“While there are signs that the market is stabilizing, commercial construction was hit hard by the economic downturn, and it will be some time before we see construction activity approaching 2008 levels,” said Charles O. Houk, president, Tremco Inc. commercial sealants and waterproofing division. “The past three or four years have been devastating for many in our industry, but there remain opportunities for those who have positioned themselves well to grow even in this still challenging environment.”
Mike Gorman, VP marketing, DAP Products Inc., agreed that the economy is looking up, especially in terms of the housing market.
“We’ve seen the highest existing home sales in four years and homebuilders are continuing to hire more workers in anticipation of continued robust housing market,” Gorman said. “An improved housing market could lead to a significant increase in demand across the consumer and commercial markets for adhesives and sealants.”
Steve Meenan, business director, 3M Adhesives and Sealants, explained that while the U.S manufacturing sector has enjoyed good growth for adhesives and sealants in 2013, other parts of the world are still struggling. Despite this, the overall long-term outlook for adhesives and sealants is favorable.
“As an example, in transportation markets there is a strong trend for vehicle light weighting to improve fuel economy,” Meenan said. “That is driving the use of new materials such as composites and plastics to replace metals. These new materials have to be bonded in the assembly process instead of welded or mechanically fastened. So we see adhesives growing faster that the general market growth where they are used.”
Henkel found that trends did indeed differ between regions. While the non-European emerging markets developed very well, momentum in North America and Western Europe was more subdued.
Jim Owens, president and CEO, H.B. Fuller, explained that because of the relatively weak economy their focus has been on ways to innovate and create value that drives change in customer’s products and processes
Tremco’s focus has remained the same in both good and difficult times.
“We are looking for opportunities to help designers, contractors and owners build or restore their structures to high performance standards,” Houk said. “While we can’t control the amount of construction activity, we can control how we approach the projects that are active. Our ability to help our customers achieve their design goals is our best insurance for continued growth.”
Gorman said that DAP saw opportunities for growth in markets that serve new residential construction and remodeling/repair.
“As we continue to experience positive trends in the housing market, consumers are increasing the amount of their investment back into their homes. We see this specifically in projects like painting rooms and larger expenditures like kitchen and bath renovations,” he said.
For Henkel, the adhesives for consumers, craftsmen and building business turned in a solid sales performance in the second quarter and household and repair adhesives performed particularly well.
“With our new plant for building adhesives in Russia, which will begin production shortly, we have established the basis for further profitable growth of the business in the region,” a representative from Henkel said.
Owens explained that electronics and hygiene products were in strong and growing demand despite the weak economy.
Rising Raw Material and Energy Costs
The rising costs of raw materials and energy have certainly added to the challenges in the adhesives and sealants market.
“Despite a significant drop in the overall demand for construction products, the cost of raw materials and the energy to convert them into finished goods has continued to rise,” Houk said. “At Tremco, we have been proactive in addressing these challenges. For example, we are relentless in our pursuit of eliminating all forms of waste from our manufacturing processes. We have set and exceeded goals related to reducing energy and water usage in our manufacturing facilities. We have achieved zero landfill contribution in several of our North American manufacturing sites and that is good from both an environmental and cost perspective. While price increases are sometimes necessary, there are many things we can do to mitigate rising costs that do not impact our customers and make us a better company to do business with.”
Meenan explained that rising raw material costs are a constant that any manufacturer has to deal with, and customers are never happy about price increases.
“Therefore, it is prudent to develop new formulations using alternate raw materials, such as renewable materials, that can be somewhat immune to the dynamics of the specialty chemical cycle,” Meenan said. “Also, the 3M manufacturing team does an outstanding job squeezing out cost using Lean Six Sigma principles. This allows us to absorb some of the raw materials headwinds without passing on price increases to our customers.”
Owens said that for H.B. Fuller, rising raw material costs are seen as an opportunity to partner with customers, suppliers and others to drive innovation in the manufacturing process.
“We adapt our product technology based on the changing availability of various raw materials, and then we work with our customers to reduce complexity and lower the overall cost to produce their products,” he said.
Henkel increased selling prices and maintained strict cost discipline in order to increase a gross margin.
“In order to improve efficiency and secure material supplies, we continuously optimize our value chain while at the same time maintaining our level of quality,” a representative from Henkel said “In addition to continuous negotiation of new, competitive contract terms, our ongoing initiative to reduce total procurement expenses is a major factor in the success of our purchasing strategy.”
Environmental regulations are also affecting the market for adhesives and sealants. The goal for adhesives and sealants manufacturers is to develop environmentally compliant products that deliver the same level of performance as previous products.
