Adhesives and Sealants Industry Profile
- Structure and Performance of the Industry
- Environmental Challenges
- Canada-U.S. Comparison
- Prospects for the Future
- Major Firms
- Industry Association
Adhesives (glues) are substances capable of forming and maintaining a bond between two surfaces, and sealants (caulks) are substances used to fill gaps or joints between two materials to prevent the passage of liquids, solids or gases.
Adhesives and sealants are formulated by compounding (mixing) the base material with fillers, pigments, stabilizers, plasticizers and other additives to yield a product with the desired end-use characteristics at an acceptable cost. Low- to medium-performance products are based on natural substances (for example, starch, dextrin, natural rubber or protein) or synthetic polymers such as polyvinyl acetate, polyvinyl alcohol, polyesters, acrylics, neoprene, butyl rubber, phenolics or thermoplastic elastomers. High-performance products have enhanced properties including bond strength, elongation capacity, durability or environmental resistance. These products are based on polymers such as epoxy, polysulfide, polyurethane, cyanoacrylate and silicone.
Adhesives and sealants can be classified according to their two major markets — industrial and consumer. The industrial segment is estimated to account for about 80 percent of the Canadian market. Nearly all manufacturers produce a wide range of products, which are consumed in the major end-use markets. Major users of adhesives are the packaging, automotive, construction and furniture industries. Sealants are used primarily by the construction, electronics and automotive industries. A large and growing element of the consumer market is aimed at the "do-it-your-selfer" engaged in building maintenance and renovation.
The consumption of low-cost adhesives and sealants in a variety of low- to medium-performance applications is still sizeable, but the overall market for these products is either flat or declining. However, in higher performance components of the industry, the prospects for growth are good. The following examples highlight some of the expected growth areas.
The packaging industry is expected to consume greater quantities of adhesives in containers and flexible packaging. While this industry uses many types of adhesives, hot-melt products are expected to grow most quickly, because they are particularly suitable to modern, high-speed processes.
New applications in construction represent huge potential markets. Floor systems can be adhesively bonded to supporting joists, adding increased strength and rigidity. Interior wallboard and panelling can be adhered to studs, providing wall surfaces free from blemishes caused by nail or screw heads. Structural sealants can be used to hold curtain wall panels and insulating glass units in place, sometimes without accompanying support from mechanical fasteners.
The automotive market also offers significant potential for new opportunities. Products are already used for interior applications (such as bonding decorative trim and carpeting, and sealing doors and windows) and for exterior applications (including vinyl roofs and side mouldings). Increased use of polymer composites will lead to increased adhesive consumption. Even in conventional metal construction, adhesive usage is expected to increase to overcome the problems of corrosion and vibration noise associated with mechanical fasteners and spot welding. The aerospace industry is also using increasing amounts of adhesives and sealants for essentially the same reasons as the automotive industry. Additional opportunities exist for products suitable for use in high-temperature applications near engines, and for products able to withstand the increased stresses resulting from higher travelling speeds.
In Canada and throughout the world, the industry is fragmented. There are many participants, many types of products and many markets to be served. In the past few years, there has been a worldwide trend toward concentration of this industry through acquisitions and mergers. Acquisition may provide access to new technology and products, allow rationalization of production facilities and provide immediate access to new markets.top of page
Structure and Performance of the Industry
The Canadian adhesives and sealants industry had shipments of $470 million in 2010, and employed 1470 people in 66 establishments (see the table entitled Principal Statistics on the NAICS 32552 Adhesives and Sealants page). Weak demand following the recession continued through 2010.
The regional distribution of establishments is shown in Figure 1.
Based on 2009 Statistics Canada data, 56 percent of establishments were in Ontario, 29 percent in Quebec, 8 percent in the Prairies, 6 percent in British Columbia, and 1 percent in Atlantic Canada. The majority of larger firms (see Table 1) operating in Canada are owned by U.S. and European multinational firms that operate subsidiary or joint venture operations around the world.
The adhesive and sealant industry is relatively labour-intensive with most plants operating batch equipment. Labour productivity in terms of shipments per employee has tended to be lower than the average for all manufacturing as shown in Figure 2. Salaries in the industry tend to be somewhat higher than the all-manufacturing average (Figure 3).
Trends in trade orientation are shown in Figure 4. In 2010, exports totalled $138 million and imports were valued at $596 million. Trade is predominantly with the United States. In 2010, 87 percent of imports originated in the United States, while 82 percent of exports were shipped there.
Canadian exports of adhesives and sealants have grown from 8 percent of industry shipments in 1990 to 29 percent in 2009. Canadian imports have also increased significantly during this period and by 2009 captured 59 percent of total domestic consumption. This growth in two-way trade reflects rationalization and specialization of the adhesive and sealant industry on a North American basis.
