Kerry Pianoforte, Associate Editor11.10.11
The adhesives and sealants market has had a number of challenging years. The global recession, and the ensuing fallout from the troubled housing market and automotive industry, continues to negatively impact the market.
“In general, market conditions remain depressed with relatively flat consumer takeaway,” said Frank Sullivan, RPM’s chairman and CEO. “We’re seeing continued depressed markets related to new home construction and lower than normal levels of housing turnover, along with continuing softness in construction markets in general.”
RPM’s consumer businesses continue to gain share in certain markets through the introduction of higher-end products at price points that are significantly higher than its traditional consumer lines.
On the industrial side, RPM’s building solutions group product lines, which include adhesives and sealants, are also gaining market share in a number of areas. “The group’s modest sales and earnings growth in the quarter is much stronger than the underlying fundamentals of the commercial and new home construction markets,” said Sullivan.
Adhesives and sealants participate in a variety of different markets and certain segments are faring better than others. Use of adhesives and sealants in construction markets represents approximately 25 percent of adhesive demand globally, according to William Magee, global director, strategy and marketing, H.B. Fuller. “The recession dramatically affected demand in these markets particularly in mature economies,” he said. “Use in electronics markets was also affected but this market represents less than 10 percent of global adhesive demand. Use in automotive markets was also affected of course. Packaging related markets, on the other hand, tend to be more recession resistant along with tapes, labels and other consumer related markets.”
“The economy has certainly caused a significant reduction in demand across the consumer and commercial markets since late 2008,” said Dominik Slappnig, head corporate communications and investor relations, Sika. “For the most part, demand has stabilized and in some markets we are seeing some growth beginning, but others remain more or less flat.”
Developments in Henkel’s markets for adhesives, sealants and surface treatment technologies in 2010 were mixed, although overall the company registered growth in the mid single-digit percentage range, said the company. “Our balanced business, regional portfolio and the launch of a number of new products, along with growth in emerging economies in particular supported the positive performance of the business sector,” said a Henkel spokesperson. “Overall, we were able to consolidate or even extend our leading positions globally, and in the individual regions we serve as well.”
In addition to the increase in demand for adhesives in the growth regions, Henkel reports that further salient trends are also expected to support growth of the adhesives market in the future. These include the constant need for greater energy efficiency and carbon emission reductions, which in turn will boost demand for sustainable products.
“Indeed, there are many adhesive applications in the field of renewable energies; and the increased use of light-weight construction and manufacturing materials also points to greater adhesive usage,” said the Henkel spokesperson. “In addition to growth in the already established spheres of application for adhesives and sealants, more and more new areas of use for these products are opening up as is seen, for example, in the manufacture of light-emitting diodes or the further inroads being made in drug delivery through the skin.”
While North America and Europe are still struggling to recover from the grips of the economic recession, emerging markets in Africa, the Middle East and Asia-Pacific represent areas of growth potential for adhesives and sealants manufacturers.
Henkel reported that it was able to significantly increase sales in the first half in the packaging, consumer goods and construction adhesives businesses despite supply shortages at some of its suppliers, the highest growth rates being achieved in Africa, The Middle East and Asia-Pacific.
“From a macroeconomic point of view this year there will be disproportionately strong global growth in customer industries of importance to us, with the transport sector expanding by between six and seven percent; electronics and electrical engineering by seven percent; and metal production and processing by around nine percent,” said the Henkel spokesperson. “With an expansion rate of about three percent, the consumer-related packaging sector will, according to our forecast, undergo below-average growth compared to industry as a whole. Construction will remain in the doldrums. Even after several years of absolute declines in output, growth in this sector is likely to stay below two percent. Moreover, this moderate rise is exclusively due to expansion in the emerging economies.”
According to H.B. Fuller’s Magee, use of adhesives in markets that are experiencing organic growth present opportunity. “These include packaging, electronics, tape, label and nonwovens,” he said. “However, the use of adhesives to replace mechanical fastening in many structural markets continues to represent a growth opportunity for the adhesives industry.”
Opportunities for growth in the consumer markets exist in a few areas, according to Slappnig. “As DIYers are more focused on renovating existing homes, they are also turning to better quality sealants and adhesives to achieve longer lasting renovation projects. ‘Fix it Once’ as opposed to doing the project with a lower quality/lower cost product that may have to be done over again in the short-term appears to be the clear trend. Greener and lower VOC products also continues to be the trend.”
