Adhesives and Sealants

SIC 2891

Companies in this industry

Industry report:

The adhesives and sealants industry consists primarily of manufacturers of industrial and household adhesives, glues, caulking compounds, sealants, and linoleum, tile, and rubber cements from vegetable, animal, or synthetic plastics materials, purchased or produced in the same establishment. Establishments primarily engaged in manufacturing gelatin and sizes are classified in SIC 2899: Chemicals and Chemical Preparations, Not Elsewhere Classified, and those manufacturing vegetable gelatin or agar-agar are classified in SIC 2833: Medicinal Chemicals and Botanical Products.

Industry Snapshot

The adhesives and sealants industry includes two chemically similar but functionally different groups of formulated products, adhesive and sealants. Adhesive products are used to create a bond between two materials. Sealants are used to create an impenetrable barrier to gas or moisture. Adhesives and sealants are made from precise blends of petroleum-derived plastic resins, synthetic rubber elastomers, and agents or additives used to enhance certain characteristics. The final formulation ultimately depends on the end use. Industries that typically use adhesives and sealants include construction, consumer products, assembly, packaging, labeling, and transportation.

The industry grew steadily throughout the 2000s, reaching $5.4 billion in 2008. Individual companies seeking to increase their revenues looked to mergers and acquisitions, particularly in foreign markets, where industry growth was expected to surpass that in the United States. By the mid-2000s the adhesives and sealants industry was being affected by ongoing consolidation, high raw materials costs, and increasing globalization of the market.

Background and Development

The adhesives and sealants industry's development can best be explained by the economy-wide transition from conventional materials (glass, stone, wood, and metal) to lighter and more economical resources, mainly petroleum-based plastics. These new materials mandated new methods of assembly and suitable bonding components. A generation of new products emerged to service this rapid growth area.

The market for reactive adhesives grew as the automotive industry moved away from mechanical fasteners. At the same time, packaging applications for reactives were on the rise, adding optimism to the adhesives industry. In the early 1990s, the reactives sector of the industry was dominated by epoxy and polyurethane systems, with urethanes taking a significantly larger portion of the market. About 100 million pounds of urethane resin went to adhesive and sealant applications in the early 1990s, compared to 28 million pounds of epoxy resin. Urethanes are most often used with flexible materials in high-impact applications, while epoxies are known for their hardness and are used with more rigid substances.

The development of epoxy/urethane hybrids attracted particular interest because of the broad range of demands placed on adhesives used in the automotive industry. Both manufacturers and users of these products were looking for the best of both worlds by combining high-tensile strength and compatibility with flexible materials. The problem was that a sacrifice was usually made in shelf life, toughness, or curing flexibility. The development of these hybrids minimized the number of sacrifices required. Developments in reactive adhesives for the auto industry also brought benefits to other industrial sectors, including appliance manufacturing.

In the second half of the 1990s, the sealants industry continued to suffer from the vagaries of the construction market, especially in maintenance and repair. According to the U.S. Census Bureau, the adhesives and sealant industry grew from $7.2 billion in shipments in 1998 to $7.9 billion in shipments in 2000. The total number of industry employees grew from 21,692 to 22,794, with a total payroll of $979 million. The industry's 13,560 production workers earned an average wage of $15.67 per hour in 2000.

Products showing the greatest growth in the late 1990s included natural-base glues and adhesives, specifically those made from natural gums, shellac, lacquers, and varnishes; hot melt adhesives; epoxy adhesives; rubber cements; and sealants. Pressure-sensitive adhesives also increased. Products with declining sales included several kinds of synthetic resin and rubber adhesives, rubber and synthetic resin combinations, and protein and dextrine vegetable natural adhesives. Nonetheless, when measured by value of product shipments, synthetic resin and rubber adhesives, including epoxies, hot melt adhesives, rubber cements, and pressure-sensitive adhesives, held 58 percent of the market share.

In the early twenty-first century, products with the most expected growth included electronics adhesives for printed wiring boards, hot melt systems, and automotive adhesives. In the late 1990s, the U.S. hot melt adhesives market was valued at $1 billion and was expected to grow 3 percent per year. The most common end-uses for hot melt adhesives were packaging, with 38 percent of the market, and disposable and pressure-sensitive products, each with 15 percent of the market.

Growth, however, is controlled by the availability of raw materials. Hot melt adhesives require hydrocarbon resins. Demand for those resins increased by 2.6 percent annually through the early 2000s. Many manufacturers attempted to expand their production capabilities to keep up with the growth of the raw materials market, and demand was expected to continue to increase at an annual rate of 4 percent. Although supply remained adequate, prices rose, which meant that the largest companies were best positioned to compete for available raw materials.

