- Today on the Metal Roofing Channel,
we are discussing the sealant market
and what global factors
are influencing its position going into 2022.
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What's up guys, welcome to The Metal Roofing Channel.
Welcome to Q and A Mondays, I'm Thad Barnette.
Make sure you subscribe if you're new,
we release metal roofing and metal construction content
every Monday and Wednesday.
Today we're discussing the sealant market
and what global factors are influencing
the market's position going into 2022.
To help me out, I have Ryan Thome from Sheffield Metals,
and he's in charge of the accessories program at Sheffield
and Sarah Nash, the owner and CEO of NovaGuard.
All right, well Sarah, let me start with you.
I really appreciate you being here with us.
Can you tell us a little bit about who NovaGuard is?
- Sure, NovaGuard is an innovator,
a formulator and manufacturer of silicone sealants.
We also have a line of PVC foam,
but that's a smaller part of the business.
The fastest growing part of our business
is our sealant, coatings and adhesives business
all under the chemistry of silicone.
So we're very familiar with all the tensions
and supply issues that have confronted us
and therefore our customers over the last year,
it's been quite an extraordinary year,
but one that we have met full force, thankfully
because we've had long standing strategic partnership
with a major global supplier of the raw material.
- Awesome and I'd love to talk a little bit
about how Sheffield's customers
can benefit from some of this knowledge.
But can we start first of all,
with where you see the state of the sealant industry?
Right now here, we're in quarter one of 2022,
from your perspective, what does that look like?
- Well, the sealant industry
has really taken off for three reasons
and we participate into of those economies.
One is the construction industry,
which Sheffield knows well continues to be extremely strong,
growing at 30% or more last year
and we continue to expect that to be the case this year.
The only thing that might've baked that growth
is the supply of various raw materials.
Doing that, but I think we've all learned a lot last year,
so we'll keep that in check.
The second major market that we participate in
is electronics.
We're building a very strong market across all electronics
coatings requirements, be they for automotive, medical,
general electronics, as you would know that to be the case.
The third market is one that has really caused
the explosive growth, is the semiconductor chip industry.
And you know all those chips
go in everything that we use and all those chips
are coated with silicone.
So what's happened fundamentally in the silicone market
is that the traditional consumers of silicone,
we continue to be there with our markets
experiencing very high growth,
but then you have the semiconductor chip industry
coming in with explosive growth.
That also I would wrap into that,
the need for solar sealants as well.
So as we've moved towards an economy
that is called in the biggest word,
the electrification of everything.
We've seen the need for silicone
just be driven higher and higher.
That's simply because in the sealant world,
and this is critically important to Sheffield as well,
silicon is the one material, coating adhesive material
that works at all temperature ranges.
So you can be in very, very cold temperatures
or very warm temperatures and silicone expands and contracts
and performs at consistently the highest levels,
we don't crack, we don't diminish in quality.
And so as individual requirements from certain industries
have gotten stronger and stronger.
With more and more companies are choosing to go to Silicon.
And we're delighted with that 'cause we feel
we do provide the superior coating in the industry
and one that is customized to very specific applications.
In Sheffield's case, we're proud to provide them
by and large with our metal roof sealant,
given your obviously strength in the metal roof industry.
But it's a very, very exciting time,
but also a very stressful time for all of us
as we compete for what has been a diminished supply
of silicone which we believe is short term,
meaning it's not a long-term situation.
It's more driven by geo-political reasons than anything.
- You know, markets like electric vehicles,
energy storage systems,
those markets explode over the last year
and really putting a strain on several products
that are fundamental to our business
and the construction markets overall.
Ryan, I'd love to ask you,
what has Sheffield been seeing in the construction industry,
how are we affected by this?
- We've been affected because we have not been able to keep
our inventories up to supply customers.
We've done a pretty good job with NovaGuard,
giving us a heads up, telling us,
"Hey, you might want to get your orders in,
there may be a longer delay than normal."
