A relatively small number of
predominantly American, French and German companies tend to dominate UK
abrasives production with a trend to higher levels of concentration
reflecting restructuring, contraction and withdrawals from the market,
with highly competitive market conditions tending to depress margins and
profitability in overall terms.
The total market
in 2004 is estimated to be worth some £225m at manufacturers’
selling prices which represents a small decrease compared to 2003
indicating, as previously mentioned, adverse market conditions.
A period of relatively flat demand in
1998 and 1999 was followed by an underlying market reduction 2000-2004,
which is likely to continue in the short to medium term with marginally
positive market conditions expected in the long term, as the industry
recovers.
Although 1999 and 2000 witnessed an
underlying improvement in construction, reflecting motivation from
millennium projects and expansion of network data infrastructures, the
continuing high level of Sterling, weak manufacturing sector and
restructuring in the automotive and steel industries resulted in flat or
relatively stable conditions for abrasives.
The period 2001-2005 witnessed highly
competitive market conditions and import competition, culminating in
companies restructuring and refocusing on more specialist, added value
market sectors whilst certain manufacturers reduced the scale of their
operation or ceased trading. Cumulatively, all these trends tended to
result in higher levels of industry concentration, mainly through the
reduction of the number of suppliers, with substantial losses incurred
in certain sectors by some companies. Forecasts for the future level of
activity in the UK abrasives market should take account of the following
key influences:
-
Low level growth in certain sectors
of construction with the significant expansion of steel frame and
modular off site construction techniques requiring grinding and
fitting viewed as positive long term motivating factors, also orders
for Olympic facilities, Heathrow T5, health, education and
infrastructure in general.
-
Low level growth in the aeroplane and
semiconductor industries.
-
Growth in specialist niche sectors
– for example, growth in coated abrasives in the joinery,
flooring, and wood flooring markets: growth in bonded in the rail
regrinding sector, and in trackwork applications generally (for
example, CrossRail, London Underground, etc).
-
Opportunities for developing
industry/product-specific abrasives and for further developing
product specific abrasives systems and equipment – for example,
floor preparation equipment.
-
Changing technology trends in certain
manufacturing sectors – for example, the continuing substitution
of plastic for metal in car production, less sanding of metal welds,
also trends to fitting new panels as an alternative to repair and
refinishing in the crash repair sector. Meanwhile, historical trends
to ‘engineer-out’ abrasives and more precise casting techniques
continue, in addition to the decline in UK manufactured steel
requiring abrasive treatment.
-
Lack-lustre conditions in the housing
market and falling levels of consumer confidence have contributed to
a recent decline in the DIY/Home improvement sector with adverse
implications for DIY abrasives in the short to medium term.
-
Migration of production and customer
sectors overseas – for example, foreign-sourced engine components
for OEM automotive.
-
High levels of import competition, in
particular the thin wheel and diamond wheel sectors, also coated
abrasives and bonded abrasives, from, for example, the Far East,
Germany, France, Italy etc.
-
Better quality abrasive products have
increased the replacement life cycles, reducing demand for
abrasives.
The three key sectors of the UK
abrasives market are classified as ‘coated’ (including
‘non-wovens’), ‘bonded’ and ‘superabrasives’. Superabrasives
and coated (including non-wovens) are considered to account for the
larger shares by value at 40% and 35% respectively, whilst bonded is
estimated to have a 25% share.
The largest market shares
of coated products were achieved by 3M, Saint-Gobain Abrasives, Hermes
and S.I.A. The principal suppliers to the bonded market were assessed as
Saint-Gobain Abrasives and Tyrolit, whilst in the superabrasives field
Saint-Gobain Abrasives were also identified as the major players.
In overall terms, major players
include Saint-Gobain Abrasives, 3M, Hermes, Marcrist, Wendt
Boart, Tyrolit, Klingspor etc. The Saint-Gobain Abrasives Division
includes Unicorn, British Nimbus, Norton, Flexovit, and Cora, etc.
Historically, there is a trend towards greater supplier
concentration in the abrasives industry. For example, Saint Gobain
acquired Unicorn, Flexovit and Cora Abrasives, etc. More recently, this
trend has been exacerbated by the difficult market, with companies being
taken over, or in some cases going out of business.
Distribution of abrasive
products is served by a wide range of dealers and trade
outlets reflecting the fragmented end uses of abrasives, for example
outlets for sandpaper include the DIY Multiples, independent retailers
and builders merchants, whilst grinding wheels for manufacturing
purposes are catered for by the industrial distributors and the
Engineers Merchants, and abrasives specialists, etc.
Major distribution channels include abrasives
specialists, industrial distributors, Engineers Merchants/Factory Supply
Stockists, DIY Multiples, Builders Merchants, Automotive, etc.
Plant and Tool hire outlets represent a major
distribution channel for abrasive products. Throughout the UK there are
an estimated 2500 to 3000 Plant Hire outlets, and 2000 Tool Hire
outlets, growing at the estimated yearly rates of approximately 2-4%,
with market leaders such as Hewden Stuart/Finning, A-Plant, HSS, etc.
