Jabil's Global Mechanicals Intelligence Archive

Global Mechanicals Intelligence

Q2 2024 | APRIL- JUNE

MARKET DYNAMICS: ADHESIVE TAPE 

• The industry faced challenges throughout 2023 and into the first quarter of 2024 due to sluggish demand for consumer electronics devices. However, there are projections for a slight uptick in demand during the second quarter compared to the previous year. Notably, the electric vehicle sector garnered significant attention and showed robust momentum during this period.
• In the fourth quarter of 2023, Shenzhen-based BYD Company exceeded Tesla's automobile shipment volume, securing the eighth position among car manufacturers solely based on electric and hybrid vehicle sales. This accomplishment creates new avenues for growth for Asian tape producers in battery and electronic components for electric vehicles.
• The Asian adhesive tape market commands more than half of the global share and is poised for significant growth in the future. Major global players are expected to expand their investments in Asia further. Concurrently, domestic tape companies in Asia continually increase capacity and enhance their technical know-how, adopting a strategy focused on high-end product alternatives.
• Tesa SE, the international adhesive tape manufacturer, recently inaugurated its second Asian factory in Vietnam – a EUR 55 million investment – aiming to boost capacity, particularly in thin PET adhesive tape for the electronics and auto industries. Capacity constraints at the Tesa plant in Suzhou led to considerations for customer business movements to Southeast Asia, expanding the geographical footprint for improved supply chain security.
• In contrast, 3M's electronic segment experienced a sharp annual revenue decline of nearly 30% in 2024, potentially prompting cost reduction activities such as labor cuts and capacity consolidation.
• The bio-based adhesive tape industry is benefiting from stricter environmental legislation and increased consumer awareness of the hazards associated with synthetic materials. Japanese suppliers initiated development years ago, prompting other producers to expedite their research efforts to catch up. As a mass product for two years, Sekisui achieved a bio-based content exceeding 70% in the PSA layer. Bio-based tape is emerging as a new avenue for applications in healthcare and mobile devices.

 

PRICING SITUATION

• The top tape producer, 3M, announced a drop in financial data for 2023, prompting various cost-cutting measures to maintain price stability and competitiveness.
• Smaller Asian tape producers have qualified with end customers, allowing them to capture some revenue from the top tape producers. Customers are actively supporting competition and the development of local supply chains.
• In the upstream industry of adhesive tape, which is the chemical industry, EU-based companies are experiencing harsh financial results due to high energy costs and weak demand. To cope, these companies are implementing cost-cutting measures such as shutting down production plants, divesting certain business segments, or redirecting investments abroad to remain competitive in pricing.
• Since 2022, the price of acrylic polymer has remained consistently low. There are indications that the price might stabilize or even experience a slight increase as demand begins to recover. Despite the favorable trend in acrylic polymer prices, the final tape pricing is influenced by a complex interplay of multiple factors beyond raw material costs. Manufacturers must carefully balance these considerations to create competitive and sustainable pricing for their tape products.

KEY TAKEAWAYS

• The adhesive tape market remains resilient and adaptable in Q2 2024.
• Key players are actively addressing market dynamics, ensuring supply stability, driving innovation, and positioning the industry for continued growth amidst global economic conditions.

SUPPLY COMMENTARY

• The adhesive tape supply has stabilized, attributed to customer destocking, slower-than-expected demand, and the sluggish improvement of the Chinese economy.
• Demand for consumer electronics and the automotive/EV sectors slightly increased in Q2 of 2024.
• To alleviate the logistical impact, the lead time for partial materials shipped through the Red Sea will increase by two weeks.
• The supply of top tape producers such as 3M, Nitto, and Tesa is predicted to remain stable, with sufficient capacity and no constraints.

MARKET DYNAMICS: FOAM

• Gasket foam is primarily used in the 3C (Computer, Communication, and Consumer Electronics) industry, the auto/electric vehicle sector, and the medical sector. The overall market demand for the 3C industry is lower than expected, and it is affected by the weak consumer market. Only the EV (Electric Vehicle) market is driving new growth.
• Rogers continues to participate in the global polyurethane foam market, with little anticipated fierce competition in the near term. Rogers recently announced the expansion of its PORON EVExtend® product portfolio, specifically designed to address challenges in EV battery pad applications. This new product family will steer the industry toward a new round of technical innovation.  Rogers’ strategy focuses on compelling growth opportunities in key markets, especially in the electric and hybrid vehicle sectors.
• Chinese foam products have started to qualify as dual sources in common applications, introducing competitive pricing to alleviate customer cost pressures.
• Sekisui’s ultra-thin foam gasket occupies a unique application that predicts low alternative possibilities for the short term.