Raw Material and Environmental Issues
In order to take full advantage of growth opportunities adhesives and sealant manufacturers must find ways to deal with raw material issues.
H.B. Fuller’s primary goal is to innovate in terms of the raw materials it uses and how they use them. “This allows us to insulate ourselves and our customers from the continued raw material volatility,” said Magee. “At the same time we must manage our price in line with the value that adhesives add to any structure. Generally the adhesive cost is only a small portion of the total cost of any structure, but it brings significant value to its end-use. We have many products that offer energy savings to our customers by enhancing efficiency on the line. Our own global sourcing and operations teams are continually looking at our production and shipping efficiencies. In fact, we employ Lean Six Sigma principles throughout our business to minimize energy costs.”
RPM said it has more pricing flexibility and more pricing agility in the industrial segment than in the consumer segment. “That’s been true really throughout RPM’s history,” said Sullivan. “Our expectation for the balance of the year is that raw material costs will be a volatile mix – with some declining and others rising in price. However, our raw material costs in total will remain flat from where they are today.”
Henkel anticipates that prices for raw materials and packaging will continue to affect their bottom line. Limited capacities among some manufacturers could also lead to supply shortages. “Henkel expects an increase in the overall price of raw materials, packaging, contract manufacturing and traded goods in the low teens percentage range this year,” the spokesperson said. “Henkel intends to offset rising raw material and energy costs by selling price increases. Further increases in raw material and packaging prices, in some cases substantial, also represent a risk, as do supply shortages with respect to certain raw materials, particularly those required by the adhesive technologies business sector.”
“To deal with rising raw material and energy costs, Sika has had to focus on new and more effective ways to take costs out of our own operations and processes,” said Slappnig. “While we have made good progress on our initiatives, we have also raised prices in certain segments where appropriate.”
In addition to raw material prices, complying with environmental regulations is a key issue for the adhesives and sealants market. These regulations are constantly being amended and consequently, manufacturers must develop new products that meet both the environmental and consumer’s demands.
“Regulations such as REACH present challenges and add cost for all chemical producers, and the impacts for adhesive manufacturers are no different,” said Magee. “In our view, other regulatory changes present challenges for H.B. Fuller and the industry to innovate and develop solutions which address these changes. There are many adhesive technology options which can address VOC related and other changes; it’s a matter of using these tools to meet the needs of the particular industry performance required.”
“VOC and environmental requirements are a major driver of product innovations for the future,” said Slappnig. “California sets the benchmark but other states follow quickly and the trends are clear. While this can add cost in some products it can also create opportunities for those who are fast and able to adapt well to the evolving requirements.”
New Technology
H.B. Fuller has introduced a variety of innovative new products. Advantra Encore and Liquamelt adhesive platforms offer customers alternatives that provide environmental benefits such as lower energy and adhesive consumption and less waste, and are more readily available to the packaging market than traditional hot melt technologies.
For its flexible packaging customers, H.B. Fuller responded with its Flextra Fast and Flextra Quiet adhesive technologies that enable faster processing, lower work-in-process, use of bio-based films and improve consumer satisfaction with the end package.
Clean Melt LT hot melt adhesives for case and carton are formulated to provide high mileage, lower maintenance costs, reduce energy consumption and improve safety due to lower application temperatures.
In addition, the Full-Care family of hot melt adhesives are based on multiple technology platforms, including olefin-based technology for enhanced supply flexibility. Full-Care adhesives are formulated to enhance production, minimize downtime and maintenance, which help manufacturers achieve more mileage with less adhesive.
RPM has launched a number of new products. Some of the new products from DAP include Caulk Backer Rod to fill large cracks and gaps prior to caulking or sealing to prevent joint failure and save on caulk usage.
StrongStik Heavy Duty All-Purpose Construction Adhesive was specially formulated for general construction, remodeling, maintenance and repair projects that require extra bonding power.
Lastly, RPM’s Fast ‘N Final Lightweight Spackling formula has unique performance characteristics that have been validated by UL Environment and meet the requirements for Greenguard Children and Schools certification, according to the company.
Henkel has made a number of new product launches. Aerodag Ceramishield is a ceramic dry film coating that is a durable anti-spatter protection for welding equipment; Loctite AssureCure System is a light cure adhesives system used for a wide range of medical items, such as syringes, catheters, blood filters or cannulas; Loctite 6300 for cylindrical assemblies, gasketing product Loctite 5800, and the thread sealant and Loctite 5400 make Henkel the only producer of a complete portfolio of non-hazardous anaerobic adhesives.