But one thing that we've been told from our customers
is they don't want us to go to another supplier.
They want us, they'll wait
and I think that's why we've partnered with Novaflex.
It's a big name in the industry
and that's who our customers,
it's the only one they want to use.
(laughter)
- That's wonderful to hear.
- Their comments' simple as that.
We're stocked at all of our locations,
so we are able to transfer from branch to branch
to take care of our customers.
- What advice would you give to a customer
they're experiencing difficulty
or we're trying to do our best to forecast
and build our inventories up,
should there be something they consider
when they're ordering product?
- We are pulling from one branch
to fulfill orders in another branch.
If you use a lot of sealant, I would suggest buying in bulk
that way you're cutting down your lead times
and helps us plan our inventories.
Again just pre-planning, it's probably easier
to stock your traditional colors.
We're not always gonna be able to transfer
from branch to branch.
All of our branches sell Novaflex
and we got to take care of our customers.
But I think the important part is,
just don't wait until the last minute to get your sealants.
We're waiting too, so if you can help us,
we'll be able to plan our inventories
and be able to stock more.
- I think what Ryan said is so important
because we too obviously for those who don't understand,
70% of the world silicone,
the raw material comes from China,
20% from Europe and only 10% from north America.
And that's because one of the three big producers
in north America closed their plant.
And I know there's some thought being given
to reopening it under a different ownership structure,
but that sent shockwave through the system.
And then if you add to that,
the fact that we've had human rights issues
and China surrounding many of their minds,
not just silica but particularly ores
that have affected a lot of those mines being closed down.
Now they're all being slowly reopened,
so it's the processors who are awaiting that material,
but again, 70% of the processing capacities is in China,
and then you layer onto that logistics issues
of getting the material from China
through the ports over to us.
It's a considerable challenge that we've all been met with.
And of course the third leg of that stool,
if it's not just the raw material and then the logistics,
it's also the labor.
We also are suffering from very uneven labor pool.
So what NovaGuard has done to address that,
is we are automating our manufacturing
of the mixing process of all these sealants.
And so by the end of June this year,
we will be completely automated
so that we can certainly stabilize.
A mixer is a very, very technical,
highly desirable job on the manufacturing floor,
and they're used in electronics,
they're used in pharmaceuticals,
they're used in paints and they're used in silicone.
Silicone as a material, as a gorgeous, wonderful material,
but not as easy to mix this paint.
So you get a mixer from a paint company,
they may not like mixing for us
'cause it's a little more complex.
So hence I chose to invest in not only just automation,
but also significant increase in our capacity.
So that we are going to, as of the end of the first quarter,
be making six times the amount
that we've been making before.
So if we have customers like Sheffield
who know that they can order more in bulk,
we'll be able to manufacture more in bulk
and get it to you and you can keep it
where you need to.
When is this all gonna become clear?
I don't know, because I think the demand for the material
on the customer side, as you said, is stronger than ever.
I mean, it's just a superior material.
And so we're each competing for applications
and once your specked in,
it's very, almost unheard of that someone
will move back to a cheaper material
of which there are some,
but we know that over time
they don't come close to the performance that we offer.
It's just gonna be a question of each of us working
as closely as we can together.
And I'm committed to,
we've just set up a new role in the company
called vice-president of customer experience
to represent our customers like Sheffield
on the plant floor, so that we know intimately,
even though we're manufacturing in bulk,
that, that material that's going into production this week
is for Sheffield.
It needs to be these quantities.
It needs to get there by X date
so that we can be in closer communication.
And I'm glad to say you feel we have been,
but there's always room for improvement.
And I'm hoping to get to where we will say,
week X of X month is when this volume of order will be done.
So, you know that we'll be shipping it out
at some point during that week.
Can we get back to the day which we used to be
before all this craziness happened?
I would be silly to say that,
but we all hope that it settles down.
