We use them every day. They are used across households and industries. They were used even in the packaging of the magazine that you are holding in your hands right now. But do you know a massive chunk of them are actually imported from countries like China and US? Yes, India is a net importer of glues and adhesives, primarily because of inadequate domestic production, and also because importing them is massively profitable!

Naveen Kumar | May 2015 Issue | The Dollar Business

All of us have heard of and used glues and adhesives like Fevicol, Fevikwik and Fevistick. They have become an integral part of our daily lives. However, although popular retail brands like the ones mentioned are the first to come to mind when we speak of adhesives, the reality is that household usage accounts for just a miniscule of the overall adhesives market. It’s businesses, particularly those involved in manufacturing, that are their main consumers. And while the wood industry is one of their top users, construction, automobile, electronics, leather, packaging and appliances manufacturing are also major users of adhesives. In fact, a detailed scrutiny of a finished product that you purchase won’t give you even a vague idea of the amount of glues and adhesives used in its manufacturing.[sociallocker id="9714"]

Flag bearers

Thanks to demand from across all industries, today, prepared glues and adhesives is a close to $12 billion global trade, dominated by Germany, China and USA. And if you believe a report by Grand View Research titled “Adhesives and Sealants Market Analysis And Segment Forecasts To 2020”, demand is expected to keep rising because of growth of construction, automotive and packaging industries, primarily in China, India and Brazil. Karan Chechi, Research Director, TechSci Research, agrees with the findings of the Grand View Research report, at least in the Indian context. Speaking to The Dollar Business, Chechi also spoke about the regions and industries in India that are driving this growth in demand. “Majority of the demand in India is observed in the West, especially in Gujarat and Maharashtra, which account for about 80% of the West India market, on account of growing furniture and textile industries, majorly in Ahmedabad and Mumbai,” he said. It’s not that only Gujarat and Maharashtra and textiles and furniture industries are generating the demand for adhesives. “After the West, the North accounts for a significant chunk of the demand for adhesives, led by the burgeoning construction industry in Delhi-NCR,” Chechi added.

But although demand for glues and adhesives has been growing at breakneck speed, domestic production has failed to keep pace. Hence, today, almost half of India’s annual demand of about 60,000 MT is being met via imports and the country is expected to be one of the biggest drivers of global demand in the future.

All across

Adhesives can be in different forms, like solid and liquid, and made of several different raw materials, like starch, latex and urea etc. They are used extensively in construction, as well as in the manufacturing of consumer products, automotive and electronics hardware, while also being an integral part of packaging, labelling and transportation industries. According to a TechSci Research report titled, India Adhesives Market Forecast & Opportunities 2019, “Adhesives offer one of the most versatile binding techniques available in the market among other technologies like welding, sewing, bolting, screwing, etc. Adhesives have many advantages over other techniques such as elimination of corrosion, superior aesthetics, uniform stress distribution, quick and cost effectiveness, and hence, their consumption is high in the manufacturing sector.”

The development of the adhesives industry can be better traced through the evolution of consumption from traditional materials like glass, stone, wood and metal to synthetic resources, majority of which are petroleum-based plastics. Emergence of these new materials required new processes of assembly and appropriate binding tools and components, which led to the rapid growth of the adhesives industry. During the 1990s, one industry that demonstrated a great interest in new-age adhesives was the automotive industry. Many American auto manufacturers sat down with adhesives manufacturers to co-produce industry-specific applications in order to reduce cost, minimise weight, and enhance recyclability of cars. It was, anyway, never a secret that chemical methods were more cost effective than mechanical processes for auto manufacturers. So, when the automobile industry started reducing the application of mechanical fasteners, the demand for reactive adhesives rose significantly. The evolution process then moved to the development of hybrids like epoxy – used for hardness and applied in more rigid substances, and urethane – used in flexible materials.

Specialist’s job

Prepared adhesives are specialty chemicals and are high margin products. This also means they’re ever evolving and need regular infusion of new technologies via R&D. This is why several industries, despite being big consumers of adhesives, prefer procuring them from specialists, instead of manufacturing them in-house. This need for constant upgrading also make adhesives an unviable business, unless volumes are very high. And this is the reason why several Indian adhesives companies prefer to import, instead of manufacturing locally. The CEO of one such company – Indiseal Sealant – Arun Dengla, told The Dollar Business, “Rather than manufacturing in India, I have gone for contract manufacturing overseas. It saves a lot of time and energy, which is required to deal with bureaucratic hassles and layers of never ending inspections when you manufacture in India. Importing allows me to concentrate on just the marketing and distribution of the products.” Contract manufacturing is also a preferred way for many, because it ensures high quality at competitive prices, thanks to the economies of scale that large manufacturers enjoy.

Reversing gear

As per the Adhesive and Sealant Council (North America’s go-to place for everything adhesives), the increasing need for weight reduction of end-products and rising purchasing powers are expected to drive the global demand for adhesives, which it thinks will be led by countries like India and China. Why then have India’s glues and adhesives imports not budged in the last three years? Partly answering this question, Nishith Bhatt, Director, Allcoatz Adhesives, a Mumbai based importer, told The Dollar Business, “We mainly supply to auto component manufacturers and the auto sector’s sales has been stagnant during this period.” Bhatt’s logic for stagnancy in India’s adhesives imports make sense, particularly when seen along with the TechSci Research report, which claims the automotive industry is a close second to only the construction industry, when it comes to consumption of adhesives.

New avenues

Although the electronics hardware sector doesn’t immediately come to mind when one thinks of adhesives consumers, the fact is that it is a big user of glues, adhesives and sealants. For, the trend towards miniaturisation of electronics goods has resulted in increasing use of adhesives. In addition, with the increasing use of electronics in the automotive sector, the demand for adhesives in automotive electronics is also growing. Another factor that is expected to keep the demand for electronics adhesives high is the implementation of tighter safety standards.

Stick to it

Due to rising consumerism, changing tastes and a focus on infrastructure growth, the demand for adhesives in India is expected to remain high. But being a specialty product, which needs massive investments in R&D, neither are its consumers taking up manufacturing, nor are those currently manufacturing, expanding capacities in a significant way. The growth of the domestic adhesives industry in India also requires supporting chemical industry infrastructure to develop a complete eco-system, which is clearly lacking at present. All this means just one thing – continuous dependence on imports. The only question is if one is willing to ignore the stagnancy over the last three years and stick to market dynamics. For, margins for importers, even in the stagnant years, have been stunning, or rather sticking!

Industry: Rubber & Plastics[/sociallocker]