02 May 2014 16:10 [Source: ICB]
Government policy to encourage investment in environmentally friendly products and processes will boost the country’s demand for adhesives and sealants
Continued economic growth, government policies encouraging the expansion of renewable energy, high-speed rail and other high-tech sectors, and an ample supply of raw materials are contributing to strong growth in the adhesives and sealants market in China.
“The economic environment in China continues to be beneficial for the adhesives and sealants industry,” notes Michael Yang, Secretary General of the China Adhesives and Tape Industry Association (CATIA).
Copyright: China Adhesives and Tape Industries Association
“We are encouraged by the initial data for 2013, which indicates that the noticeable decline in the growth rate for both output and sales in 2012 has been arrested,” Yang says. In fact, the growth rates for both output and revenue increased steadily in 2009-2011 before dropping sharply in 2012, which was attributed to certain tighter economic policies introduced by the government (such as various restrictions on the purchase of urban houses in order to control rising prices, suspension of railway investments due to a severe accident, strict control of personal car licence numbers in large cities in order to avoid traffic jams, and the adjustment of oil prices).
For 2013, CATIA estimates that the growth rates for output and sales revenue increased to 9.7% and 8.6%, up from 8.5% and 5.9% in 2012, respectively (see first table).
Drilling down to specific end-use applications, the largest markets for adhesives and sealants in China include paper, board and related products (~36%), building and construction (~27%), and woodworking (~15%). Transportation, and footwear/leather each account for 7-8% of the market, and assembly operations accounts for just under 6% of sales.
HEALTHY GROWTH FROM END-USERS
According to CATIA estimated data for 2013, the volume growth for adhesives and sealants was quite strong in most of these sectors last year (see second table). Assembly operations led with a very high growth rate of 31.5%, which may not be surprising since it is starting from a very small base. The transportation and building/construction sectors also experienced very healthy growth in 2013.
Volume sales for retail, and even paper and related applications, which is a declining market for US and European manufacturers, grew at reasonable rates. Only adhesives for woodworking experienced a decline in volume sales in 2013, which can be attributed to reduced demand for wooden furniture, partly due to worries about formaldehyde emissions and individual health concerns.
Yang is expecting the strong level of growth observed for adhesives and sealants in the majority of these end-use markets in 2013 to continue given the high growth occurring in many of the end-use markets, recent government policies that will impact several high-technology markets that employ adhesives and sealants, and increasing supply of raw materials.
In addition, the key issues that have challenged the Chinese adhesives and sealants industry in the recent past – including excess production capacity, inadequate domestic demand, and poor product competitiveness – are being addressed, according to Yang.
Macroeconomic policies by the government are, in particular, expected to have a strong, positive impact on the adhesives industry in China, according to Yang.
“The government is encouraging investment in renewable energy technologies, particular solar energy and wind power, both of which consume a significant amount of high-performance adhesives and sealants,” he notes.
The high-speed rail and metro sectors are also being emphasised by the government and Yang expects this emerging market will create additional demand for adhesives and sealants. Other industries for which the government has issued policies include electronic appliances, automobiles and construction, all of which utilise adhesives and sealants and are experiencing strong growth in the country.
“The macroeconomic policies issued by the government are designed to encourage further growth in these industries, most of which are emerging sectors for China. As a consequence, increased demand in these markets will expand the domestic applications for adhesives and sealants and contribute to real growth of our industry as well,” Yang observes.
With respect to the types of adhesives that will be most impacted, Yang notes that the policies most recently issued by the National Development and Reform Commission (NDRC), which has broad administrative and planning control over the Chinese economy, specifically refer to the use of more environmentally friendly adhesive technologies.
As a result, he expects that waterborne, solvent-free, hot melt and UV-cured formulations will experience the greatest growth going forward, generally at the expense of solvent-based products. This trend is, in fact, already occurring. Based on CATIA’s data for 2012 and estimates for 2013, it can be clearly seen that the sales volumes for waterborne, hot melt and reactive adhesives are increasing markedly, while those of solvent-based adhesives are beginning to decline (see bottom table).
A second dynamic underway in China that is beneficial to adhesive and sealant manufacturers is the increased capacity for many of the major raw materials needed to produce these products.
“The state of raw material supply in China is definitely favourable for downstream markets,” asserts Yang. “There is, in fact, oversupply for some of the major ingredients that are used to manufacture adhesives and sealants, which means that CATIA’s members are able to reduce their cost of goods and be more competitive both domestically and globally.”
Specific products of note include acrylic acid (AA) and ester monomers, vinyl acetate monomer (VAM), chloroprene rubber, and various resin chemistries, including epoxies, EVA resins and silicones. Together, Yang believes, these factors – the general ongoing growth of the Chinese economy, the implementation of government policies encouraging the growth of high technology emerging sectors, and ready access to lower-cost raw materials – will fuel further growth of the Chinese adhesives market.
“We expect the government will continue to encourage the use of environmentally friendly manufacturing processes, products and industries, such as renewable energy. As a result, those adhesive and sealant technologies that have reduced environmental impact will see the greatest growth. In addition, the continued emphasis by the government on high technology sectors, and particularly solar energy, wind power and high-speed rail and metro, will create greater demand for specialty adhesives that are very high quality and offer high performance and multi-functionality.
“Those Chinese manufacturers that are innovative and can develop products that meet requirements for quality and performance while also having an attractive environmental profile will have the opportunity to realise strong growth,” Yang concludes.
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