Despite heightened industry consolidation in the late 1990s, industry watchers did not expect the larger companies to push out smaller competitors altogether. As specialized applications for adhesives increase in demand, smaller firms are expected to be able to carve out their own unique niches. Nonetheless, larger companies began taking a larger portion of market share. In the late 1990s, over 55 percent of the market was controlled by the top 20 companies, compared to 50 percent in 1982.

Because the adhesives and sealants markets depend greatly upon secondary industries, trends in other sectors of the economy can have a big impact on this industry. One sector showing increasing interest in adhesives and sealants was the automotive industry. Several U.S. automakers joined with adhesive and sealant makers to develop industry-specific applications to cut costs, reduce weight, and even increase recyclability of cars made with these products. Chemical methods are cheaper than mechanical methods for automakers, and that means mpre adhesive use by the component suppliers.

Concerns over the environmental impact of adhesives and sealants increased following the passage of the Clean Air Act Amendments of 1990. Under that legislation, the Environmental Protection Agency (EPA) was required to set standards for volatile organic compounds (VOC) content and emissions reduction. In 1999, the agency proposed a regulation that required adhesives products purchased by consumers to have a VOC content of 10 percent or less. Because the regulation was based on California guidelines already in place, most companies with a nationwide market were not expected to be greatly affected. Such regulations increased the production and demand for water-based and hot melt products, although water-based adhesives may still contain toxic residues.

Despite numerous challenges, including a slumping economy that limited profitability within many industries, growth in the adhesives and sealants industry was steady, albeit slow, during the first half of the 2000s. According to various industry experts, by the mid-2000s, the U.S. adhesives and sealant market was valued between $8.5 billion and $11.45 billion. Adhesive products accounted for approximately 85 percent of sales and sealants accounted for the remaining 15 percent of sales. Sales were split among several groups: construction (32 percent), packaging (31 percent), nonrigid bonding (14 percent), transportation (10 percent), tapes (8 percent), rigid bonding (7 percent), and consumer (less than 1 percent).

Several factors in the mid-2000s presented challenges to significant growth. First, the industry was considered mature, so growth was expected to come primarily through industry consolidation as companies looked to increase their bottom line by adding to their portfolio. Most of the companies were either those earning in excess of $700 million or those earning less than $50 million. Midsize companies were quickly disappearing as they were swallowed up by the few conglomerates.

The second challenge facing the industry was the spiraling cost of operations and raw materials. Many adhesive and sealant companies were forced to raise prices to offset the increasing costs associated with production. Feedstock prices rose significantly during the mid-2000s, as did the cost of crude oil, petrochemicals, and natural gas. The industry was hit with not only increased costs of raw materials used to manufacture adhesives and sealants but also higher utility rates, health insurance rates, and costs associated with environmental and regulatory compliance. The adhesive manufacturing industry's cost of materials was $4.61 billion in 2005, up from $3.68 billion in 2002.

Finally, in the mid-2000s, the industry faced the challenges of the ever-increasing globalization of the market. In particular, China's rapidly expanding economy was drawing buyers and producers to its market. The largest adhesive and sealant companies looked outside the mature U.S. market to find organic growth in Asia. However, smaller U.S.-based companies struggled to compete with international companies with much lower wage rates and far fewer regulatory and compliance issues.

Current Conditions

According to industry statistics, an estimated 1,394 manufacturers of adhesives and sealants produced products valued at $5.4 billion in 2008, with industry-wide employment of 39,123 workers. California led in market share with 10.9 percent, while Minnesota led in shipments of $1.4 billion.

The 641 manufacturers of adhesives accounted for 46 percent of the market with 13,056 workers and shipments of $1.3 billion. Adhesives and sealants were manufactured by 328 establishments employing 13,899 and shipping nearly $3 billion in products. There were 161 manufacturers of sealants employing 3,406 workers and generating $208 million in revenue.

Other industry sectors were laminating compounds manufacturers that employed 767 workers with sales of $391.6 million; epoxy adhesives were manufactured by 871 workers who shipped $311.4 million; caulking compounds, synthetic rubber, or plastic contributed $32.7 million; and sealing compounds for pipe threads or joints shipped $29.1 million.

A difficult overall market environment for adhesive and sealants manufacturers was burdened by decreased demand among key industrial customers. A general trend toward postponement of construction projects had an adverse effect on the performance of the building adhesives segment as well. Elsewhere, significant reductions in volume occurred, notably in the automotive industry. These reductions shrank the industry's bottom line.