Henkel’s Loctite brand will be expanding its health and safety range with three innovative anaerobic products. The retaining adhesive Loctite 6300 for cylindrical assemblies, gasketing product Loctite 5800, and the thread sealant Loctite 5400 all combine technology with sustainability, according to the company. Henkel already introduced its first two anaerobics with a “white” material safety data sheet in 2009: the threadlockers Loctite 2400 and Loctite 2700. The three newly developed Loctite products also contain no hazardous ingredients. This means that according to the tough regulations of (EC) No. 1907/2006 – ISO 11014-1, they do not have to be labeled with any hazard symbols, risk or safety phrases. Nor do they contain any declarable CMRs (carcinogenic, mutagenic and reproductive toxins).
Sika has launched its first new Sikaflex sealant based on the i-Cure technology, which offers zero VOC and improved properties for the commercial markets. The company has also launched the new SikaSil line of silicone sealants for the commercial and consumer markets. Lastly, the new Sikaflex Universal adhesive was recently launched in Home Centers.
Side bar
H.B. Fuller Company (NYSE: FUL), a leading global adhesives provider, has received notification from NSF International that its UR3501 A/B two part adhesive for spiral wound membrane bonding for reverse osmosis (RO) filtration has been tested and certified by NSF to NSF/ANSI Standard 61 - Drinking Water System Components - Health Effects. This certification adds to H.B. Fuller's NSF certification of two of its potting compounds (FE7811 Epoxy and UR2187 Polyurethane) for hollow fiber water filtration. H.B. Fuller has been a leading supplier of spiral wound membrane bonding for RO for more than 20 years, and now this NSF certification further helps H.B. Fuller customers achieve their own certification objectives.
This is an important distinction that gives customers confidence that NSF Certified H.B. Fuller adhesives have been tested and meet this important criterion for filter manufacturing. Using innovative adhesives that not only perform consistently but also carry the NSF certification mark brings H.B. Fuller's customers closer to achieving NSF Certification for their finished filters. In some instances, manufacturers using NSF Certified materials can bypass some or all chemical testing when seeking NSF Certification of their filter, providing assurance that their finished products meet all standards.
"This NSF International certification represents our continuing and deepening commitment to the membrane separation industry," said Matt McGreevy, H.B. Fuller business director. "We strive to provide our customers with every advantage in meeting industry requirements."
“In general, market conditions remain depressed with relatively flat consumer takeaway,” said Frank Sullivan, RPM’s chairman and CEO. “We’re seeing continued depressed markets related to new home construction and lower than normal levels of housing turnover, along with continuing softness in construction markets in general.”
RPM’s consumer businesses continue to gain share in certain markets through the introduction of higher-end products at price points that are significantly higher than its traditional consumer lines.
On the industrial side, RPM’s building solutions group product lines, which include adhesives and sealants, are also gaining market share in a number of areas. “The group’s modest sales and earnings growth in the quarter is much stronger than the underlying fundamentals of the commercial and new home construction markets,” said Sullivan.
Adhesives and sealants participate in a variety of different markets and certain segments are faring better than others. Use of adhesives and sealants in construction markets represents approximately 25 percent of adhesive demand globally, according to William Magee, global director, strategy and marketing, H.B. Fuller. “The recession dramatically affected demand in these markets particularly in mature economies,” he said. “Use in electronics markets was also affected but this market represents less than 10 percent of global adhesive demand. Use in automotive markets was also affected of course. Packaging related markets, on the other hand, tend to be more recession resistant along with tapes, labels and other consumer related markets.”
“The economy has certainly caused a significant reduction in demand across the consumer and commercial markets since late 2008,” said Dominik Slappnig, head corporate communications and investor relations, Sika. “For the most part, demand has stabilized and in some markets we are seeing some growth beginning, but others remain more or less flat.”
Developments in Henkel’s markets for adhesives, sealants and surface treatment technologies in 2010 were mixed, although overall the company registered growth in the mid single-digit percentage range, said the company. “Our balanced business, regional portfolio and the launch of a number of new products, along with growth in emerging economies in particular supported the positive performance of the business sector,” said a Henkel spokesperson. “Overall, we were able to consolidate or even extend our leading positions globally, and in the individual regions we serve as well.”
In addition to the increase in demand for adhesives in the growth regions, Henkel reports that further salient trends are also expected to support growth of the adhesives market in the future. These include the constant need for greater energy efficiency and carbon emission reductions, which in turn will boost demand for sustainable products.
