The strict environmental regulations present in most European countries is still an important driver of market growth for emulsion polymers, despite the fact that the market has had to cope with numerous challenges such as rising raw material and energy costs recently.
This is one of the results of an analysis from the consultancy firm Frost & Sullivan. According to this paper the market is expected to increase from EUR 3.15 billion in 2003 to EUR 4.19 billion in 2010 at a healthy compound annual growth rate (CAGR) of 4.1 %. Revenue growth is likely to be price-driven in the short term and volume-driven in the long run.
In addition to having to abide by legislation, end-users are also becoming increasingly aware of the adverse effects of VOC present in most solvent-based products, a factor that is also impacting the market positively. “Water-based emulsion polymers are particularly well-placed to take advantage of this situation,” remarks F & S Research Analyst Hariharan.
However, emulsion manufacturers are currently struggling to cope with skyrocketing prices of raw materials and rapidly increasing energy costs.
Price increases for raw materials are being exacerbated by their current shortage of supply, and it is also posing a strong logistical challenge to European emulsion manufacturers. This is largely due to the growing demand from fast-developing economies in the Far East as well as a lack of capacity addition in Europe itself. Fortunately, these supply conditions are expected to stabilise in the near future with many major manufacturers increasing their capacities in countries such as China and India.
Faced by these challenges, the emulsions market is likely to go through a period of sustained consolidation as smaller participants get squeezed out of the market, leaving only the larger and financially strong companies operative. These remaining high-volume participants are anticipated to benefit from their huge bargaining power, and thereby ensure the growth of the market in the long term.
Accordingly, in 2003, there were less than 35 active participants with the top ten companies accounting for roughly 77 % of total market revenue. Some of these top players are major chemical companies, with significant presence in the raw material production for these emulsions as well such as BASF, Dow, Rohm & Haas and Ciba Speciality Chemicals. There is also a second tier of companies, consisting of the niche players such as BIP and Alberdingk Boley, who cater to customer specific requirements in this market.
F & S says that the market leaders in this segment are those who can offer a wide range of products across a wide range of chemistries and applications and are geographically decentralized. These players will be at a competitive advantage over the rest of the field, as they have products to suit any requirements of the customer, be it either cost effective solutions, or high performance product requirements. But, there are also successful players such as PolymerLatex and Synthomer who concentrate only on specific chemistries in the emulsion polymers market.
Companies that strongly focus on product development are likely to succeed. For instance, the production of innovative multiphase acrylic particles – wherein two or more different polymers are simultaneously allowed in one particle – helps offer higher performance levels. Companies are also evaluating development of custom-designed emulsions as a way of retaining existing customers and gaining new ones.
Among the various end-user industries, the building and construction industry offers the highest potential for growth. This is mainly due to the increased use of emulsions and redispersible powders in mortar modification and similar applications.
Among the products, the analysts of F & S juge polyurethane dispersions to be the most promising emulsion polymers. They will increasingly being used in various high-performance applications such as original equipment manufacturing coatings and structural adhesives. These polymers are forecast to grow at a CAGR of 5.7 % from 2004 to 2010.
Germany is the largest regional market in Europe, having contributed about 26.2 % of total revenue in 2003. Although stagnant economic development in the country has restrained overall market growth during the last two years, various structural reforms by the government and corporate restructuring are likely to restore the German market to economic health and help drive demand for emulsions.
In the meanwhile, strong growth in the United Kingdom and Ireland – which jointly constitute the second biggest market in terms of revenue – are expected to be a key driver to market expansion and to partially compensate for the lacklustre performance of Germany over the next few years.
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