As discussed in previous chapters of this blog, there are a number of new problems facing the sealant, adhesive and resin industries. Regulations are getting stricter, and are changing more frequently as consumer awareness of health and the environment becomes more prominent. Globalization is a new factor affecting countless industries in an ever smaller world, whilst mergers and acquisitions are becoming more frequent, having an effect not only on those directly involved, but across whole markets.
So which of these challenges do industry heads believe will have the biggest impact on business in the coming years?
Patricia C. Souza thinks that regulatory changes may cause the most problems for the industry. As Market Segment Manager at Lanxess Corp. she is well placed to see the affect of these laws, stating, “Regulatory affairs compliance is one of the main challenges of biocide producers serving the adhesives and sealants industry. The effects of globalization directly impact the regulations that apply to our products. For example, if a Lanxess customer is manufacturing an adhesive in the U.S. but exporting its products overseas, additional regulations on the country of destination may apply. As a supplier, we need to ensure that our raw materials are Registration Authority compliant not only in North America (federal and state registrations), but in most cases also in others regions (e.g., Asia, Europe, etc.). It is crucial to work together with our customers to understand their process and channels to market to properly support them from both a logistical and regulatory point of view.”
Julie O. Vaughn, Vice President, Marketing and Business Development at Emerald Performance Materials, agrees, stating that, “The regulatory landscape is a significant challenge faced by the industry. We have seen that agencies such as the U.S. Environmental Protection Agency have taken a different stance with industry, placing more hurdles and restrictions on manufacturers. This could dampen creativity and the development of new materials and put regions with high regulatory hurdles at a disadvantage in this global market.”
JP Kuijpers, Business Unit Director of Adhesives at Eastman Chemical Co. is aware of these challenges, but believes that bigger problems are faced with feedstock supply. He notes the impact recent changes have had on his business, stating, “Raw material supply is a continual challenge for global manufacturers, and Eastman is no exception. The global use of lighter cracker feeds has led to more constrained availability of raw materials for tackifier resins, which in turn has led to a tightening of the hydrocarbons market.”
But he also believes that his company has the right resources and strategy to resolve these problems. He continues by explaining how the advantages are three pronged, stating, “Firstly, in many of our businesses, we are an integrated manufacturer, which gives the company an enviable cost position. Secondly, with the expectation that market prices for commodity products, raw materials, and energy costs will continue to be volatile, feedstock flexibility on what kind of raw material can be used provide mitigation to these changes. Finally, Eastman’s global manufacturing footprint enables efficient delivery of finished products where our customers need them, including in some cases delivering product molten instead of pelletized to reduce conversion costs for our customers.”
Keith Olesen, Field Marketing Manager at Arkema Coating Resins, also sees problems ahead for purchasing managers and supply chains, pointing out that, “Volatility in raw materials has been and likely will remain a key challenge for the foreseeable future. As a downstream consumer of petrochemicals, we must work closely with our customers to manage this volatility in a way that is practical and fair for both parties.”
He notes how his firm is limiting these challenges, by stating that, “For Arkema, acrylic resins are an important product line that we offer to the adhesives and sealants market. Here we have been investing in our upstream integration on acrylic monomers to enhance the cost control and reliability of supply for the products we offer to our customers. Our recent investment in Sunke, an acrylic acid manufacturing JV in partnership with Jurong Chemical in China, is a good example of this commitment.”
Dan Marvin, Director of Technical Services, MAPEI Americas, is also conscious of sourcing challenges, noting that, “As the U.S. economy picks up steam, the availability of certain materials will be spotty and prices high compared to historical levels.”
But he is also convinced that the greatest challenge remains in minimizing costs, particularly the cost of transportation. He writes that, “Increases in transportation costs are looming as the industry struggles to find qualified drivers. MAPEI has a dedicated transportation team that can find the best routes, rates and backhauls. Pulling from a supplier base that circles the world, logistics is a huge part of supply chain management.
Other pricing pressures come from suppliers of packaging, from pallets to buckets to bags. Again, our purchasing department is constantly working with our vendors to ensure a reliable supply. A variety of techniques is used, such as long-term contracts vs. spot market buying, consignment agreements, and constantly qualifying backup sources.”
There certainly are great challenges ahead for the industry, if for no other reason than the sheer diversity and quantity of products being produced. The figures for European production alone are immense, as FEICA, the Association of the European Adhesive & Sealant Industry notes, “More than 2,300,000 tonnes of adhesives and sealants are produced and used in Europe each year and this volume is on the increase. Adhesive manufacturers offer more than 250,000 different products for the most diverse applications – and these products are customized for virtually every purpose.”
Analysts from the consultancy firm, Research and Markets in their report entitled ‘Concise Analysis of the International Adhesives and Sealants Industry – Forecasts to 2018’ agree that the industry is both large and expanding. They write in one recent report that, “The global adhesive and sealants industry is expected to witness moderate growth and reach an estimated $58.14 billion by 2018.”
Evidently, whilst the industries do face many challenges, there is good cause to be positive. In fact there is growing cause to be positive, as the list of usages for these products is growing. As the recent Research and Markets report notes, “The adhesive and sealants market is primarily boosted by the emerging economies, technological advancement, globalization, and increased usage of adhesives and sealants to seal and protect materials in an environmentally friendly manner. Packaging, automotive, construction, and furniture industries are the major drivers of the adhesive and sealant industry. Sealants are mainly driven by the construction, electronics, and automotive industries.”
The report is even more upbeat about the future, noting that, “From the analysis presented, adhesives and sealants’ raw material suppliers as well as producers will recognize that valuable opportunities exist in the industry due to impressive trends in demand quantity and growth.”
The future is always full of challenges, and for sealants, adhesives and resins, they include tightening regulations, globalization, feedstock sourcing, M&A’s and rising costs, but surpassing these hurdles will only make the industry stronger. Ultimately, the future is bright; the future needs sealants, resins and adhesives.