Global raw material input costs are by far the most expensive components in the cost of goods sold for adhesive and sealant formulators, equaling about 50% of revenue as an industry average (a higher percentage than coatings formulators face). Globally, raw material prices are facing greater uncertainty after seeing a period of relative stability following supply chain constraints, shortages, and inflation pressures in 2021 and 2022.

For 2024 and 2025, a dominant theme has been the trend of moderating inflation and continued growth. While the extreme price spikes of previous years have largely subsided for input costs, the overall cost basis for adhesive and sealant formulators remains elevated compared to pre-pandemic levels. Energy prices, a critical input for resins and other raw materials, have seen declines from their peaks but remain sensitive to geopolitical instability and OPEC+ output decisions.

Key Raw Material Cost Drivers

Several key drivers are expected to shape the trajectory of raw material costs for the adhesives and sealants industry.

Global Economic Growth

The pace of economic recovery and growth, particularly in major economies like China, the United States, and Europe, will be a primary determinant of demand for raw materials. Current forecasts from entities including the World Bank and the Organisation for Economic Co-operation and Development (OECD) indicate a period of potentially slowing global economic growth. The OECD recently decreased its forecast for global GDP growth to 2.9% while lowering it even more for the United States (down to 1.6%).

Geopolitical Landscape

Ongoing conflicts, trade tensions, and resource nationalism continue to add volatility to raw material pricing. Disruptions to supply chains, sanctions, and export restrictions can significantly impact the availability and cost of specific raw materials. Tariffs, such as those recently enacted or expanded (as in the case of the U.S. on steel and aluminum), are affecting downstream industries.

So far, most raw materials used in the adhesives and sealants industry have escaped tariffs under Annex II of the April 2 executive order on reciprocal tariffs. That said, imported epoxy resins have recently become a subject of anti-dumping investigations in the United States and EU, with China, India, South Korea, and Taiwan facing import duties.

Supply Chain Dynamics

Efforts to build more resilient and diversified supply chains are ongoing. This includes reshoring/near-shoring, friend-shoring, and investments in domestic production. While these strategies aim to reduce long-term risks, they can also involve higher initial costs. Many formulators have made good progress in making their supply chain more robust following earlier supply disruptions.

Monetary Policy, Foreign Exchange, and Inflation

Central bank policies regarding interest rates and inflation control will continue to influence borrowing costs, investment decisions, and overall economic activity, thereby impacting commodity demand and prices. Currently, the European Central Bank is cutting short-term interest rates, while the U.S. Federal Reserve is holding the targeted interest rate steady during Open Market Committee meetings, waiting for more data before deciding its next action.

In terms of the value against other currencies, the U.S. dollar has seen a decline since the beginning of the year (when it was thought tariffs would be supportive). Instead, it has weakened as demand for U.S. assets from foreigners, individuals, and government has waned and growth slowed.

Demand from Key End-Use Industries

The growth of major end-use markets for adhesives and sealants impacts raw material demand and pricing:

• Construction — Construction represents a substantial market for both adhesives and sealants. Housing starts and infrastructure projects directly influence demand for silicone and polyurethane chemistries. Expectations for 2025 are low-single-digit growth for new home sales, while existing home sales continue to hover near recent lows of about four million units per year.
• Automotive — The automotive industry’s moves toward electric vehicles (EVs) and lightweight materials are increasing the demand for specialized adhesives used in bonding dissimilar substrates. This trend is expected to continue fueling demand for high-performance adhesives despite slowing growth in EV sales and the prospect of subsidies ending. The industry itself is in a challenging environment, with China having excess production capacity as demand for new vehicles is expected to be flat in 2025.
• Packaging — Growth in the e-commerce sector and demand for flexible packaging continue to drive demand for adhesives. Sustainability trends are also influencing the types of adhesives used in this space, but the driver currently has a larger impact in Europe than the United States.
• Electronics and other manufacturing — Growth in electronics, appliances, and general manufacturing also contributes to demand for various adhesive and sealant products. The effectiveness of current efforts to reshore manufacturing from Asia is still an open question, given the complexity of the supply chain and the long lead times needed.

Feedstock Overview

Adhesives and sealants producers are sensitive to crude oil prices due to the preponderance of oil-derived feedstocks. The U.S. Energy Information Administration (EIA) has lowered its expectations for global oil demand by 0.5 million barrels per day and lowered the forecast for Brent crude by $8 a barrel on average.

More than half of the petrochemical derivatives begin with ethylene, while propylene is the second-largest chemical produced in industry. Ethylene and propylene are two important building blocks for the manufacturing of various chemicals, including many used in the production of adhesives and sealants.

Ethylene is used in the manufacturing of vinyl acetate monomer as well as styrene, while propylene is used in making polyurethane, acrylic, and phenolic resins. Tracking the prices of these materials is a key element of strategic decision making, assisting adhesives and sealants producers and end users with keeping their costs in line and planning appropriately for the future.

Other important feedstocks for adhesives and sealants include:

• Butadiene — Butadiene is another bulk commodity chemical produced in large volume globally. It is an important raw material to produce polybutadiene elastomers and styrene-butadiene rubber (SBR), as well as styrene-butadiene latex.
• Beneze — Another large-volume commodity petrochemical, benzene is mainly produced in oil refineries. The primary derivatives produced from benzene are ethylbenzene, cumene, cyclohexane, and nitrobenzene. Benzene is also a precursor to bisphenol A (used in epoxy resins) and phenol.
• Styrene — Styrene is used in the formulation of styrene block copolymer (SBC) hot melts. Sub-categories of SBCs include styrene-butadiene-styrene (SBS), styrene-isoprene-styrene (SIS), styrene-ethylene/butylene-styrene (SEBS), and styrene-ethylene/propylene-styrene (SEPS).
• Vinyl acetate monomer (VAM) — VAM is an important component in many waterborne resin systems, including ethylene vinyl acetate (EVA) for use in packaging, woodworking, and footwear.
• Methylenediphenyl diisocyanate (MDI)/toluene diisocyanate (TDI) — MDI/TDI react with a polyol not only to produce rigid polyurethane systems including foam, but also adhesives used in flexible packaging, automotive, footwear, and woodworking applications.

Outlook for Key Industry Raw Materials

Long-term, the industry anticipates that conditions may improve in the second half of 2025 and 2026, driven by continued domestic economic growth and potentially softening input costs for some petrochemicals as seen in recent data. A potential oversupply of ethylene and propylene could also influence pricing.

Figure 3, which indexes several industry inputs tracked in a blended price from different regions by The ChemQuest Group, shows that prices declined beginning in 2022 and have remained below their peak. Recent trends have shown weakness in 2025. We expect this is a temporary phenomenon and that prices will grow by low single digits through 2026.

Navigating the Current Environment

For adhesives and sealants manufacturers, navigating the raw material cost environment will require:

• Diversified sourcing — Reduce dependence on single suppliers or regions, instead of just-in-time supply
• Regular monitoring of market dynamics — Utilizing financial instruments to lock in prices is usually not a viable option for formulators, but it is possible to track relevant PPIs as well as price trends for upstream inputs in negotiations.
• Innovation through investment in technology — Optimize material usage and explore alternative materials
• Strong supplier relationships — Collaborate closely with current suppliers for better terms and supply security

The raw material cost outlook for the industry is characterized by a complex connection of moderating inflation, larger-than-normal geopolitical uncertainties, and shifting global economic growth patterns. Though the widespread sharp input price increases seen in the recent past appear to be behind us, formulators should strive for flexibility and redundancy in managing their input needs and costs.

To learn more, reach out to the author at atmuhleman@chemquest.com or visit chemquest.com.