Basa Online - British Adhesives and Sealants Association

Following more than 12 months of repeated increases in the price of virtually all raw materials, and with little sign of any easing in the current upward price spiral, there will inevitably be further significant price increases in the price of adhesives and sealants for the building and construction industry warns the British Adhesives and Sealants Association.

Many commentators have identified a long-term structural rising trend in commodity prices around the world, with fears that the 2010 pattern of frequent raw material price hikes continuing for much of 2011.

Styrene, acrylate, acetic acid (for polyvinyl acetate), butadiene, acrylonitrile, hydrocarbon resin, polyethylene, polypropylene, polyurethane, and ethylene, all essential raw materials for many formulations, are experiencing some of the largest hikes with increases ranging from 40 – 120%.

Meanwhile the costs of natural fillers, aggregates and cements are increasing significantly too and there is the prospect of additional increases from proposed new legislation such as the £30 per tonne “carbon tax” (equivalent to 10% increase on current prices) for cement, which will have a substantial impact upon flooring and tiling products.

When combined with higher energy costs & continued increases in transport costs, formulators are reporting the need to pass on multiple price increases, often in double digits, as the inflationary impact from more than 12 months of raw material price increases can no longer be absorbed if the business is to remain viable.

The supply situation for a number of key polymers is becoming critical too, with a growing number of raw material suppliers invoking Force Majeure, stock allocations or sales controls shortening the supply chain and creating profound effects for adhesives & sealants manufacturers. Many formulators are experiencing critical stock levels of essential raw materials forcing them to place their customers on allocation while simultaneously passing on repeated price increases.

Outages upstream, natural disasters, plant failure/maintenance, unprecedented demand from emerging markets and the loss of production capacity in Europe are just a few of the factors that have combined to create this “perfect storm”.

Background

Many adhesives & sealant raw materials are derived from oil based feedstocks. Brent Crude has increased from an average $60 per barrel in 2009 to $100 at present. This has resulted in a sustained and prolonged period of inflationary price increases throughout 2010, with the trend moving towards monthly increases by the beginning of this year. The current political unrest in primary oil producing countries in the Middle East & North Africa only adds to the uncertainty in future costs as spot prices move well ahead of $100/bbl as we write.

There are few state of the art cracker and polymerisation facilities in Western Europe and most new investment is going into the Far East and Middle East where growth and demand is higher. BASA has highlighted this trend to government and the implications for longer-term security of supply.

The British and Adhesives Association (BASA) represents the interests of adhesive and sealant manufacturers, suppliers and distributors in the UK and Ireland. The association speaks for the majority of the adhesives and sealants industry and has almost 100 member companies.

BASA is also a leading member of FEICA, the European association for the adhesives and sealants industry. It is reporting similar increases in input costs for the industry across all of Europe.

For further Information contact:

John Murdoch

Secretary.

Tel 01909 480888

E-mail: secretary@basaonline.org