Randolf Karrer, Managing Director Technology at IGK
What is the price trend for sealants and adhesives to produce insulating glass? This question, in addition to a global shortage of raw materials, concerns processors and IG manufacturers. GW News spoke to Randolf Karrer, Managing Director Technology at the supplier IGK. Here is what he had to say.
GW News - Supply bottlenecks and price increases are a major concern to many glass processors and IGU manufacturers. Where does this shortage come from?
Randolf Karrer - There are several reasons! Firstly, a number of companies - including BASF and Evonik - have declared Force Majeur for their plasticiser production almost at the same time. Meanwhile, many other production plants around the world have had supply bottlenecks for precursor products, resulting in an extreme undersupply of the market. In addition, the construction industry in Europe has been booming for several years, so that there was basically a high demand for raw materials. To make matters worse, there was also the worldwide pandemic, so that after the shutdown, certain sectors of industry could not react so quickly to the high demand.
GW News - And what impact have China and Texas (i.e. the US) had on this situation?
Karrer - You could read everywhere that the Chinese industry was the first to recover very early and very quickly after the pandemic and is currently undergoing economic growth of about 20 per cent compared to the previous year. This means that China - as the world's largest trading power - has a very large domestic market with high demand. At the same time, freight rates out of China have doubled compared to the beginning of the year!
Quite independently of this, the onset of winter has virtually paralysed the entire Texan chemical industry, which is downstream of the petrochemical industry there. It took a very long time for this damage to be repaired and since then they have been struggling to keep pace with the booming economy. Unfortunately, this has massively affected an essential supplier of raw materials for polyurethane sealants for the insulating glass industry. In my opinion, these effects will continue at least until autumn, if not into winter.
GW News - Do you see other causes of this crisis?
Karrer - Yes, the concentration on a few large producers - especially in the chemical industry - that has come about as a result of globalisation has led to the fact that we usually have only a few - in some cases as few as only two - globally active producers for the required polymers. If, for example, one of them has a technical problem or needs maintenance, the other cannot cover the entire demand. If, in addition, our industry competes with another market segment where higher prices are paid for the same raw material, it does not take a genius to see who will leave the field as the loser. I think we will see one or two surprises here in the near future.
GW News - How is IGK positioned today, are you able to deliver in the medium and long term?
Karrer - Of course, we are also affected by this worldwide shortage of raw materials. Our purchasing and formulation strategy is having a positive effect, however: We have at least two suppliers for almost every raw material we need, in some cases even up to five suppliers, and have therefore so far been able to supply all our customers without interruption, so that in all cases production could continue for our customers.
The fact is that significant price increases have occurred for all sealants supplied in steel drums - above all silicone, where there is a massive shortage, followed by polyurethane and polysulphide as well as hot-melt adhesives.
IGK Isolierglasklebstoffe GmbH
GW News - Do you have to set quotas on your deliveries to processors today?
Karrer - Yes, we have had to. We have been able to supply our customers continuously until today, although we (www.igk.global) have had to make do with partial deliveries since the end of May.
GW News - In which segments are you expecting (further) price increases?
Karrer - As far as chemical raw materials are concerned, it seems that we are not yet at the peak - especially now in June. Plasticiser prices have risen again and individual suppliers are now trying to capitalise on this in the truest sense of the word. Whether the peaks in glass and steel prices have been reached has yet to be seen...
GW News - Where are price increases unavoidable for IGK when it comes to?
IGK Isolierglasklebstoffe GmbH
Steel drums, for example, have become about 60 (!) per cent more expensive since the beginning of the year.
Karrer - All sealant types are affected, above all silicone, where there is a massive shortage. Polyurethane comes second, followed by polysulphide and hot-melt adhesives. The fact is that significant price increases have occurred for all sealants supplied in steel drums. Steel drums, for example, have become about 60 (!) per cent more expensive since the beginning of the year. You will understand that we have been forced to pass on these price increases to the market along with the specific increase in the price of raw materials and packaging.
GW News - Can processors better protect themselves against such market fluctuations by optimising their operating processes?
Karrer - To be honest, I see little or no possibility of protecting one selves against such a global raw materials crisis. Our competitors in the market seem to be in a similar situation. Changing the secondary sealant from, say, polyurethane to polysulphide does not seem to be an option either, since polysulphide polymer and the corresponding plasticisers are not available on the market in sufficient quantities. Some of our customers have full order books and are even considering short-time work due to a lack of raw materials. This is a situation unprecedented in my professional career!
GW News - What do you think are the long-term effects of the current situation?
Karrer - The price level of raw materials for insulating glass will initially - in my estimation - settle at a high level. But since this price development does not only apply to our industry, it will also effect on the building sector.
Already today, the costs of new construction for single-family and multi-family homes have risen massively, so that prospective builders will think at least twice about whether now is the right time for such an investment. If the willingness for investments fall in the course of such considerations, some economic experts already see the spectre of inflation on the horizon.
The interview has been conducted by Matthias Rehberger, Head of Content at GW News