Under the Canada-U.S. Free Trade Agreement (FTA), tariffs on adhesives and sealants, and the resins used to make them, on goods traded between Canada and the United States were completely eliminated on January 1, 1993. Under the North American Free Trade Agreement (NAFTA), tariffs on adhesives and sealants between Canada and Mexico all dropped to zero by January 1, 2003.top of page
Although the manufacture of adhesives and sealants involves relatively simple processes, extensive knowledge and experience with the raw materials as well as their formulation and compounding is essential. Few companies perform research and development (R&D) in these areas in Canada. Most Canadian subsidiaries depend on their foreign parents to provide new technology. A few of the larger adhesive and sealant manufacturers are vertically integrated, producing resins, either in Canada or elsewhere, for captive consumption. For other firms in the industry, there is a high degree of dependence on raw material suppliers for the introduction of new technologies. The adhesive and sealant companies then assume responsibility for formulation of these new raw materials into products offering improved performance. This aspect of formulation is where most adhesive and sealant companies derive their competitive advantage — by designing and producing products to satisfy a particular market demand.top of page
Environmental as well as health and safety issues have been the driving force behind many recent technological changes. Manufacturers are facing pressure to produce products that emit smaller amounts of volatile organic compounds (VOC). In many cases, this goal has necessitated reformulation of products. The use of petroleum solvents can be significantly reduced by shifting to water-based formulations. In addition to reducing VOC emissions, water-based formulations offer advantages such as easier clean-up, and less odour. Although this technology is advancing rapidly, there are applications where solvent-based products must still be used to achieve the desired performance. A second technique has been to decrease the amount of solvent (increasing the solids content). One type of low-solvent formulations (the hot-melt products) are designed for application at elevated temperatures. A third option is replacement of hazardous solvents with less-hazardous solvents. In this case, the replacement product may be usable only until higher standards force another change.top of page
The value of shipments per employee (adjusted to constant Canadian dollars) has been consistently higher in the U.S. adhesive and sealant industry than in the Canadian industry (Figure 5).
Part of this difference can be attributed to the presence of larger-scale plants in the United States. A large portion of the Canadian industry is composed of subsidiary operations of multinational firms. These firms had originally established plants in Canada largely because of the high Canadian tariffs on imported adhesives and sealants, and thus were scaled to this market. With North American product rationalization resulting from the FTA, these multinational plants now tend to serve North American markets, but in most cases these are still constrained from producing commodity products by virtue of their lack of size, and tend instead to focus on niche products.
Average salaries in the United States (converted to constant Canadian dollars) have also been consistently higher than those in Canada (Figure 6), although this differential has disappeared in recent years.
Gross margins [defined as (value added — production wages)/shipments] are used as a crude measure of profitability for the industries in the two countries in Figure 7. In recent years, margins in Canada have been lower than those in the United States.
Prospects for the Future
Elements of the adhesives and sealants industry are mature, and as such these parts are projected to continue to grow in close relation to overall growth in the economy. However in other applications, the use of adhesives and sealants is still growing rapidly.
The Canadian adhesive and sealant industry is dominated by foreign-owned companies. Most of Canada's international trade is with the United States. Much of the sector does not compete in markets outside North America.
Significant worldwide growth is anticipated in the technology-intensive area of high performance adhesives and sealants. Foreign competition in these products is expected to become more intense as companies assume a global business orientation. The prospects for continued success and growth are best for those Canadian producers that diversify away from a dependence on lower-performance products into these new high-performance areas.
With the advent of this more competitive environment, it appears that the industry will have to reassess its business strategy. Canadian-owned companies must increase access to state-of-the-art technology, move to larger-scale production of a narrower product range and develop expanded export markets. Subsidiaries of multinationals have ready access to new technology. The challenge for these companies is to secure exclusive mandates for the manufacture of specific products.top of page
|Company||Head Office Location||Location of Plants|
|Dural division of Multibond||Canada||Dorval, Quebec
|Forbo Adhesives||U.S.||Pointe Claire, Quebec|
|H.B. Fuller||U.S.||Boucherville, Quebec|
|Halltech||Japan||West Hill, Ontario|
Delta, British Columbia
|Momentive Performance||U.S.||Pickering, Ontario|
|Nacan Products||United Kingdom||Toronto, Ontario
Surrey, British Columbia
|Roberts Company Canada||U.S.||Brampton, Ontario|
|Technical Adhesives||Canada||Mississauga, Ontario|
|3M Canada||U.S.||London, Ontario|
Adhesives and Sealants Manufacturers Association of Canada
B10-800 Steeles Ave West, Suite 221
Thornhill, Ontario L4J 7L2
Email address: email@example.com
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