World consumption of construction chemicals, including coatings, grouts, mortars, adhesives, caulks, cement and asphalt additives, and polymer flooring systems, was valued at approximately $24 billion in 2004, according to analysts at The Freedonia Group. The U.S. is the largest consumer of construction chemicals globally, comprising roughly one-quarter of the total while Western Europe and Asia/Pacific region each account for approximately 20% of the market.
"Areas of the world such as Africa, Latin America, the Middle East and Eastern Europe account for a comparatively small amount in the global market, primarily because these areas have less developed infrastructures," said Teresa Hayes, vice president of research, The Freedonia Group. "In general, most of the economies in these areas do not produce or consume large quantities of construction chemicals, although there are exceptions. Poland and Hungary in Eastern Europe, Israel in the Middle East, South Africa in Africa, and Brazil and Argentina in Latin America are such exceptions, due to the relatively advanced state of their national economies.
"Some fairly significant markets, such as India and Indonesia, do not make extensive use of construction chemicals, but the sheer size of their respective populations makes them larger markets for construction chemicals than their level of industrialization might otherwise suggest," Hayes continued.
In the U.S., demand for construction chemicals used in on-site applications is projected to increase five percent per year to $7.5 billion in 2008, essentially in line with average growth over the last decade, according to Freedonia's analysts. However, this steady growth masks significant changes in specific market segments. Slowing demand in residential building will be offset by a significant rebound in nonresidential construction, specifically the industrial and commercial markets. The fastest growth is expected in cement additives, sprayed polyurethane foam (SPF) and caulks, although opportunities exist in nearly all products based on improvements in materials technology.
Discussing the Western Europe market was André Verhije, international marketing and sales manager, Eurocol BV, a subsidiary of Forbo. "Now that the economy is growing, we expect that the market for construction chemicals will grow approximately five percent per year for the next four years," he said. "We have high expectations for the Eastern Europe region including Russia and Ukraine, and will open a production plant in this region to facilitate our entrance into these markets."
Of the $24 billion global market for construction chemicals in 2004, China accounted for roughly 15% of the total, according to The Freedonia Group's statistics. Several thousand companies supply construction chemicals to China's construction industry.
"This market is highly fragmented, with the five leading competitors-Nippon Paint, Imperial Chemical Industries, Degussa, Sika and Henkel-supplying just 18% of the total market," according to Hayes. "The diversity of the construction chemicals used in the construction industry contributes to the lack of concentration in the market, as does the regional nature of business in China. Even among the leading firms, there is a significant difference in the product offerings."
Demand for construction chemicals used in on-site applications in China is forecast to expand 10.5% annually through 2009 to $6.6 billion, according to Freedonia's analysts. While growth will be moderate after more than quadrupling in value since 1994, strong annual gains will continue as China's ongoing emergence as an economic powerhouse provides additional capital for infrastructure and housing construction. Growth will also be driven by the use of higher quality products as structure quality and longevity become progressively more important, environmental regulations tighten and construction techniques advance to meet the needs of increasingly complex projects.
Acquisition & Expansion
Many leading construction chemicals companies in the U.S. and Europe have been active on the acquisition front. Most recently, BASF completed its acquisition of Degussa's global construction chemicals business. The acquisition included production sites and sales centers in more than 50 countries as well as a research and development center in Trostberg, Germany.
Commenting on BASF's motivation for expanding its global presence as a provider of construction chemicals, Dr. Andreas Kreimeyer, member of the board of executive directors of BASF for the performance products segment said, "Construction chemicals is an innovative business area with cyclically resilient margins."
Earlier this year, ICI decided to sell its Cimsec Business, part of ICI Paints Europe, to Henkel. ICI said it was letting go of the tile adhesives and grouts business in order to focus on its decorative paint brands in Central and Eastern Europe. Cimsec, which is used by professional tile layers and by consumers, operates in Austria, Hungary, Czech Republic, Slovakia, Croatia and Poland.
DAP, Inc., a wholly owned subsidiary of RPM International, acquired Custom Building Products' line of ready-to-use pre-mix patch and repair products. Custom's major patch and repair brands acquired by DAP include Patch-N-Paint, Lightweight Spackling, All Purpose Spackling Paste and Flexall Flexible All Purpose Filler.
H.B. Fuller Company and Roanoke Companies Group, Inc. entered into an asset purchase agreement under which a subsidiary of H.B. Fuller acquired all the assets of Roanoke, a manufacturer of pre-mix grouts, mortars and other products designed to enhance the installation of flooring systems. Focused particularly on the retail home improvement market segment, Roanoke's brand portfolio includes Tile Perfect, CHAPCO, Color Caulk and AIM. Roanoke will become part of H.B. Fuller's Specialty Construction Brands, Inc. (SCB) business unit within the Full-Valu/Specialty Group. The acquired brands will align with SCB's TEC brand in the flooring market.
Expanding its presence in South America, Henkel has acquired the adhesives company Alba Adesivos from Hexion Specialty Chemicals. Alba Adesivos, based in Boituva, Sao Paulo, Brazil, is a leading Latin American producer of branded consumer and professional grade adhesives. Its primary products include contact cements, polyvinyl acetate adhesives, silicone sealants, and epoxy putty adhesives for consumers and contractors.
H.B. Fuller Window recently acquired the assets of Henkel's Teroson Insulating Glass Sealant business. "This established us as a leading supplier in Europe, and also introduced premium polysulfide technology into our portfolio of products," said Tina Dear, global marketing director, H.B. Fuller Window. "This acquisition has allowed us to significantly broaden our product line and enter segments we did not previously participate in. Furthermore, it positions us even more strongly to participate in fast-growing regions such as China and the Middle East."
Adhesive manufacturer Lord Corporation also signed a definitive agreement with Henkel to purchase its rubber-to-substrate bonding and rubber coating business. The business primarily serves automotive and industrial manufacturers of rubber molded and extruded components and includes the trade names Chemosil, Flocksil, Cuvertin and Sipiol.
Lastly, Forbo is in the process of building a new powder production facility in Russia to fulfill the local needs for cement-based leveling compounds and adhesives. "With our R&D capacity in Germany and the Netherlands we will be able to develop products with local raw materials in combination with the powder dispersions we use now in Western Europe."