Since 1893, when Edward Goodrich Acheson patented the manufacturing process for silicon carbide—the industrial abrasive he called “carborundum”—abrasives have played an integral role in the development and maturation of industrial technology.

“Without carborundum, the mass production manufacturing of precision-ground, interchangeable metal parts would be practically impossible,” notes the National Inventors Hall of Fame in Akron, Ohio, where 66 years after his death Acheson was inducted in 1997.

He'd hardly recognize today's abrasives industry. American manufacturers produced $3.6 billion worth of abrasive products in 2005, according to The Abrasives Industry in Europe and North America, a report by industry analysts John Briggs and Ted Giese. In Western Europe that year, abrasives manufacturers produced roughly $4 billion worth of industrial abrasives and Eastern European manufacturers turned out about $995.8 million worth of abrasives, according to the report.

And in 2002 (the most recent year for which comprehensive government statistics are available), there were about 2,400 abrasives distributors in the United States, according to the U.S. Census Bureau's Industrial Supplies: 2002 report. Those distributors had sales of more than $4.24 billion that year in abrasives alone and total sales of more than $14.77 billion.

But as with just about every industry, the increasingly global nature of commerce has changed the face of the abrasives sector with an ongoing series of mergers and acquisitions. Large multinational players buy up their smaller brethren and look to cut costs by moving production to countries with low labor rates, while mid-market companies seek to grow by acquiring or merging with their mid- and small-sized competitors.

The product line's ubiquity in manufacturing has closely tied its fortunes to the ups and downs of that industry. Like manufacturing as a whole, the abrasives sector has bounced back somewhat from the recession of 2000-2002, says Giese, who is also director of the Abrasives Engineering Society.

“Many companies are now seeing growth and profits not seen since the 1990s,” he notes.

And as with any other segment of the global economy, the good fortune breeds consolidation as companies seek to broaden their product lines and geographic footprints.

As an example, Giese cites the 3M Corp., a major player in abrasives, which recently acquired a pair of smaller competitors: General Industrial Diamond and Standard Abrasives.

“The driving force for consolidation appears to be more in the capture of specific markets … than in the acquisition of new technologies,” he explains, adding that foreign companies such as France's Cinetic Industries are entering the American market through acquisitions. Cinetic bought the Landis Grinding Corp. and its abrasives subsidiaries CITCO and Gardner Abrasives in late 2005 (for a partial list of recent mergers and acquisitions in the abrasives industry, see page 30).

“The U.S. base of abrasives manufacturers continues to shrink slowly, but such shrinkage is relatively insignificant in an industry where only a few large companies dominate the key portions of the market,” Giese says.

Giese is quick to specify that consolidation isn't a death knell for smaller operators.

“In a business climate where profitability is a primary concern of large companies, there will always be room for small companies that are willing and able to develop niche markets that larger companies would consider too small to commit resources [to]. This is particularly true for the abrasives industry, where the number of applications is nearly limitless,” he says. “The many and diverse uses of abrasives—from the use of powdered abrasives to remove paint from semiconductors, to grit used in flap discs for sheet metal fabrication—will continually create opportunities for specialized applications.”

In 2002, abrasives—which once accounted for as much as one-third of General Tool & Supply Co.'s sales—had fallen to just 15 percent or 20 percent of total revenues, says Jim Miller, executive vice president of the Portland, Ore., distributorship.

That trend was driven by the closure or movement overseas of manufacturing customers, Miller says. Though abrasives still make up between 15 percent and 20 percent of the company's sales, it has diversified its product line and thus sells more quantity than it did five years ago.

“Business has grown, but it has grown across a number of product lines,” he explains. “A lot of it moved from your standard roughing abrasive to superabrasives. Superabrasives are now a bigger piece of the pie.”

The drive to increase market share has also prompted manufacturers to expand their product lines, notes Giese.

“Across the industry, companies are expanding product lines to stabilize businesses and avoid cyclic swings for specific product groups. More coated abrasives manufacturers are selling bonded products, for example,” he notes.

For Miller, the consolidation on the manufacturing side is a function of the increasingly global nature of commerce.

“I think a lot of the things you see have been because the transition has been from a focused national program to a very global set of issues,” he notes, citing companies with multinational operations such as 3M and French conglomerate Saint-Gobain, which owns the Norton Abrasives brand. “They're playing the game across the world, asking themselves, 'Where are the markets that match our capabilities? Where can we buy someone that will fill in where we're lacking?' … It's very interesting to watch, not only in abrasives. Now you're seeing more globally-oriented [abrasive] products. It's a global presentation, but it's still dominated by Saint-Gobain and 3M.”

Gene Huegin, president of Pferd Inc. in Leominster, Mass., cites a different form of consolidation in abrasives. The activity he's noticed is more on the distribution side—mostly because the ripest acquisition plums in manufacturing have already been plucked.

“A lot of that [consolidation] has continued, however many of the more sought-after consolidation targets probably have been taken at this point. The consolidation I'm seeing more of is on the distribution side,” Huegin explains.

For distributors, he adds, the consolidation is geared towards finding suppliers that can provide them with multiple product lines.

“If the economy should soften or worse in the next year or 18 months, there will be more impetus by distributors to find manufacturers that provide a nice consolidation option for them,” Huegin says. “When times get difficult and they're trying to meet rebate or freight issues, a manufacturer that offers a very comprehensive package becomes very viable to them.”

And there's a similar move afoot among end users as well.

“The [end] users also are saying, 'Why do I need seven or eight vendors coming in here to address process issues when I can go to a smaller number, maybe even one abrasives company, that can offer a soup-to-nuts solution?'” he notes.

Competition from Chinese abrasives manufacturers is another piece of the picture. Giese estimates that there are more than 800 abrasives firms in China, posing a potential short-term threat to domestic manufacturers via the lower prices they can ask for their products.

But a number of factors will prevent them from posing a long-term threat, he says.

“Rising materials prices, increasing export fees imposed by the Chinese government and poor exchange rates cut into their profit,” he explains. “Nonetheless the cheaper prices of Chinese goods has had an impact upon U.S. companies by forcing them to keep prices low.”

Giese says research and development of new abrasives is mostly limited to a few large companies and universities that have the necessary technical resources.

“Research that leads to new abrasives and products is beyond the capabilities of most small companies in this industry, with a few exceptions,” he says.

And abrasives R&D is largely an overseas phenomenon, led by the two conglomerates with truly global footprints, Giese adds.

“Using the number of recent patents as a measure, 3M and Saint-Gobain dominate advances in abrasives,” he notes. “Though there is important research scattered among universities in the United States, U.S. efforts are falling far behind other countries.”

Sales of new products such as superabrasives and premium aluminum oxide still lag behind the brown aluminum oxide used in coated abrasives belts.

“Abrasives will always be important, particularly for uses with new advanced materials,” Giese concludes. “The increasing applications of ceramics and other advanced materials will insure a growing market for superabrasive products. Markets for more conventional abrasives will be stable, because they are a basic tool or commodity needed by all facets of the manufacturing industry.”