Construction chemicals: a review of new technology trends, capital investment and acquisition activity in the construction chemicals market.Worldwide, the construction industry contributes significantly to the global GDP, and is one of the most important elements of every economy. Today's demands on buildings, roads, bridges, tunnels and dams could not be met without construction chemicals. Construction chemicals will gain importance in the years ahead, particularly in developing regions of the world where the construction of new buildings and infrastructure continues to gain speed. In developed economies the focus will be on renovation and maintenance.
Recent raw material cost inflation, energy costs and transportation costs are creating significant financial challenges for all construction chemical suppliers. "Despite price increases, we are struggling to maintain margins," said Randy Korach, president of Tremco Global Sealants Division. "The rising cost of goods coupled with the tightening of construction lending practices suggests a considerable slowing of demand may be on the horizon," Korach continued. "For now, though, demand remains robust in much of the developing world and standards are evolving to embrace western technology to meet performance and design challenges."
The construction market is developing according to the macro-economic trends, according to Christoph Schmidt, brand and business unit communications, Henkel Adhesives Technologies. "We noticed a slowdown in the U.S. and Western European markets," he said. "On the other hand strong growth in parts of Eastern Europe, Asia, the Middle East and Africa can be noticed.
"The construction market is consolidating increasingly and manufacturers are facing sharper legal regulations," continued Schmidt. "Product developments are responding to the trends including construction speed, convenience for workers/inhabitants, safety, and environmental issues like energy and health."
Inflation in energy and feedstock costs is the biggest issue facing the construction chemicals market today, which has spurred the trend towards sustainable design and will continue to grow in importance. "With rising energy and feedstock costs, we are continually trying to reduce operating costs in our facilities. This includes analyzing processes to identify efficiencies, which could reduce processing time and the amount of energy consumed," Korach said. "Being in the specialty chemicals industry, we use water in our manufacturing processes, which we recirculate and use in other processes. This has enabled us to reduce our water consumption by nearly 75%. At our Toronto facility water usage has been reduced by 19,000,000 gallons a year. As with other companies, we are exploring alternate lighting sources. In addition, along with the investigation of renewable resources, we are actively pursuing other alternative raw materials which may be less volatile in pricing and availability."
In an increasingly competitive market that continues to consolidate, construction chemical suppliers turn to product innovation and value added services to stay ahead of the competition. "In today's competitive environment, Tremco is embracing tools such as LEAN management techniques and Six Sigma tools to attack inefficiencies in all areas of our business so that we can improve throughput in this inflationary environment while continually improving customer satisfaction," said Korach. "In our product development and service areas, we are continually working on the development of a 'value-added' position for our customers so that we give them a reason to choose us as their supplier of choice. Our focus is on product innovation and customer intimacy, which entails understanding their needs and responding to them. In addition, we are continually pursuing strategic acquisitions globally and continuing to invest in our processing capabilities through a global capacity expansion program."
In today's increasingly price-driven market Schmidt said, "To stay ahead of the competition, Henkel Building Systems offers very high-quality, value-added and innovative products. Furthermore, Henkel offers clearly positioned product ranges answering to the different customer needs."
The regulatory environment today is difficult and dynamic. "Different regulatory areas make it difficult to manage our supply chain effectively as we need to have varying formulations for different parts of the country," said Korach. "This creates additional demands internally as product recommendations through our Technical Services Group may need to be altered depending on the source of the inquiry, and Customer Service and Traffic need to ensure the appropriate formulations are shipped to the proper locations.
"Rather than fighting the growing regulatory environment here and abroad, which includes REACH, SCAQMD and CARB, we are paying close attention to the direction being taken and acceptance in other areas of the country or world," Korach continued. "We do not want to merely respond to the immediate situation. Instead, we are using the knowledge gleaned to develop a strategy for the future, which includes next generation technology. In this way, we will be able to anticipate new regulatory requirements and will be ready with appropriate products and technologies."
"Being ahead of time with regard to new regulations and customer needs through the usage of new technologies is key," said Schmidt. "The regulatory environment has only affected our company by more administrative work in some countries however had only slight impact on the product development or production processes."
NEW PRODUCT INNOVATION
Innovation in product development these days is especially targeted towards sustainable products. "Due to the strong emphasis on sustainability and reductions in energy usage as well as the growing demand for fast track construction, air barriers, sustainable coatings and systems such as reflective coatings or vegetative roofing, and green concrete waterproofing membranes and sealants are making strong inroads," said Korach. "Tremco's green concrete technology for waterproofing membranes and sealants is innovative and tremendously enhances performance. A new hybrid sealant technology is also providing enhanced physical properties and application-oriented benefits for sealants. It is moisture-curing, non-staining, offers superior UV resistance, is cost-effective and is paintable."
