Abrasives are usually used in shaping or finishing a workpiece using friction. Normally, in finishing, process materials are often polished to give it a smooth and reflective surface. However, in the case of satin, matte, or beaded finishes abrasives are used to roughen the surface. Abrasives are largely used in industrial applications in grinding, polishing, honing, buffing, drilling, cutting, lapping, sharpening, and sanding. Calcite, emery, diamond dust, sand, rouge, sandstone, and powdered feldspar are some of the common forms of naturally appearing abrasives. Majority of the demand for abrasives is driven by its use in industries such as an automobile, metal fabrication, consumer goods, and construction. The automotive industry accounts for roughly 40% of the demand in the abrasives market.
Emerging markets are likely to provide more scope for the demand growth in the abrasives market. APAC is the fastest growing region in the world and is expected to keep up this growth pace due to the growth of emerging economies such as China and India. Increase in the middle-class population in the APAC region is driving the growth of the automobile industry, which, in-turn, drives the demand for abrasives. The contribution of emerging economies such as MEA and South America cannot be neglected as the region’s automobile industry is experiencing steady growth prospects.
The price of abrasives is highly dependent on the raw material and energy expenses incurred by the supplier. Most suppliers engage in forwarding contracts to mitigate the risk of raw material price fluctuation and adopt renewable source of energy, which leads to cost reduction in operations. As a result, prices in the global abrasives market are expected to remain stable in the coming years. The prices of abrasives in this market are highly dependent on the volume of order quantity, which is why volume-based pricing is highly adopted in this market.
The spend on the abrasives category accounts for a small share of the buyer’s cost structure and most buyers prefer a tactical approach toward category management. As a result, most of the purchases are often based on the immediate necessity for abrasive materials. However, buyers from automotive and metal fabrication industries observe streamlined procurement and bulk buying. Also, the majority of the buyers use the abrasive material as tools in manufacturing operations. As this accounts for a small share of the buyer’s overall cost buyers should prefer a VMI approach toward managing abrasives. Adopting such approach can also significantly reduce management expenses for buyers as suppliers would undertake order generation, material delivery, and storage of the procured abrasives.
Category management tips
The product development and differentiation in the global abrasives market are bleak due to which most suppliers adopt a cost-differentiation strategy for gaining market share. Category managers must focus on timely delivery of material to their premises, which would ensure that operations do not halt due to low material availability. Cost containment could be achieved by adopting forward contracts approach. Additionally, category managers can also look to outsource cost extensive functions to third-party service providers through low-cost country sourcing. The level of outsourcing is dependent on the criticality of the category for buyers due to which buyers from automotive and metal fabrication industries conduct most procurement functions in-house.
Read more about the market outlook of the abrasives market along with procurement insights, pricing models, category management, and market challenges in SpendEdge’s upcoming report on the global abrasives market.