According to IVK, significant price increases for basic chemicals and intermediates, limited availability and a strong global demand are making adhesive raw materials far more expensive.
Since early 2016, the adhesives industry has been concerned about sharp price increases in basic chemicals and intermediates that are used for a large number of key adhesive raw materials, according to an announcement made by the German Adhesives Association (IVK, Industrieverband Klebstoffe e.V.). In the past 24 months, the contract price for ethylene in Europe has risen by about 40 percent, for propylene by 70 percent. Butadiene, for which the price has almost doubled, and styrene (+ 30 percent) are classed as volatile commodities since their price levels in Europe are strongly dependent on global supply and demand. Since mid-2016, these additional costs for basic chemicals have noticeably increased prices on intermediates and speciality chemicals. Since late 2016, the adhesives industry has seen price increases of 40 percent for vinyl acetate monomer (VAM), the main raw material for aqueous dispersion adhesives, and for ethylene vinyl acetate (EVA) polymers. The reason for this is reportedly a strained, import-dependent supply situation due to an ongoing pull on demand coming from the Asian and US markets, in particular.
The landed costs for typical raw materials required for producing thermoplastic hot-melt adhesives – EVA polymers, polyolefines, resins and waxes – have also increased significantly over the same period in line with the cost increases in raw materials mentioned previously. IVK also sees the steadily rising regulatory costs and restricted freight capacity as factors weighing markedly on the cost structure of German adhesive manufacturers.
Polyurethane adhesives are particularly affected
The limited availability of polyesters and isocyanates is having a drastic effect. These source chemicals are the main components of polyurethane (PUR) hot-melt adhesives. Isocyanates have increased in price by up to 70 percent in the past two years. As a result of several announcements made by various manufacturers in 2017 citing force majeure, availability on the world market continues to be restricted, so that the adhesives industry has been faced with significantly higher raw material costs. Due to the very high proportion of isocyanates in the formulation of PUR adhesives, the manufacturing costs of these products have been particularly affected.
Strained formulation and production cost structure
The continuing limited availability of raw materials, combined with ongoing high global demand for chemical raw materials and speciality chemicals from which adhesives are manufactured, will ultimately cause added strain to the formulation and manufacturing cost structure of German adhesive manufacturers, according to IVK. Furthermore, the entire chemical industry, including the adhesives industry, is confronted with various national and European laws and regulations (German Renewable Energy Sources Act, German Federal Immission Control Act, REACH, CLP, EU Biocides Regulation, etc.) that create significant administrative overheads throughout the value chain. Another particular challenge at present: the growing shortage of qualified drivers has led to scarce freight capacity in Europe, which in turn has sharply increased transport costs.