"The market segment of energy-saving/efficient products has shown a strong increase while products containing solvents or other hazardous chemical substances are showing a downtrend," said Schmidt. "Some examples of Henkers innovations are Ceresit CM 90 Easy Flex Plus, dust reduced flexible the adhesive; Thomsit RX 20, dust-free and low emission premium leveling compound; Ceresit CR 90, crystallizing cementitious waterproofing slurry; and Ceresit CT 84, an express ready to use PU-adhesive for fixing EPS insulation boards.
"Furthermore, two break-through technologies called SilicoTec and FlexTec are used in an increased number of our products," Schmidt continued. "SilicoTec technology is used in water-based products and provides humidity protection and is particularly designed for repair work such as on roofs. Advantages include universal protection against intrusion of humidity inside and outside, permanent elasticity, excellent adhesion, UV-resistance and easy application. Some products that incorporate this SilicoTec technology are ELCH PRO FT 101 Flextec, Sista Universal Abdicht-Reparatur and Elch Pro Dach 3000. FlexTec technology incorporates flexible tailored polymers to control properties like speed of hardening and it contains advantages over PU and silicone including better adhesion, higher UV-resistance, chill flexibility and it is solvent-free. Product examples include Thomsit P685, Pattex Supermontage and Sista Solyplast SP 201."
INVESTMENTS & ACQUISITIONS
Key manufacturers of construction chemicals continue to expand operations throughout the globe. H.B. Fuller recently announced that it will invest further in its Asia Pacific region through building a new hot melt moisture cure (HMMC) and polyisobutylene (PIB) manufacturing facility in China. Construction on the new facility is expected to commence in early 2009 with production expected to begin in early 2010. The new facility, together with the company's new Asia Pacific technology center in Shanghai, will enable the company to more fully serve the needs of its customers in the region. The facility will produce specialty adhesives for textile and performance wood applications, which include insulating glass, textile lamination and footwear.
"H.B. Fuller is committed to investing for organic growth in key developing economies, including the Asia Pacific region," said Michele Volpi, president and CEO in a statement to the press. "The new plant further supports this strategy by building an enhanced supply chain capability to better serve our customers in this region. We are confident that this will further accelerate our existing organic growth profile in Asia."
BASF's construction chemicals division is to open a plant for concrete admixtures in Kolkata, East India. The new plant is BASF's response to soaring Indian construction industry demand for concrete admixtures in East India, North East India and West Bengal. Kolkata is BASF's fourth production site for construction chemicals in India. BASF production plants in Mumbai, Bangalore and Nalagarh cater to the demand for construction chemicals in southern and central India.
"The opening of the Kolkata plant marks a key milestone in the expansion of our business in East India," said Prasad Chandran, chairman, BASF Group, India and head South Asia. With a contribution of almost seven to eight percent to the GDP, the construction industry in India is a focus area for BASF."
"Local production takes us close to our customers in India's regions and enables us to respond rapidly and flexibly to their needs," said Himanshu Kapadia, head of the BASF Construction Chemicals division in India. "That way, we benefit from the soaring demand in India and at the same time help local construction industry to develop."
BASF's construction chemicals business in India has been growing at an annual rate of 45% for the past five years. Growth is mainly driven by infrastructural projects in the public sector. Large projects in East India include expansion of the national freeway network, hydroelectricity plants as a source of energy, and promotion of the industrial infrastructure in West Bengal.
Sika AG has expanded its concrete admixtures business with a partnership in Western China. Sika's Chinese subsidiary, Sika (China) Ltd., has entered into a partnership with Sichuan Keshuai Additive Co., Ltd., a supplier of concrete additives to the growing Western China markets.
Sichuan Keshuai Additive Co., Ltd. was established by Shuai Xiwen, a pioneer and expert in the field of concrete admixtures. Sichuan Keshuai Additive Co., Ltd. has approximately 130 employees and 2007 sales of approximately $17 million. The company's main production facilities are located near Chengdu in the western province of Sichuan. Sika is acquiring a majority stake of the company.
Sichuan Keshuai Additive Co., Ltd. has access to an extensive distribution network in Western China. The cooperation will enable the parties to support the construction industry in this region with a broader range of locally produced products and technologies. Sika (China) Ltd. is based in Suzhou, Jiangsu Province.
Earlier in the year Sika strengthened its polymer flooring business in North America through two acquisitions. Sika's U.S. subsidiary, Sika Corporation, acquired Valspar's commercial and industrial polymer flooring business. Revenues for this business totaled approximately $17 million in 2007.
Sika Corporation also recently acquired the commercial and industrial polymer flooring business of ICS Garland, Inc. Revenues for this business totaled approximately $14 million in 2007. The ICS Garland polymer flooring business, with its portfolio of epoxy, polyurethane, and ESD (Electrostatic Sensitive Devices) technology products, is also a good fit for Sika's growth strategy for North America.
BY TIM WRIGHT