Adhesive Tape Market Update: RAW MATERIALS …

1 Adhesive Tapes:THE KEY COMPONENTSThe structure of an Adhesive tape includes a number of key components which play a crucial role in the make up of that particular tape product. Within the majority of single sided Adhesive tapes, there are three key constituent parts:Substrates: Substrates or carriers, as they are often otherwise referred to, are the main component of an Adhesive . Non technical end users of the product would be likely to perceive the substrate as the actual tape itself. So for example, the substrate in an electrical tape would be PVC and for a duct tape , would be cloth. Substrates include aluminium foil, foam, cloth, PVC and : Many different types of adhesives such as rubber resin, acrylic, silicone or phenolic can be used within Adhesive tapes.

2 The choice of Adhesive depends on the required tape product performance, as each Adhesive type has its own different properties, such as temperature or UV resistance. Liner: Used to separate the Adhesive from the backing or another Adhesive and to allow easy unwind to protect the Adhesive before final assembly or for identification purposes. Facts: ADHESIVESL inked to oil feedstock s so heavily influenced by oil pricesSynthetic rubber shortages of supplyTackifying resins seeing successive cost increases between July - Sept. 08 Acrylic suppliers announced in August their intention to implement large increases Issue 1: September 2008 RAW MATERIALS RevealedAdhesive tape Market Update: Explosion in Raw material Cost Prices Hits Tapes Market Hard30% within the year, including successive price increases of up to 20% being imposed by major manufacturers in both June and July StrainWithin the Adhesive tapes Market , manufacturers and distributors alike are struggling to contain these unprecedented increases which are putting such a strain on already struggling for manufacturers but, in some circumstances, to shortage of supply and the imposition of allocations by manufacturers of certain key raw MATERIALS .

3 Suppliers of raw MATERIALS are now publicly stating that these are the most difficult times that they have experienced for twenty years and the volatility of the current Market is such that many suppliers are already quoting Force Majeure as today s unique price increases show little resemblance to previously seen Market structures and seasonal IncreasesBoth natural and synthetic rubber MATERIALS , as used as key ingredients for tape adhesives, are a prime example of this trend. Driven by the recent price boom in oil and all other traded commodities, a global shortage of synthetic rubber has spurred further demand for natural rubber, with consequential huge increases in price for both MATERIALS of above 50% over the last year!Likewise, polyethylene film (LDPE), also used as a major raw material component has experienced massive price pressure, with cost increases of over 2007/8 has been an extraordinary period for the manufacturing industry across Europe.

4 New record high increases in raw material and oil prices, coupled with hugely growing energy and freight prices has led to spiralling costs. The relentless number, frequency and magnitude of these imposed increases is unprecedented in modern times. The days of once a year January price increases are fast becoming a thing of the past!Tight SuppliesIncreasingly also, these record increases have been coupled with tight supply, especially for petro chemical and related feed stocks, which are intrinsically linked to many Adhesive tape components. This in turn leads not only to rapidly increasing Natural & Synthetic Rubber Prices05 01 0 01 5 02 0 02 5 03 0 03 5 0Ju l-0 7A u g -0 7S e p -0 7O c t -0 7N o v-0 7D e c -0 7Ja n -0 8F e b -0 8M a r-0 8A p l-0 8M a y -0 8Ju n -0 8Ju l-0 8A u g -0 8Q 4F / C0 %5 %1 0 %1 5 %2 0 %2 5 %3 0 %3 5 %4 0 %4 5 %5 0 %N R w f/ lS R B u t y l% c h a n g eHIDDEN COSTS: The Rising Costs of Freight & EnergyMost householders have seen rising costs in diesel prices in Europe hit hard over the last 12 months, so it comes as no surprise to reveal that these double digit percentage increases are also leading to dramatic increases in transportation costs for businesses.

5 On top of this, many freight companies are now implementing carriage fuel surcharges for land freight, which can be reviewed and increased monthly. The scale of these additional charges can be significant, from 5-11% across most of Europe and for air freight can actually be as high as 20%!Additionally, manufacturers across Europe are suffering from unprecedented rises in energy costs, which can wipe out the benefits of careful cost reduc-tion programmes overnight. Al-though the level and frequency of gas and electricity increases can vary substantially around Europe, some areas such as the UK who are most exposed from their need to import the major-ity of their energy requirements, have been subject to enormous increases of over 250% for natu-ral gas and 300% for electricity over the past forward, despite some small decreases in wholesale prices.