SUPPLY ANALYSIS

• Projections for polyurethane demand in Q2 CY 2024 are weak, but the electric vehicle (EV) market remains on a growth trajectory. Despite the weak demand, the supply remains stable for the coming quarters.
• Rogers has experienced a reduction in lead time for its BISCO silicone foam, shortening it from about 10 months to two months. This adjustment reflected the weak demand and sufficient capacity. In response, Rogers is considering investing in an additional production line for silicone foam in China to enhance overseas delivery lead times.
• Notably, the foam supply remains unaffected by the situations in the Red Sea and inter-Korean regions, indicating resilience in the face of geopolitical challenges.

PRICING SITUATION

• Global PET resin sales have declined with reduced global demand, leading to a corresponding alignment of PET film prices with Q1 CY 2024. This adjustment reflects the market's response to prevailing economic conditions.
• The price of recycled PET resin remains uncertain due to insufficient post-consumer resin supply. The two-month lead time for resin recycling poses a risk in terms of supply and the implementation of capacity expansion.
• In the upstream adhesive tape industry, EU-based chemical companies face financial challenges due to high energy costs and weak demand. To cope, these companies are implementing cost-cutting measures, including shutting down production plants and divesting certain segments.
• Despite challenges like overcapacity and low demand persisting in some chemical sectors, market participants closely monitor developments in China and positive economic growth in India.
• The feedstock of protective film is silicon DMC polymer, and its price has remained low since 2022. The price is predicted to rise slightly with demand recovery, but there is no clear indication of a significant cost impact on protective film producers.
• Given the recovery in demand, it presents an opportune time to negotiate prices with suppliers.

KEY TAKEAWAYS

• The protective films market in Q2 2024 presents challenges and opportunities. Navigating this requires a clear understanding of supply chain dynamics, pricing trends, and strategic market adjustments.

MARKET DYNAMICS

• The protective film market is predicted to experience increased demand in Q2 2024 due to multiple incentive plans and recovering overall demand. 
• Recycled Protective Film is becoming a popular requirement for protective film producers, driven by the growing emphasis on sustainability solutions. This new access requirement is reshaping the supply chain in some industries, and those producers who get involved early are expected to gain a competitive advantage.
• Nitto continues to lead the high-end protective film market. Their products are the preferred choice, particularly when the protective film can impact the yield rate of high-value components. However, Nitto faces intense competition in common know-how products.
• Chinese protective film producers are gaining ground by offering reliable products at competitive costs. Their focus on affordability appeals to cost-driven customers. Global producers face intense competition in common products but are less competitive with cost-driven customers.
• The protective film market is evolving, with sustainability and cost-effectiveness playing crucial roles. Nitto’s leadership and Chinese producers’ rise highlight the industry’s dynamics.

SUPPLY ANALYSIS

• The supply of protective film runs smoothly, with stable lead times and capacities. Both global producers like Nitto and other Asian protective film producers are maintaining sufficient capacity, ensuring a stable supply in the market.
• In contrast, the supply of PET film remains stable despite economic uncertainties. However, the incident in the Red Sea has caused a two-week increase in transit time. This emphasizes the interconnected nature of global supply chains, where disruptions in one region can cascade transit times and logistics.

PRICING ANALYSIS

• Global PET resin sales have declined with reduced global demand, leading to a corresponding alignment of PET film prices with Q1 CY 2024. This adjustment reflects the market's response to prevailing economic conditions.
• The price of recycled PET resin remains uncertain due to insufficient post-consumer resin supply. The two-month lead time for resin recycling poses a risk in terms of supply and the implementation of capacity expansion.
• In the upstream adhesive tape industry, EU-based chemical companies face financial challenges due to high energy costs and weak demand. To cope, these companies are implementing cost-cutting measures, including shutting down production plants and divesting certain segments.
• Despite challenges like overcapacity and low demand persisting in some chemical sectors, market participants closely monitor developments in China and positive economic growth in India.

         PET resin price index (refer to Packaging section) 

 

• The feedstock of protective film is silicon DMC polymer, and its price has remained low since 2022. The price is predicted to rise slightly with demand recovery, but there is no clear indication of a significant cost impact on protective film producers.
   
• Given the recovery in demand, it presents an opportune time to negotiate prices with suppliers.

KEY TAKEAWAYS

• The protective films market in Q2 2024 presents challenges and opportunities. Navigating this requires a clear understanding of supply chain dynamics, pricing trends, and strategic market adjustments.