We all help the supply of the material increases,
which would then change the dynamics
that we're all under now
and the pressure that we all feel from various sources.
But it's a great material and we're delighted
to be a strong supplier, partner to Sheffield
and just know we're gonna continue to do everything we can
to keep you stocked on time.
- Awesome and that's a great lead
into our next topic here.
I'm hearing about how NovaGuard is improving
and working to help that supply chain
and the downstream product over 2022.
Can you tell me a little bit about what you see
as the future outlook,
is there any information that you can share
or any thoughts that you have
on what we may see in the coming months?
- Well, I think we know from a logistics side
that we're all gonna be under pressure
because the Longshoremen are planning a strike in June.
And so things that are, materials that are being brought in
to California in particular,
which is where they're gonna target, we've been told
is really gonna be under a lot of pressure.
So we're trying to get ahead of that.
But a lot of our material does come in from Thailand.
It's manufactured in Thailand,
and it does come into either Vancouver, Newark or Halifax.
So it's traveling the other direction
through the Suez canal, Mediterranean the Atlantic,
which seems to be a little bit faster.
So I would say any one supplier needs to have extremely
strong relationships with their supply chain.
I mean, we're all partners together here.
I think long gone are the days where you just try
and get anything at the cheapest price,
because now it's just about getting it.
And then we're all working very hard
to make sure we can get it at a reasonable cost.
I mean, nobody's interested
in paying these freight rates anymore,
whether they're on sea or by truck.
So I'd say there's some things,
unfortunately on the horizon in 2022,
along with there's the Olympics and the Chinese new year,
I mean, China basically
will be shut down for a month or two.
So I'm just grateful that our supply partner product
comes out of Japan and Thailand,
but that's not to say that we won't be impacted in some way
by other things beyond that,
or again by labor until I get our plant
fully automated on the mixing side,
we are fully automated on the packaging side.
But I think we've all learned enough to know
that this is an opportunity for us
given the strength of silicone in the market,
that it's incumbent upon us to make significant investments,
to make sure that we're your partner for the longterm
and that's what we're doing.
We will do everything we can to keep abreast of pricing
and to make sure that it's a very dynamic market,
but again, the semiconductor chip industry,
because of why you're talking about
whether it's battery storage,
automotive, electronics, you name it,
I mean, they're just used everywhere.
And the demand for silicone has sort of in a way squeezed
what was historically available for construction,
general, industrial and regular electronics uses.
But even the electronics industry is upgraded
from a proxies to silicone.
We're getting a lot of inquiries there
because of the performance of the material.
It's not just the absolute supply,
it's the dynamic around,
why it's used and where it's used,
and those markets are continuing to grow.
I wish I could give you very specific answers,
but I think I've shed some light on some of the things
that will continue to influence it in 2022.
- Absolutely and I think that information
just further supports how important it is
for Sheffield's customers,
the construction industry overall
to pre-plan as much as possible.
That's something historically
that a lot of contractors or manufacturers struggled with.
But I think as we've experienced 2020, 2021,
and now heading into 2022,
that becomes more and more important.
- For sure that I can speak to that a little bit.
I think traditionally, we've prided ourselves
on having inventory of just anything accessory wise,
but those days are aren't as easy right now.
People would come and plan by the job,
they would order what they need
for what they're doing that day,
and they can continuously do that,
Now, especially with the sealant,
just pre-planning is going to make everybody's life easier,
whether it's us holding on to inventory
or just being able to better plan for our customers.
We can certainly help them with that too.
They can just give us an idea
of what colors they're using stuff like that.
Anything, any information
we can get to help us keep our inventories ready for them?
- Well Sarah, thank you so much for your input.
Ryan thank you as well.
Glad to have you guys on the channel today.
If you have any questions, please comment down below.
We'd love to answer them.
Subscribe here to The Metal Roofing Channel
and as always I'm Thad Barnette
and we'll catch you next time.
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