6 More pain is expected as both the UK and continental Europe experiences continual pressure in this Energy Prices01 02 03 04 05 06 07 08 0S e p -0 7O c t -0 7N o v-0 7D e c -0 7Ja n -0 8F e b -0 8M a r-0 8A p l-0 8M a y -0 8Ju n -0 8Ju l-0 8A u g -0 8pence/therm01 02 03 04 05 06 07 08 09 0 /MWHG A SP O W E RPrice Index - Cloth, Film, Foil0 . 8 00 . 9 01 . 0 01 . 1 01 . 2 01 . 3 01 . 4 01 . 5 01 . 6 01 . 7 01 . 8 0Ju l-0 7A u g -0 7S e p -0 7O c t -0 7N o v-0 7D e c -0 7Ja n -0 8F e b -0 8M a r-0 8A p l-0 8M a y -0 8Ju n -0 8Ju l-0 8A u g -0 8Q 4F / C-1 0 %-5 %0 %5 %1 0 %1 5 %2 0 %2 5 %3 0 %3 5 %C L O TH (R a y o n )F IL M ( P o ly e t h y le n e )F O IL ( A lu m in iu m )% c h a n g eFacts: SUBSTRATESR epresent more than 40% of total tape cost generallyGlobal producers such as Dow imposing unprecedented multiple price increasesRayon cloth up over 40% in 12 months 2008 The Voice of the MarketO I L U P D AT E : Oil prices continue to set new records, and the recent speculative boom has merely highlighted the fundamental problem of shrinking reserves and rising consumption.

7 The global demand for oil and related feedstocks is growing at a faster rate than new capacity coming on-stream, with demand especially from rapidly developing countries such as China and India set to spiral ever in recent weeks the price of oil has fallen, it is still 60% higher than the price 12 months ago! For the situation to improve long term, we would need to see huge and sustained oil price decreases to even get close to the levels that were anticipated in : LINERSAll suppliers of silicone coated liners announcing high increases due to rising cost of silicone metal, exacerbated by the recent earthquake in ChinaStrong demand and extended lead times supported these increases CHINA - changing situation?

8 Over the last 5 years, China and similar developing economies have become widely known as the place to go for low cost industrial raw MATERIALS and finished goods. However, today s situation is looking very different as high levels of inflation in the Far East (China: 8%, India 11%) have forced raw material prices higher than ever before, so that they are now at a higher level than both North America and Europe with cost increases over the last 6 months at twice the level of Europe!As China s economic growth continues to boom, so their demand for oil and related products has been driven upwards, at a higher rate than major economies such as Japan and Germany. A decade ago, China was a net exporter of oil, but today imports up to 40% of its demand and is now the world s second largest user of crude to their rapidly expanding domestic Market , a less favourable exchange rate against the US$ and the 2007 removal by the national government of a lucrative 13% export refund, Chinese suppliers are now seen to be moving their attention away from the attractive export Market of Europe towards the more profitable supply of the local Market .

9 Raw MATERIALS Revealed Disclaimer The information given herein is based on research compiled from public news sources, experts from the chemicals and adhesives industries and from personnel at Scapa Europe. While this information is, to the best of our knowledge and belief accurate, no guarantee of its accuracy is made. published by Scapa. For more information about this newsletter, contact Sarah Quilliam, Marketing Manager on +44 (0) 161 301 7480 The raw material situation has triggered much speculation and discussion. Here are just some of the comments made public over recent Dow Chemical Company, supplier of many oil based feedstocks, announced in June 2008 that it would raise the price of all of its products by up to 20 percent, as the company attempted to mitigate the extraordinary rises in energy and raw material costs.

10 Andrew N. Liveris, Dow chairman and CEO, said: Our first quarter feedstock and energy bill leapt a staggering 42 percent over the year, with the cost of oil and natural gas climbing ever higher. The new level of hydrocarbons and energy costs is putting a strain on the entire value chain Dow spent $8 billion on energy and hydrocarbon-based feedstock costs in 2002. At the current rate, the company stated that those costs would climb to $32 billion at this years rates!AFERA, the trade association for Adhesive tape manufacturers, has also been driven to make a statement with Marketing Committee Chairman Eric Pass stating: The current economic situation, with increasing costs for manufacturing and transportation, is putting a lot of pressure on the business results of AFERA members.