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Despite the Global Recession, Paint Makers and Raw Material Suppliers Continue to Invest in Their China Operations

By Tim Wright | November 19, 2009

The global economic turmoil has affected the Chinese economy, slowing its pace of development. However, the first half of 2009 has witnessed a gradual warming-up of China's economy with the housing market reviving, infrastructure constructions booming and

By Tim Wright

The global economic turmoil has affected the Chinese economy, slowing its pace of development. However, the first half of 2009 has witnessed a gradual warming-up of China's economy with the housing market reviving, infrastructure constructions booming and increasing demand in the automotive market. All these driving forces indicate that China's paint and coatings market will be revived in the second half of 2009 and beyond.

China’s paint and coatings industry accounts for approximately US$4 billion of the roughly $93 billion global coatings market. Moving forward, as the China’s paint and coatings industry becomes more sophisticated, increasing regulations, especially those regarding environmental concerns, are expected to upgrade the industry in terms of technology, management and marketing. EU's REACH and Behavior Rules of Chinese Coatings Industry are the two key regulations for the Chinese coatings industry.

Meanwhile, as export markets have shrunk badly during the economic downturn, some segmental coating markets have slowed down. The production of powder coatings and wood coatings decreased in the first half of 2009 as a considerable percentage of the industry targets the export market directly or indirectly. The powder coatings and wood coatings markets are expected to recover much slower compared to other segmental coating markets.

Coatings manufacturers are benefiting from reviving demand from the automotive and construction industry in China. Continuing strong car sales is driving the increase of project volume for coatings manufacturers as well as construction projects. From January to September 2009, car sales in China rose by 36% compared with the same period last year. The plus in September amounted to 77%.

Leading multinational companies are expected to continue to strengthen their footholds in China through merger and acquisition as well as infrastructure expansion to improve distribution channels and to increase production capability.

PPG, the world’s second largest coatings manufacturer, recently broke ground at its first resin production facility on main land China at the Zhangjiagang Yangtze International Chemical Industrial Park, Jiangsu province. Resins are key raw materials for paints and coatings, and the Zhangjiagang plant will supply other PPG plants throughout China, as well as automotive and industrial customers.

The Zhangjiagang plant will primarily produce water-based electrodeposition resins, which provide a more environmentally responsible alternative to traditional resin products for use in automotive and general industrial coatings. The plant will span 60,000 square meters and initial production capacity will be 27,000 metric tons. The plant is scheduled to begin operation in early 2011.

PPG said the facility will be "a model plant in Asia" in terms of its environmental features, and it will incorporate many of PPG's "green" building materials, such as low-volatile organic compound (low-VOC) coatings and low-emissivity glass.

Valspar has expanded its global automotive color operations by opening a color technology center in Shunde, China. Establishing a color technology center in this location enables Valspar to offer more service options to its automotive customers in Asia Pacific and Australia. The center is designed to increase the quantity of available colors for automotive customers while at the same time ensuring that common technology, methods and procedures are being practiced. The center plans to develop 6,000 colors the first year with plans to grow to a capacity of 9,000 colors per year. The center includes employees skilled as colorists, sprayers and color information experts. The new color technology center will also support global color development projects for Valspar’s automotive refinish brands including De Beer and Valspar Refinish.

AkzoNobel, the world’s largest coatings company, inaugurated a new Powder Coatings Technology Centre in Ningbo, Zhejiang province. This R&D center has a state-of-the-art laboratory and will have an initial team of 20 scientists and technicians organized in centers of expertise for the strategic market sectors. The new facility is located at the existing AkzoNobel powder coatings manufacturing site in Ningbo. All the centers of expertise—automotive, architectural, furniture, domestic appliance, IT and general industrial—and their corresponding marketing teams will be located at the center. AkzoNobel, owner of the brands Interpon and Resicoat, is the world’s largest manufacturer of powder coatings.

Carboline Company, a subsidiary of RPM, has acquired a 49% interest in its Chinese licensee, Carboline Dalian Paint Production Co., Ltd. (Carboline Dalian). The remaining 51% of the joint venture will be owned by UniChemical Company, a long-standing partner of Carboline in another joint venture, Carboline Korea Ltd. Carboline Dalian , with sales expected to approach $10 million, manufactures corrosion control coatings and linings for a variety of industries, including offshore drilling, oil and gas, petrochemical, general manufacturing and OEM, nuclear and conventional power, among others. Carboline Dalian’s headquarters and manufacturing facilities are located in Dalian City, Liaoning Province, People’s Republic of China. The company, which employs 60, also has a sales office and warehouse in Shanghai.

H.B. Fuller Company has opened a new technical center in Shanghai Zhangjiang Hi-Tech Park, China. The new lab, part of the company’s five-year strategic plan, is the company’s first regional technical center in Asia Pacific and will house research and development, applications testing, sales and regional leadership. The new technical center will focus on next-generation adhesive applications, helping the company promote product development and localization of initiatives in a variety of market segments, ranging from insulating glass, packaging and nonwovens and fiberglass sizing and binding, to footwear and textiles, lean flooring and reverse-osmosis filtration. H.B. Fuller also invested further in its Asia Pacific operations and built a new hot melt moisture cure (HMMC) and polyisobutylene (PIB) manufacturing facility in China.

