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AM26069 AMA ABRASIVES MARKET JULY 1999

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Companies covered include:

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KEY AREAS

THE MARKET

Overall market size by value for abrasives, 1993-2003.
Market trends from 1996-2003. Future prospects, major factors influencing market development, etc.
Assessment of key factors influencing end-use demand - engineering, automotive, construction, DIY.
Review of import/export levels - trends, key sources of imports, impact on UK market.

PRODUCTS

Analysis of market by major product sector - Coated, Bonded, Superabrasives - Product mix by value, recent trends & future prospects.
Coated - Market size, mix by product type (flexible sheets, non-woven web products, ‘shaped’ products), trends within sector (e.g. market size and growth of portable sanders).
Bonded - Market size, key areas of application and trends, product mix by value of portable power tools in the cutting and grinding sector (grinders, disc cutters etc.). DIY/professional mix of portable grinders by value and trends. Industrial applications and trends (guillotines, crankshaft and general purpose grinding machines, machine tools etc.).
Superabrasives - Market size, mix by product type (grinding wheels, saw blades, drills/lathe tools/dressers etc.). Growth market sectors, key application areas and trends within product sectors.
Review of Portable Power Tool market - market size 1996-2000, DIY/Professional mix by value.

SUPPLY AND DISTRIBUTION

Supply Structure - major abrasives suppliers by market share. Key suppliers within product sector. Changing supply structure - growing concentration through acquisition. Review of major suppliers.
Key distribution channels - Independent specialist abrasive stockists, Engineers Merchants, DIY Multiples, Builders Merchants, Tool and Plant Hire, Factory Supplies Stockists etc. Review of major outlets within channel. Trends and end-use sectors supplied. Key products within channel. Review of sales of Tool and Plant Hire Markets, 1997-2003.
Builders Merchants/DIY Multiples/Tool and Plant Hire - market shares, outlets, market size.

FUTURE PROSPECTS/GENERAL

Switch to higher value abrasives. Trend to 'harder' materials and tighter tolerances in engineering, and the implications for abrasives.
Review of market influences - engineering sales by sector, engineering output 1998 (electrical, automotive, other transport etc.), construction activity, production of cars and commercial vehicles, the UK Woodworking market, PDI/Savings ratio, interest rates and inflation, etc.
Analysis of future prospects - forecast of market size up to 2003. Key factors influencing forecasts within products and end-use markets.

The Report contains over 90 pages and 30 tables and charts of ORIGINAL research on the UK Abrasives Market and provides incisive and thought provoking views on its future development.

EXECUTIVE SUMMARY

The market for abrasive products is a mature market and is diffuse particularly in terms of the range of product end uses. The total market in 1999 is forecast to be £317m at manufacturers’ prices, which is a similar level to the previous year.

It can be seen that growth was more rapid through the mid 1990's reflecting the recovery from the recession of the early 1990's and the greater optimism in the industry at that time. The strength of the pound sterling in recent years has constrained the market's growth and this situation looks set to continue in the medium term future.

The earlier rate of growth is attributed to a recovery in engineering manufacturing output and exports during 1996, and 1997, a period when construction and consumer demand for DIY abrasive products also began to increase, peaking in 1997 and declining thereafter. Consumer demand for finished goods, such as cars and furniture, has recently improved and may motivate increased demand for abrasives in retail or indirectly in engineering or industrial applications in the short to medium term.

Growth in the UK building sector, although more positive in 1996-7, recently declined in terms of new housebuild and RMI. However, certain areas of construction have shown marginal improvement during the latter part of 1998, and are likely to show marginal growth in the short to medium term future.

Whereas housing, retail developments and the public sector have generally been relatively stable, commercial, utilities, railways and general infrastructure projects have shown more positive trends, with millennium-based projects also providing a significant stimulus to construction output.

Projected growth for abrasives 1999-2003 has been conservatively forecast at around 1 percent, taking into account forecasts for the engineering manufacturing industry, and the likelihood of negative volume growth, but limited 'value-added' or 'value' growth.