“Regulatory agencies are demanding manufacturers in our industry provide environmentally friendly solutions,” Houk said. “The challenge of course is to help these agencies achieve their goals without compromising the performance that our customers have come to expect when they use our products. We take product stewardship seriously and we are working very hard to provide safe, sustainable solutions without compromising our ability to deliver high value to our customers.”
At 3M, reducing solvent and VOCs is a concern for the environment and for worker safety and comfort, and viewed as an opportunity for growth.
“3M sees an opportunity to lead the way through new product development,” Meenan said. “As an example, we launched a line of low-VOC aerosol adhesives that had far lower VOC content than what is allowable in environmental regulations.”
Changes from traditional solvent adhesives to those that are thermoplastic are a big driver of growth for H.B. Fuller.
“H.B. Fuller has consistently been a huge steward of the environment, both at our plants and in support of our customers, so lower VOC adhesives is something we’ve been a leader in,” Owens said.
New Products and Acquisitions
Tremco has launched several new products recently according to Houk. They have introduced Dymonic 100, a new breed of urethane sealant suited for expansion and control joints, precast concrete panel joints, perimeter caulking (around windows, doors and panels) and aluminum, masonry and vinyl siding. The sealant’s aliphatic formulation eliminates long delays due to cure time or inclement weather.
They have also introduced Vulkem OC810, a durable, one coat, low-odor deck coating solution for light pedestrian traffic areas such as balconies, roof terraces and mechanical rooms. Tremco’s Vulkem OC810 Coating is a high-solids, aliphatic urethane membrane designed to be applied in one 35-40 mil coat for aesthetically pleasing, durable waterproofing protection that is mildew- and fungus-resistant and low VOC (less than 30g/L).
Another Tremco product recently launched is T3 Building Solutions, a high-performance sealing system for use around windows and doors that controls thermal bridging and air infiltration which can lead to heat loss, occupant discomfort and premature structural deterioration.
3M recently introduced a new alternative to solvent-based adhesives. 3M Fast Tack Water Based Adhesive 1000NF offers strength and speed that are comparable to solvent-based adhesives, with additional benefits including zero VOCs (per EPA test method 24) and Greenguard certification.
H.B. Fuller launched Sesame High Modulus Tape at Pack Expo in September. This product provides corrugated packaging designers with the ability to increase the stacking strength and box life of produce boxes. This new fiber technology ensures that boxes, trays and bins will hold up better even in the most challenging environments.
For DAP, this year marks one of their largest product launches ever with the introduction of seven new products for the contractor and do-it-yourselfer.
“SmartBond construction adhesives represent one of our key new products launches,” said Gorman. “It is revolutionary new foaming gel construction adhesives formulated and designed to help contractors and DIYers work faster, saving both time and money. It provides eight times the coverage of standard cartridge adhesives, so users can do more with less.”
Henkel has released three new products recently. Loctite MAX 3, polyurethane matrix resin developed for fully automated series production of composite components for the automotive industry. In collaboration with KraussMaffei, Henkel has developed a process for the manufacture of components based on glass or carbon fiber and using high-pressure RTM technology that creates a surface quality good enough for automobile exteriors. Technomelt Supra 100 Cool is an innovative hotmelt adhesive for the packaging industry, which delivers high efficiency in packaging production while also promoting sustainability in customer operations. In addition to its low application temperature of 100 degrees Celsius and its high adhesive strength, Technomelt Supra 100 Cool is also characterized by its wide-ranging suitability in case sealing, carton closing and tray erection. Henkel also released the new high-performance elastic adhesive Teroson PU 8590 LD, which is used for direct glazing and assembly work in vehicle construction enables manufacturers to achieve a significant reduction in vehicle weight.
H.B. Fuller has made a few acquisitions this past year. They acquired Forbo’s industrial adhesives business in March, which was a major consolidation of two industry leaders. Last September H.B. Fuller made an important acquisition in the electronics space that enabled them to increase their market knowledge and qualification capabilities in a wide range of microelectronics assembly technologies. Most recently, they purchased a company in Brazil that is strengthening their business in packaging markets and also Latin America.
On September 18th, Henkel opened the world’s biggest adhesive production plant in Shanghai, China. The new factory is comprised of 150,000 square meters of space and is now the central production site for industrial adhesives in China and the Asia-Pacific region. Customers being served by the new adhesives plant include enterprises in the automotive industry and various consumer goods sectors. Annual output is forecast to reach up to 428,000 metric tons of adhesives.