A new DuPont laboratory and manufacturing facilities in China are accelerating the adoption of coatings with improved environmental performance by Chinese automakers. DuPont’s technical center, located in Shanghai, and the manufacturing operations in Changchun allow nearby DuPont scientists to respond to local customers’ needs quickly and efficiently. Shanghai General Motors uses advanced DuPont finishes, made in China, on its Cruze model.

As an example, the new Shanghai General Motors plant at Shenyang is located just west of the DuPont Changchun plant, and will use the DuPont water-based coatings produced at that facility. Shanghai General Motors is a joint venture between General Motors and the Shanghai Automotive Industry Corporation. The site has an annual capacity of 150,000 cars, and is not affected by the General Motors bankruptcy which includes only North American operations.

Sherwin-Williams Aerospace Coatings has expanded its global presence to meet increasing demand in Asia by adding a new distributor in China. The new distributor includes Shen Zhen Lubair Aerospace Co. Ltd., with two locations in Shen Zhen, China. These new distributor joins established distributors in Brazil, United Kingdom, Canada and Mexico, creating a greater international presence for Sherwin-Williams in the aerospace industry.

In January 2009, Hempel A/S acquired 100% shares of Hempel-Hai Hong (China) Ltd. and the company name was changed to Hempel (China) Ltd. The former company was founded in 1992 as a joint venture of the Hempel Group and China Merchants Holdings (International) Co Ltd. Hempel (China) Ltd is a wholly owned subsidiary of Hempel A/S in China. With its headquarters in Hong Kong, there are three production facilities, nine sales offices located in Beijing, Dalian, Qingdao, Shanghai, Chengdu, Guangzhou, Shenzhen, Wuhan and Tianjin, and eleven stock points strategically located in China. Another new advanced production plant in Guangzhou is under construction.

Today, Hempel (China) is one of the market leaders of supplying coatings in marine, container, protective and decorative markets. The annual turnover exceeds US$400 million.

BASF Coatings has opened a new training center in Shanghai to meet the growing demand for automotive spray paint professionals and body shop staff. The new Refinish Competence Center in Shanghai provides training for spray painters from authorized service centers and body shops working with leading distributors. Successful participants learn the best techniques for painting and repairing car brands such as Mercedes Benz, Audi, Volkswagen, and Peugeot Citroen, as well as other leading brands. Courses last for four days each and range from beginning spray gun use to advanced color matching.

As for raw material suppliers to the coatings industry, Celanese Corporation recently announced its plans to expand its vinyl acetate/ethylene (VAE) manufacturing facility at its Nanjing, China, integrated chemical complex. The investment will support continued growth plans for the Celanese Emulsion Polymers business throughout Asia, including China, India and Southeast Asia and Australia. The expanded facility will double the company’s VAE capacity in the region and is expected to be operational the first half of 2011. The emulsions expansion is the latest in a number of investments by Celanese in China. Nanjing is currently the largest integrated site in the Celanese global manufacturing network with six production units including acetic acid and vinyl acetate monomer (VAM), several units from Celanese’s Ticona business and the existing emulsions plant.

Wacker Chemie AG and Dow Corning Corporation started the construction of the second phase of their pyrogenic silica plant in Zhangjiagang, Jiangsu province, China. The pyrogenic silica plant, together with a siloxane plant, is a key facility of an integrated silicone manufacturing site developed by both companies at Jiangsu Yangtze River Chemical Industrial Park in Zhangjiagang to produce materials used extensively in industries including construction, beauty and personal care, power and automotives. Covering an area of one million square meters, the site is China’s largest facility of this kind and among the world’s largest and most advanced integrated production complexes for silicones. The overall nameplate capacity for both siloxane and pyrogenic silica, including the second phase silica plant, is expected to be approximately 210,000 metric tons per year

Clariant opened a surfactants production facility in Zhenjiang, Eastern China. The plant, which is fully operational, has been designed to meet China's growing demand for surfactants from various sectors such as personal care, paints and coatings as well as metal working industries. The new state-of-the-art 50,000 square meter facility has a capacity of more than 22,000 tons per year. The plant includes the very latest environmental technology. Zhenjiang will serve China's domestic customers in personal care, paints and coatings as well as metal working industries. Other products available at the plant will include chemicals for textile, oil, mining and homecare segments. The new plant is part of a US$100 million investment program Clariant has made in China during the last 18 months.

German specialty chemicals group Lanxess completed the acquisition of China's Jiangsu Polyols Chemical Co. Ltd. for €82.4 million. Jiangsu Polyols achieved sales of approximately €10 million in 2008 and currently employs some 170 staff at its facility in Liyang, west of Shanghai. It mainly produces trimethylol propane (TMP) that is used in lubricants, paints and coatings. Lanxess’ business basic chemicals business unit is already a supplier of TMP in China.