The three key sectors of the UK abrasives market, under our definition are "coated", "bonded" and "superabrasives". The sectors hold similar shares of the market, though coated and superabrasives are considered to take larger shares at 37 percent and 35 percent respectively, with bonded at around 28 percent.

The largest market shares of coated products were achieved by 3M, Unicorn, Hermes and S.I.A. The principal suppliers to the bonded market were headed by Unicorn and Carborundum, whilst in the superabrasives field Unicorn (including Nimbus) and Tyrolit were identified as the major players.

In overall terms, major players include Unicorn, 3M, Norton, Hermes, Marcrist, Flexovit (UK), Diamant Wendt, Tyrolit, Arrow, Klingspor etc.

There is a trend toward greater supplier concentration in the abrasives industry. Between 1996 and 1998, Carbo Plc acquired a number of abrasives manufacturers, suppliers and distributors. Unicorn were acquired by Saint Gobain in 1997, and more recently Flexovit was acquired by Saint Gobain in 1998. Cora Abrasives are also owned by Saint Gobain.

Distribution of abrasive products is served by a wide range of dealers and trade outlets reflecting the many and varied end uses of abrasives. To illustrate the range of the distribution network, outlets for sandpaper include the DIY Multiples, independent retailers and builders merchants, whilst grinding wheels for manufacturing purposes are catered for by the provincial Engineers Merchants, wholesalers and abrasives specialists, 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 2.3 percent and 4 percent respectively, with market leaders such as Hewden Stuart, Finning, Initial Services, Andrews Sykes, Maxxiom and others etc.

One of the largest abrasives manufacturers - Carborundum - own a number of regional and provincial stockists whilst Unicorn and 3M pre-pack DIY and trade products, distributing (in this market segment) through DIY Multiples, Builders Merchants etc.

Major distribution channels include Abrasives specialists, Engineers Merchants/Factory Supply Stockists, DIY Multiples, Builders Merchants, Chain Stores, auto-refinishing