U.S. shipments of chemical products fell roughly 13 percent in March 2009 compared to the same time in 2008, with shipments of adhesives that fell some 12 percent. As the industry rebounds, domestic consumption for sealants and caulks was forecast to grow 2.9 percent annually to over two billion pounds in 2012, which translates into nearly $4 billion.

Industry Leaders

Henkel Adhesives Technologies, based in Avon, Ohio, is a subsidiary of Germany-based Henkel KGaA. Adhesives is one of Henkel's three main business groups, which also include laundry/home care and cosmetics/toiletries, including the Dial Corporation. Henkel Adhesives Technologies reported revenues in 2007 of $7.2 billion, which represented about 44 percent of Henkel KGaA's revenue.

National Starch and Chemical Company, based in Bridgewater, New Jersey, is a subsidiary of London-based Imperial Chemical Industries, which acquired the company from Unilever in 1997. National Starch, which produces a wide variety of adhesive products, operates 154 manufacturing and customer service centers in 37 countries and employs 9,500. The company posted record sales of $3.29 billion in 2004. Henkel KGaA acquired National Starch Businesses in April 2008.

H. B. Fuller Company, based in St. Paul, Minnesota, manufactures adhesives, sealants, and coatings. Founded in 1887, H. B. Fuller operates in 31 countries and employs 3,100, including 120 chemists, at its 225,000-square-foot office research facility in Minneapolis. The company posted revenues of $1.3 billion in 2008.


In the mid-2000s, the adhesives and sealants industry was comprised of approximately 450 establishments, down from nearly 700 companies in the mid-1990s. Many of these establishments were small businesses, and only 20 percent reported more than 50 employees. In 2005, the industry had 20,342 employees, 12,766 of whom were production personnel. Ranked by the total value of shipments, the top five states in the mid-2000s were Ohio, Illinois, California, Texas, and New Jersey.

America and the World

Because most products in this industry are based on commonly held formulas, and because of the high cost of overseas shipping, exports are not a large part of this industry, with the exception of some high-performance, application-specific products. In the mid-2000s the industry's largest companies attempted to increase their share of the international market by moving operations to locations of growth--most significantly, China.

The global market for adhesives and sealants in 2004 was an estimated $31.9 billion, and the United States accounted for approximately 35 percent of demand, followed by Europe with 34 percent, and Asia with 28 percent. However, market demand was expected to grow rapidly in Asia, and especially in China, through the end of the 2000s. Gaining a foothold in the global marketplace was crucial for companies seeking larger scale growth.

Research and Technology

Adhesives and sealants manufacturers counted on proactive research and development to keep them a step ahead of environmental regulators and market demands. Among the challenges faced were regulations aimed at reducing volatile organic compound emissions and bolstering pollution prevention measures.

Newer areas of technological challenge in terms of bonding were glass-reinforced polyesters. One newer plastic technology was resin transfer molding (RTM). This is a polyester material, based on resin, that was being used in lower-volume auto and truck applications such as sporty or upscale car models.

A growing number of players in the adhesives and sealants industry expressed a desire to move away from the use of primers in adhesive systems because of their flammability and volatility. However, such a change presents difficulties in getting the right adhesion to certain materials. Physical and chemical changes can be made to the surface of these materials, but the focus is to make adhesives and sealants that will incorporate the function of a primer. Environmental mandates on chlorofluorocarbons, volatile organic compound emission standards, and other ecological considerations are thus forcing adhesive formulators to nudge solvents out of their products and find alternatives. Research continued on meeting high-performance parameters such as water resistance, durability, and humidity resistance without using such solvents.

In addition, a number of large users of solvent-borne adhesives installed equipment to recapture and recycle, or properly incinerate, solvent and were less likely to change to solventless products. Adhesives manufacturers have moved production of industrial adhesives away from solvents to 100 percent solids, epoxies, and urethanes. With respect to pressure sensitive adhesives such as duct tape and heavy-duty industrial tapes, manufacturers have raised solid content to 65 percent, from as low as 35 percent.

In the mid-2000s the industry looked for ways to combat high energy costs and improve environmental performance. In one step, new curing technologies such as the use of ultraviolet light were making inroads as an alternative to the traditional use of thermal curing, which uses ovens that are fueled primarily by natural gas and emit carbon dioxide.

New technologies were creating a plethora of new products on the market. For example, in 2004 H. B. Fuller was granted seven patents and applied for another 10. However, the industry faced the challenge of educating designers, architects, and engineers on the reliability and safety of its products.

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