ASC: Commentary

Two big topics of conversation will undoubtedly be on the minds of adhesive and sealant producers when they meet at the ASC’s Spring Convention in Nashville on 20-22 April: the ongoing impacts of last year’s sharp oil price drop and the continuing surge in the value of the dollar. The strength of US domestic growth and the imminent interest rate hike will undoubtedly also be in the mix for delegates’ conversations.

The oil price and the dollar moves both have the potential to drive down raw material prices for adhesives manufacturers – especially those traded internationally – as US producers are forced to react to lower priced imports and reduced opportunities to export excess production. The effect has already been seen in polyethylene contracts, for instance, which have fallen for the first time in several years, even though US ethylene based on ethane is by and large not directly affected by the oil price.

The lower oil price should also have a positive impact on consumer spending, already reasonably healthy as US GDP continues to expand steadily. Automotive and construction sectors are recovering and the jobs market looks to be on a positive trajectory.

Taken together these create a positive situation for the adhesives industry, which can expect to benefit in volume and margin terms. Manufacturers’ ongoing drive to add value through innovation and a solution- rather than simple product-offering approach, should also be paying dividends.

One sign of the positive assessment of the sector is the steady and growing interest in merger and acquisitions (M&A) activity in the industry. There have been several big deals of late, but many more smaller ones are on the cards, as strategic and private equity buyers look to build their presence in a healthy sector of the chemicals market.

These topics will be the subject of presentations at the ASC conference. This special publication, produced by ICIS for ASC, also addresses these and other topics, such as innovation and sustainability. I hope it helps with those interesting conversations!