Pricing pressures hit adhesives market

By Staff -- Industrial Distribution, 11/1/2000

High oil and gas prices continue to impact industry across the board-and the adhesives and sealants market is no exception.

While business conditions continue to be good for most, rising raw materials costs are causing price increases and have contributed to a cooling manufacturing sector in recent months. In September, the National Assn. of Purchasing Management announced that manufacturing activity had declined in August after 18 months of growth.

Richard D'Autilio, director of marketing and sales for the construction and distribution division of Bostik, Inc., says the market for his company's products remains good, though it's not as strong as it's been in the past few years.

"The first half of the year, it was very strong," says D'Autilio, "but since June, it has moderated and slowed down ... that's the trend in most of the business out there."

Massachusetts-based Bostik manufactures adhesives and sealants used in a range of industries. In addition to high oil prices, D'Autilio says rising interest rates have also led to a more moderate business environment over the last few months.

While sales are solid for many in the industry, the pressure of rising raw material costs is causing many firms to raise prices, which has a trickle-down effect to distributors and end users. In August, National Starch and Chemical Co. announced it would add a 9.5 percent surcharge to the price of all its liquid adhesives sold in the United States.

"This temporary surcharge is intended to help National Starch recover a portion of raw material costs which have been steadily rising over the past 15 months," W. Dexter Brown, senior vice president, adhesives-Americas, said in a prepared statement. "We do not expect any relief before the end of the year."

The surcharge will be rolled back as raw material costs decline, according to the company.

Kevin Boyle, director of industrial distribution for Loctite Corp., says his company is experiencing much of the same on pricing issues. Boyle says Loctite is increasing prices anywhere from five to 10 percent, due to both rising raw materials costs and the effect of a comeback in the Far East and Pacific Rim markets.

As far as business goes however, Boyle says Loctite is having a record year, with sales to distribution up 16 percent through mid-September. While Boyle attributes the increase to many of Loctite's internal business programs, he says integrated supply and systems contracts at the distributor level are also key factors.

"Trends toward systems contracts and integrated supply are driving consolidation, and those with broader lines are enjoying more growth," says Boyle. "The breadth of our line is having a great impact."

Looking ahead, industry analysts predict annual growth of between four and five percent for the U.S. polyurethane adhesives and sealants market. That's according to a recent report by research firm Frost & Sullivan, which studied market trends for 1997 through 2005. Key market drivers in that segment are: excellent performance characteristics of the product, adhesives being used increasingly to replace mechanical fasteners, productivity improvements in end-user manufacturing, and an increase in residential remodeling, according to the report.