“Indeed, there are many adhesive applications in the field of renewable energies; and the increased use of light-weight construction and manufacturing materials also points to greater adhesive usage,” said the Henkel spokesperson. “In addition to growth in the already established spheres of application for adhesives and sealants, more and more new areas of use for these products are opening up as is seen, for example, in the manufacture of light-emitting diodes or the further inroads being made in drug delivery through the skin.”
While North America and Europe are still struggling to recover from the grips of the economic recession, emerging markets in Africa, the Middle East and Asia-Pacific represent areas of growth potential for adhesives and sealants manufacturers.
Henkel reported that it was able to significantly increase sales in the first half in the packaging, consumer goods and construction adhesives businesses despite supply shortages at some of its suppliers, the highest growth rates being achieved in Africa, The Middle East and Asia-Pacific.
“From a macroeconomic point of view this year there will be disproportionately strong global growth in customer industries of importance to us, with the transport sector expanding by between six and seven percent; electronics and electrical engineering by seven percent; and metal production and processing by around nine percent,” said the Henkel spokesperson. “With an expansion rate of about three percent, the consumer-related packaging sector will, according to our forecast, undergo below-average growth compared to industry as a whole. Construction will remain in the doldrums. Even after several years of absolute declines in output, growth in this sector is likely to stay below two percent. Moreover, this moderate rise is exclusively due to expansion in the emerging economies.”
According to H.B. Fuller’s Magee, use of adhesives in markets that are experiencing organic growth present opportunity. “These include packaging, electronics, tape, label and nonwovens,” he said. “However, the use of adhesives to replace mechanical fastening in many structural markets continues to represent a growth opportunity for the adhesives industry.”
Opportunities for growth in the consumer markets exist in a few areas, according to Slappnig. “As DIYers are more focused on renovating existing homes, they are also turning to better quality sealants and adhesives to achieve longer lasting renovation projects. ‘Fix it Once’ as opposed to doing the project with a lower quality/lower cost product that may have to be done over again in the short-term appears to be the clear trend. Greener and lower VOC products also continues to be the trend.”
Raw Material and Environmental Issues
In order to take full advantage of growth opportunities adhesives and sealant manufacturers must find ways to deal with raw material issues.
H.B. Fuller’s primary goal is to innovate in terms of the raw materials it uses and how they use them. “This allows us to insulate ourselves and our customers from the continued raw material volatility,” said Magee. “At the same time we must manage our price in line with the value that adhesives add to any structure. Generally the adhesive cost is only a small portion of the total cost of any structure, but it brings significant value to its end-use. We have many products that offer energy savings to our customers by enhancing efficiency on the line. Our own global sourcing and operations teams are continually looking at our production and shipping efficiencies. In fact, we employ Lean Six Sigma principles throughout our business to minimize energy costs.”
RPM said it has more pricing flexibility and more pricing agility in the industrial segment than in the consumer segment. “That’s been true really throughout RPM’s history,” said Sullivan. “Our expectation for the balance of the year is that raw material costs will be a volatile mix – with some declining and others rising in price. However, our raw material costs in total will remain flat from where they are today.”
Henkel anticipates that prices for raw materials and packaging will continue to affect their bottom line. Limited capacities among some manufacturers could also lead to supply shortages. “Henkel expects an increase in the overall price of raw materials, packaging, contract manufacturing and traded goods in the low teens percentage range this year,” the spokesperson said. “Henkel intends to offset rising raw material and energy costs by selling price increases. Further increases in raw material and packaging prices, in some cases substantial, also represent a risk, as do supply shortages with respect to certain raw materials, particularly those required by the adhesive technologies business sector.”
“To deal with rising raw material and energy costs, Sika has had to focus on new and more effective ways to take costs out of our own operations and processes,” said Slappnig. “While we have made good progress on our initiatives, we have also raised prices in certain segments where appropriate.”
In addition to raw material prices, complying with environmental regulations is a key issue for the adhesives and sealants market. These regulations are constantly being amended and consequently, manufacturers must develop new products that meet both the environmental and consumer’s demands.
“Regulations such as REACH present challenges and add cost for all chemical producers, and the impacts for adhesive manufacturers are no different,” said Magee. “In our view, other regulatory changes present challenges for H.B. Fuller and the industry to innovate and develop solutions which address these changes. There are many adhesive technology options which can address VOC related and other changes; it’s a matter of using these tools to meet the needs of the particular industry performance required.”
