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How Oil Prices and Environmental Regulations Hurt and Help the Adhesive Market

In addition to emerging market sectors, there is a very simple reason for the overall growth of market for adhesives worldwide: it’s more affordable to make them.

Falling global oil prices have made it much more affordable to acquire raw materials. Even as prices have rebounded from their 2016 low, the average price for crude oil remains below its average for the past decade, passing significant savings along to the manufacturers of petroleum-based products such as ethylene, propylene, and vinyl acetate monomer.

But as with any industry or product based around oil, increasing environmental regulations present a hurdle on the path to profits. In the United States, regulations restricting the impact of potentially hazardous materials have laid the groundwork for potentially higher costs, creating significant potential issues for manufacturers who use these materials. These higher costs are of particular concern for smaller customers.

History shows these regulations are unlikely to become more permissive over time and since the underlying health and environmental benefits are difficult to contest, it’s likely best to plan to adapt to these new hurdles as a way of life.

There may be a silver lining, though. In some cases, environmental regulations can be a net gain for the adhesive industry.

For instance, as some countries have developed more demanding fuel economy regulations, adhesives have become a more significant part of the automotive industry. As manufacturers take steps to increase their fuel economy by making their vehicles lighter, adhesive and sealant manufacturers have a bigger role to play, leading to increasing research and development investments from that market sector.

This situation is not unique to the world of automotive manufacturing, underscoring a need for adaptability and a willingness to change among adhesive manufacturers. As emerging markets in China and throughout the Asia-Pacific region continue to grow, such adaptability will only become a more and more profitable attribute.