The buoyancy in protective coatings sales, which enabled European coatings companies to earn record high revenues in the sector last year is continuing into 2008.
The driving forces behind the growth is investment in energy facilities, particularly in oil and gas production and distribution and in wind turbines, and in infrastructure projects in Eastern Europe, like transportation and manufacturing plants.
In addition, new environmental legislation in the EU, especially that relating to the emission of VOCs like solvents, has prompted a move into added-value protective paints.
However, Western European coatings companies involved in the sector are likely to have to rely on global sales to keep up the momentum. In addition to needing quality products and an understanding of what customers want, "success in the highly competitive protective coatings market increasingly requires a global reach," according to Martin Chew, divisional vice president for protective coatings at Norwegian-based Jotun.
A global operation in protective coatings, based on a combination of consistent product standards and technical service support, has to have, increasingly, a network of coatings plants across the world. Jotun opened in March its first manufacturing facility in India, which will help it to serve customers in South Asia and the Middle East.
This need for an international production and services capability has been a big impetus behind a surge of mergers and acquisitions in the protective coatings sector in Europe.
In the first quarter of this year, Akzo Nobel reported that the main growth impetus in its marine and protective coatings business was protective coatings which achieved a double-digit volume increase compared to the same quarter in 2007.
The protective coatings activity was also a star performer for the company last year, helping the marine and protective coatings business to raise its sales by 11% to €1.25 billion ($1.9 billion).
Jotun's protective coatings sales soared by 40% last year. At Danish-based Hempel, protective sales rose by 30% last year, which was a similar increase to that in 2006.
For European companies one of the fastest growing of the protective coatings segments has been oil and gas not only in Western but also Eastern Europe.
"There is a continuing boom in construction of oil and gas facilities," said John Dunk, worldwide marketing manager of the Interpon protective coatings activity at Akzo Nobel's International Paint, marine and protective coatings business. "Oil and gas companies have been increasing their capital expenditure not only on offshore production but also onshore refining and gas operations."
A big rise in building of oil and gas rigs production facilities globally in areas like the North Sea-as well as outside Europe-has helped boost sales of International Paints' Chartek intumescent fire protection coatings.
In Russia the country's expanding oil and gas sector has both bolstered demand for protective coatings and has been providing finance for infrastructure schemes, which also require protective coatings.
"Within the Russian energy sector, it's not just oil and gas production which need coatings but also new pipelines," explained Petri Jarvinen, director of business support and marketing at Tikkurila, the coatings division of Kemira of Finland. "The earnings from oil and gas is financing a huge amount of infrastructure development where the requirement is for low-cost but efficient coatings."
European coatings producers also benefit from the enormous sums of money being poured into oil, gas and other energy projects in the Middle East.
They have been re-organizing their operations in order to target the mega-projects in the region related to the oil and gas industry, like offshore rigs and platforms and onshore power plants and refineries. Jotun's protective coatings sales increased by 40% last year in the Middle East, against 30% in Europe.
The Norwegian company has set up an Offshore Concept Team, based in Singapore, to collect and analyse information on the offshore industry to help improve sales and marketing and customer management in the Middle East, as well as in Asia and elsewhere in the world.
One of Jotun's biggest offshore customers is Seadrill, a Bermuda-based offshore contractor, which has 37 drilling units and 13 under construction around the world. Jotun's global support for the drilling specialist supplements a deal which covers Seadrill's offshore units in the North Sea.
In line with a policy of establishing itself as a single source of protective coatings for customers, Hempel last year reached a five-year agreement with Saudi Aramco, Saudi Arabia's state-owned oil company with the world's biggest crude oil reserves. The deal extends not just to the supply of coatings but also IT services, logistics, technical services and new product development.
The sort of environmental and safety standards which have been helping push protective coatings sales in the EU are being introduced in regions around Europe.
As a result there is likely to be a greater use of waterborne and high solid coatings based on epoxy and polyurethane resins both within and outside Europe. At the same time applications of solvent protective coatings could decrease.
"In Russia, for example, the biggest demand is for solvent protective coatings because they are cheaper and easier to use than waterborne but even there the use of solvent coatings will shrink," said Jarvinen. "Waterborne coatings are popular in the Scandinavian protective market but elsewhere the trend seems generally to be towards high solids which are growing strongly in Western Europe as a whole and will gradually become more common in Eastern Europe as well."
However, in Western Europe, in particular, tougher environmental standards than those required by EU legislation are becoming more prevalent. These are linked to safety and performance standards as well.
The Norway's petroleum sector, for example, has a range of standards labelled Norsok which set thickness levels and numbers of coats while laying down specific test methods. The country has an inspection system covering corrosion protection and surface treatment standards, which is being extended to other parts of Scandinavia.
In the rapidly growing renewable energy market in Europe, standards are being laid down by wind turbine manufacturers which go well beyond regulatory limits.
Vestas of Denmark, the world's leading supplier of wind power system, has drawn up a black list of chemicals which cannot be used in its turbines as it strives to ensure that its machines have completely environmentally friendly life cycles through to their recycling or disposal.
Demand for protective coatings grows
European companies continue to expand the international sales of their protective products.
By Sean Milmo
Published May 29, 2008
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