“VOC and environmental requirements are a major driver of product innovations for the future,” said Slappnig. “California sets the benchmark but other states follow quickly and the trends are clear. While this can add cost in some products it can also create opportunities for those who are fast and able to adapt well to the evolving requirements.”
New Technology
H.B. Fuller has introduced a variety of innovative new products. Advantra Encore and Liquamelt adhesive platforms offer customers alternatives that provide environmental benefits such as lower energy and adhesive consumption and less waste, and are more readily available to the packaging market than traditional hot melt technologies.
For its flexible packaging customers, H.B. Fuller responded with its Flextra Fast and Flextra Quiet adhesive technologies that enable faster processing, lower work-in-process, use of bio-based films and improve consumer satisfaction with the end package.
Clean Melt LT hot melt adhesives for case and carton are formulated to provide high mileage, lower maintenance costs, reduce energy consumption and improve safety due to lower application temperatures.
In addition, the Full-Care family of hot melt adhesives are based on multiple technology platforms, including olefin-based technology for enhanced supply flexibility. Full-Care adhesives are formulated to enhance production, minimize downtime and maintenance, which help manufacturers achieve more mileage with less adhesive.
RPM has launched a number of new products. Some of the new products from DAP include Caulk Backer Rod to fill large cracks and gaps prior to caulking or sealing to prevent joint failure and save on caulk usage.
StrongStik Heavy Duty All-Purpose Construction Adhesive was specially formulated for general construction, remodeling, maintenance and repair projects that require extra bonding power.
Lastly, RPM’s Fast ‘N Final Lightweight Spackling formula has unique performance characteristics that have been validated by UL Environment and meet the requirements for Greenguard Children and Schools certification, according to the company.
Henkel has made a number of new product launches. Aerodag Ceramishield is a ceramic dry film coating that is a durable anti-spatter protection for welding equipment; Loctite AssureCure System is a light cure adhesives system used for a wide range of medical items, such as syringes, catheters, blood filters or cannulas; Loctite 6300 for cylindrical assemblies, gasketing product Loctite 5800, and the thread sealant and Loctite 5400 make Henkel the only producer of a complete portfolio of non-hazardous anaerobic adhesives.
Henkel’s Loctite brand will be expanding its health and safety range with three innovative anaerobic products. The retaining adhesive Loctite 6300 for cylindrical assemblies, gasketing product Loctite 5800, and the thread sealant Loctite 5400 all combine technology with sustainability, according to the company. Henkel already introduced its first two anaerobics with a “white” material safety data sheet in 2009: the threadlockers Loctite 2400 and Loctite 2700. The three newly developed Loctite products also contain no hazardous ingredients. This means that according to the tough regulations of (EC) No. 1907/2006 – ISO 11014-1, they do not have to be labeled with any hazard symbols, risk or safety phrases. Nor do they contain any declarable CMRs (carcinogenic, mutagenic and reproductive toxins).
Sika has launched its first new Sikaflex sealant based on the i-Cure technology, which offers zero VOC and improved properties for the commercial markets. The company has also launched the new SikaSil line of silicone sealants for the commercial and consumer markets. Lastly, the new Sikaflex Universal adhesive was recently launched in Home Centers.
Side bar
H.B. Fuller Company (NYSE: FUL), a leading global adhesives provider, has received notification from NSF International that its UR3501 A/B two part adhesive for spiral wound membrane bonding for reverse osmosis (RO) filtration has been tested and certified by NSF to NSF/ANSI Standard 61 - Drinking Water System Components - Health Effects. This certification adds to H.B. Fuller's NSF certification of two of its potting compounds (FE7811 Epoxy and UR2187 Polyurethane) for hollow fiber water filtration. H.B. Fuller has been a leading supplier of spiral wound membrane bonding for RO for more than 20 years, and now this NSF certification further helps H.B. Fuller customers achieve their own certification objectives.
This is an important distinction that gives customers confidence that NSF Certified H.B. Fuller adhesives have been tested and meet this important criterion for filter manufacturing. Using innovative adhesives that not only perform consistently but also carry the NSF certification mark brings H.B. Fuller's customers closer to achieving NSF Certification for their finished filters. In some instances, manufacturers using NSF Certified materials can bypass some or all chemical testing when seeking NSF Certification of their filter, providing assurance that their finished products meet all standards.
"This NSF International certification represents our continuing and deepening commitment to the membrane separation industry," said Matt McGreevy, H.B. Fuller business director. "We strive to provide our customers with every advantage in meeting industry requirements."