TABLE OF CONTENTS

The UK Abrasives Market 1999 - Contents		Page
1.	INTRODUCTION	6
2.	SUMMARY	7
3.	ECONOMIC ENVIRONMENT	10
3.1	GDP Growth	10
3.2	Interest Rates and Inflation	11
3.3	Unemployment	11
3.4	Sterling	11
4.	OVERVIEW OF THE MARKET FOR ABRASIVE PRODUCTS	13
4.1	Market Definition	13
4.2	Market Size	14
4.2.1	Background	14
4.2.2	Current Situation	15
4.2.3	Future Development	16
4.3	International Trade in Abrasive Products	18
5.	PRODUCT SEGMENTATION	22
5.1	Definition	22
5.1.1	‘Coated Abrasive Products’	22
5.1.2	‘Bonded Abrasive Products’	22
5.1.3	‘Superabrasive Products’	22
5.2	Coated Abrasive Products	24
5.2.1	Flexible Sheets	25
5.2.2	Belts, Discs and Shaped Sheets for Mechanical Abrading	25
5.2.3	Non-Woven Web Abrasives	30
5.3	Bonded Abrasive Products	31
5.3.1	Grinding Wheels	31
5.3.2	Off Hand Grinding Wheels	32
5.3.3	Bonded Grinding Wheels Attached to Machine Tools	36
5.3.4	"General-Purpose" Bench/Pedestal Grinding Wheels	38
5.4	Superabrasives	39
6.	DISTRIBUTION CHANNELS	43
6.1	Distribution of Abrasive products	43
6.1.1	Structure & Distribution	43
6.2	Distribution Channels	46
6.2.1	Industrial Sector	46
6.2.2	Automotive Outlets	48
6.2.3	Building & DIY	49
6.2.4	Other Channels	56
7.	MAJOR SUPPLIERS OF ABRASIVE PRODUCTS	58
7.1	Supply Structure	58
7.1.1	Overall Market Shares for Abrasive Products	58
7.1.2	Coated Products	60
7.1.3	Bonded Products	61
7.1.4	Superabrasives	62
7.2	Major Suppliers	63
8.	KEY MARKET INFLUENCES	70
8.1	Industrial Sectors	70
8.1.1	Fixed Investment in the Engineering Manufacturing Industry	70
8.1.2	Short Term Trends In The Performance Of The Engineering Manufacturing Industry	70
8.1.3	Medium-Term Trends in Engineering Output	72
8.1.4	Exchange Rate Fluctuations	75
8.2	Automotive Production	76
8.3	Woodworking	76
8.4	The Auto-Refinishing Trade (including cars, buses, lorries, vans)	78
8.5	Building, DIY and Retail Sectors	78
8.6	Construction Applications	79
8.7	General	81
8.7.1	Interest Rates & Inflation	81
8.7.2	Housing	83
8.7.3	Population Profile	84
8.7.4	Employment/Unemployment	86
9.	FUTURE PROSPECTS	87
List Of Tables And Charts
Chart 1:	UK Abrasives Market 1993-2003 at £m MSP	7
Table 2:	The UK Market for Abrasives 1993-2003 £m MSP	14
Chart 3:	The UK Abrasives Market At Constant 1995 Prices £m	17
Table 4:	Imports And Exports Of Selected Categories Of Abrasive Products For 1998	19
Table 5:	Imports Of Selected Categories Of Abrasive Products By Country £m	20
Table 6:	Exports Of Selected Categories Of Abrasive Products By Country £m	21
Chart 7:	Segmentation of the UK Abrasives Market - 1998	23
Chart 8:	Product Mix For Coated Abrasives 1998 By Value	24
Table 9:	The UK Portable Power Tool Market 1996-2000 (£m MSP)	28
Chart 10:	DIY / Professional Purchases of Portable Sanders	29
Chart 11:	Portable Power Tools Mix in the Cutting & Grinding Sector 1998	33
Chart 12:	DIY and Trade/Professional Purchases of Portable Grinders	34
Table 13:	Main Types of Superabrasives and Their Applications	39
Table 14:	1998 Estimated Superabrasives Sales at MSP, UK Market	40
Table 15:	Channel Share By Application Area	45
Chart 16:	Merchants Market Shares	50
Table 17:	Tool Hire Market 1997-2002 (£m)	52
Table 18:	Plant Hire Market 1998-2003 (£m)	53
Chart 19:	DIY Multiples Market Share 1997	54
Table 20:	UK DIY Multiples - Number of Outlets	55
Table 21:	Market Shares of The Abrasive Products Market in 1998.	59
Table 22:	Key Suppliers - Coated Products	60
Table 23:	Key Suppliers’ - Bonded Products 1998	61
Table 24:	Key Suppliers - Superabrasive Products	62
Table 25:	Engineering Sales Output Changes	71
Table 26:	Comparison of Engineering Sector Output By SIC Code (1990=100) 1996-2000	72
Table 27:	Comparison of Engineering Sector Output by SIC Code 1996-2000 (1990=100)	74
Table 28:	Exchange Rate Fluctuations 1994-1998 - DM, Dollars, and the ECU to the Pound Sterling, Spot Rates	75
Table 29:	The Production of Cars & Commercial Vehicles in the UK 1990-1998	76
Table 30:	The UK Woodworking Market £bn MSP 1995-1998	77
Table 31:	Contractors Output - New Work and RMI Non Housing - Current Prices (£m)	79
Table 32:	New Orders Obtained by Contractors 1990-1998 Current Prices (£m)	80
Chart 33:	Interest Rates and Inflation (RPI) from 1990-2000	82
Chart 34:	PDI & Savings Ratio	83
Table 35:	Number of Property Transactions in England and Wales 1990-1998	84
Chart 36:	Age Distribution of the Resident UK Population 1997 (‘000)	85
Chart 37:	Number of Employees in Employment GB - June 1981-98 (Millions)	86

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Last updated by Paul Tucker 22th January 2000