Wednesday, November 3, 2010

India’s C5 Tackifier Adhesive Market: Opportunity Analysis

C5 is the aliphatic hydrocarbon resins which are mainly used in hot melt adhesives having the character of tackifying with the substrates and can be roughly divided by raw material into mixed variety, aliphatic variety, dicyclopentadiene (DCPD) variety, copolymerized variety and hydrogenation-modified variety. These resins are ideal for tackifying SIS and SEBS block copolymers.

C5 tackifier based hot melt adhesives are amongst the premier emergent adhesives in the industry. The usage of hot melt adhesives continues to grow thanks to their exclusive properties that include adhesion to a broad assortment of surfaces, effortless use, aging features, and strength, among others. Hot melt adhesives are distinctively superior in terms of speed and cost efficiencies, and at par with water-based alternatives in terms of adhesion and VOCs emissions. However, escalating raw material prices represent a daunting challenge for hot melt adhesive market participants.

Hot melt adhesive refers to all adhesives which are essentially solvent less solid materials at ambient temperature and must be applied to the bonding surface at elevated temperatures to permit adequate flow. It is consisting of both non-pressure sensitive adhesives as well as pressure sensitive adhesives.

Primary functions and Selection Parameters
C5’s hot melt adhesives can be supplied in various physical forms to meet specific logistic requirements:
• Solid
• Molten
• Liquid
Primary functions
• Compatible with Adhesive Polymer-- Not a Filler
• Lowers Average Molecular Weight-- Viscosity Adjustment
• Raises the Blended Tg-- Not a Plasticizer, Improves adhesion
Desirable Attributes
• Lower Color
• Increased Stability
• Tuned Polarizability
• Increased Compositional Variation
Tackifier selection depends primarily on softening point, composition, molecular weight and molecular weight distribution. The tackifier can also be used to make other adhesive additives compatible.
• Pressure-sensitive
• Non-pressure-sensitive
Targeted & Potential Markets
  • Automotive - Such as carpet and sound-dampening insulation, headliner attachment and application of decorative decals.
  • Building & Construction - As sealants, mastics, roofing membranes, plastic composites, concrete modifiers and industrial cleaners.
  • Nonwovens - Hygiene industry almost exclusively for the manufacture of nonwoven products including baby diapers, adult incontinence products, and feminine care personal hygiene products.
  • Packaging - Applications such as case & carton closure, flexible packaging, envelopes, and corrugated converting.
Market Potential in India

India, perhaps, holds the maximum potential for growth in hot melt adhesives market globally given its 4% share of the APAC hot melt adhesives market, compared to its neighbor, China, with over 18.8 % of the APAC market. The Hot melt adhesive industry in India is growing rapidly and is projected to grow at a rate of 18.7% in the next 4 years. In the last 5 years, the growth rate in Indian hot melt adhesives market has been approximately 16.4% annually. 

In Indian hot melt adhesives industry, non-pressure sensitive adhesive represents high growth rate while traction is towards nonwovens and automotive applications. Indian demand for hot melt adhesive is booming, producers may want to also concentrate on business in India. The strongest demand for adhesives in India is for water-borne products. The demand is high but supply is low. India cumulative FDI is approx US $ 100 billion but adhesives related investment is less than 1%, lower than china but with potential to compete.

The C5 petroleum resin production is mainly concentrated in countries with advanced petroleum and chemical industries such as the United States, Japan, Germany, Russia, France, Britain and Holland. The total capacity of C5 petroleum resins in the world is around 1100,000 metric ton per annum and the capacity in the United States and Japan accounts respectively for around 59% and 22% of the total global market. Worldwide the C5’s hot melt adhesive market has annual growth rate 4% but in India it is growing with double digit growth rate (18.7%) in spite of the economic recession which tremendously affected adhesive markets in North America, Japan and Western Europe. Contributing to this increase was the unprecedented growth of the emerging markets in the rest of Asia and India. 

Historically, the adhesive industry was dominated by a few industrialized countries. Now, a significant portion of new demand is being generated by emerging countries such as China. The next major growth country could be India. In India C5’s hot melt adhesives industry is growing somewhat faster (double digit growth rate) than GDP due to developing industry and at same time innovation in adhesive formulations and polymer and resin technologies results in new applications for hot melt adhesives. There is a huge gap between demand and supply of the hot melt adhesives which leads to tightening supply and growing demand push price escalation up the tackifier chain.

Market fragmentation continues as new adhesive demand is generated from a supply and demand standpoint. The demand growth is also supported by the emergence of new market applications that result from changing substrates and evolving assembly processes. On the supply side, despite ongoing industry consolidation and M&A activities at the level of the multinational companies, new small- and medium-sized companies are beginning to serve targeted market niches and/or specialize in a specific state-of-the-art technology.

Driving factors for the growth of Indian C5’s hot melt adhesive market 

• Good GDP growth rate
• Burgeoning manufacturing sector
• Growing urban infrastructure need
• Increasing diapers market penetration
• Sectoral boom in, automotive industry, greater usage in oil and gas segments
• With the slow down of North American and European market, global players are increasingly investing in the Indian industrial market


• High raw material costs
• High energy costs
• Quality compatibility

Competitor (Supplier base to India): They do not have manufacturing base in India 

• Eastman
• ExxonMobil Chemical
• Cray Velley
• H.B. Fuller Company (US)
• Henkel
• Jowat Corporation (US)
• Some Chinese suppliers