In construction, new housing starts in the United States shot up in the early 1990s as mortgage rates fell drastically during the recession. Buyers took advantage of the lowest mortgage rates since World War II, as well as considerable recession-driven price drops in major housing markets such as Los Angeles and Washington, D.C. The largest builders of commercial and industrial projects saw their markets also recover and were predicting continued steady growth as long as interest rates remained low. Adhesive and sealant makers noted a strong pickup in the do-it-yourself market by the mid-1990s, and sales of existing homes bore that out. Both Europe and North America saw a recession-driven growth in the do-it-yourself markets as homeowners repaired or upgraded existing dwellings.
The headquarters of leading manufacturers of military and civilian aircraft are located in the United States, Europe, and the Commonwealth of Independent States. Components are made in many countries, mainly in the United States and Europe, but also in Canada, Asia, and Latin America. The military market, which had dropped since 1991, was extremely poor in the early and mid-1990s, with tens of thousands of workers in the United States alone being laid off and major companies disappearing in acquisition deals. Demand for commercial aircraft rose after mid-decade, with flights increasing as the recession lessened. Asia, with its large population, was expected to grow at the most rapid rate, prompting U.S.-based Boeing and McDonnell Douglas to export some assembly work to China in attempts to gain market share there.
Forest products companies in North America and Europe were greatly affected by environmental laws that prompted large scale recycling, particularly of newsprint and consumer packaging. By the mid-1990s, pulp and lumber prices were still high, causing wood producers to increase their use of adhesives to turn more of the sawdust and short pieces into usable...
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