Global coatings activity heats up
A new report by Euromonitor paints an optimistic picture of the future of the global coatings market.
by Sean Milmo
Global growth in coatings sales will double in the second half of the current decade while by volume it will go up by a third, according to a study by the London-based market research organization Euromonitor International, commissioned by Akzo Nobel.
Annual growth during 2005-2010 will average 5.4% by value against 2.7% during 2001-2005, while in volume terms the average will be 5.6% against 4.2% in the first half of the decade.
Even Akzo Nobel seemed to be surprised by the level of optimism of the results of the study, which have been included in a Global Coatings Report 2006 published by the company. The study covered published data and included interviews with coatings manufacturers, end-users and industry experts.
“We regard the growth projects given in this overview as being too bullish,” said Hans Wijers, chairman of Akzo Nobel, the world’s leading coatings manufacturer.
Wijers told a meeting in London to mark the launch of the report that Euromonitor “is even more excited by the growth prospects than I am.” But he stressed that his company also believes that there are “significantly strong growth prospects, particularly in emerging markets because of higher incomes and increased industrial usage.”
He pointed out that in China an average household spends only $20 a year on paint. In Western European the average annual household expenditure is $130 and in the U.S. $160.
Euromonitor emphasizes that in addition to rising disposable income, emerging markets are also benefiting from industrial relocation as coatings-buying industries transfer their production from Western Europe and North America to the lower-cost areas of Asia and Eastern Europe.
Other key drivers to growth include the move from solvent-based coatings to environmentally friendly options, such as powder coatings, waterborne coatings and UV curables.
“This shift towards more environmentally friendly coatings such as high solids means that volume growth when measured in liters appears understated,” Euromonitor said. “These coatings require less volume to be applied for the same coverage when compared to more traditional options.”
Asia Pacific, which now comprises the largest regional coatings market with a 31% global share, will continue to demonstrate robust growth over the next few years as it both attracts more manufacturing investment and enjoys still higher disposable incomes.
Much of Asian growth will be powered by the Chinese economy. By 2005 the Chinese market was accounting for 30% of regional sales, after coatings demand in China almost doubled in five years. In 2005-2010 coatings sales in the country will rise by 63% to $12 billion a year against an average coatings growth in Asia of 39%.
However, Euromonitor predicts that Eastern Europe will be the fasting expanding coatings market with value growth of 68% through 2010. While growth in China will actually be slowing down, that in Eastern Europe will be accelerating from an annual average of 11% to 14%.
Eastern Europe is benefiting from the transference into the region of production plants of relatively high users of coatings such as automotive and furniture manufacturing. Demand for coatings in the region has also been bolstered by an uplift in the Russian economy.
Comparatively healthy growth in the mature markets of Western Europe and North America is also being predicted by Euromonitor. Coatings consumption in Western Europe is expected to switch from a decrease of 3.5% by value in 2001-2005 to an increase of 13% in the next five years. In North America growth will more than triple from six percent to 19%, an even higher rate of increase than that forecast for Latin America.
Demand in the established markets will be boosted by new technologies opening up new sectors, some of which will be heavily influenced by environmental legislation. Also, the construction and housing market will continue to be a big impetus behind coatings demand, particularly in North America. “The splintering of the nuclear family and the growth of the second or holiday home is creating a demand for a larger number of housing units,” said Euromonitor.
Globally the decorative paints market will continue to be the largest coatings sector accounting for 45.3% of sales in 2010, according to Euromonitor. Average annual growth will rise from 3.8% in 2001-2005 to 5.5%.
In Latin America, where overall coatings demand is predicted to more than quadruple to 17% in 2005-2010, decorative paints are the main force behind coatings growth because economic and political instability has been undermining industrial investment and a rise in industrial coatings sales.
In Brazil an average annual decline of 0.6% in coatings consumption in the first half of the decade might have been bigger but for decorative paints sales. The Brazilian government has been investing in a National Housing Scheme to deal with a shortfall in supply of new homes.
Worldwide the annual average rise in industrial coatings sales is forecast to increase by approximately 2.5 times to six percent in 2005-2010, giving it a 37% share of the total global market by the end of the decade. Much of the growth, however, will occur in developing countries.
Demand for powder coatings will be a big stimulus to growth in industrial coatings. It is expected to increase by an average of 11.5% through to 2010 against 10.3% in the first half of the decade. “While the explosive growth seen in the 1990s is now slowing in North America and Western Europe, interest in powder coatings continues apace in Asia and other developed markets as environmental awareness takes a greater hold,” said Euromonitor.
Among special purpose coatings, protective coatings are expected to raise annual growth rate from 2.8% to 4.3%. Much of the increase in consumption will come from investment in road and rail infrastructure in developing countries, notably China, as well as from additional funding for manufacturing and power plants.
Looking at the long-term future, the Akzo Nobel report predicts that coatings demand will be enhanced by the broadening of functionalities beyond protection and aesthetics. Coatings that react to external stimuli such as temperature, stress, strain and environmental conditions will become more common. “The diversity of coatings products, and their impact on society, will dramatically increase over the coming decades,” the report concluded.
Mexico’s Comex Targets the Southeastern U.S. market
Through its acquisition of Color Wheel Paint & Coatings, Comex has positioned itself to target the Southeast U.S. market.
by Charles W. Thurston
Latin American Correspondent
Comex S.A., Mexico’s largest paint producer recently purchased its eighth U.S. paint manufacturer—Color Wheel Paint & Coatings of Orlando, Florida—to target the U.S. Southeast market, through its wholly-owned subsidiary Professional Paint Inc. (PPI), Lonetree, CO. While there are no plans to move paint across the U.S.-Mexico border, technology is flowing, according to Kent Child, CEO of PPI.
Color Wheel produces seven million gallons of paint and coatings per year, including its Optima and Weather Master brands, and operates 37 retail outlets in Florida. Its products are regionally formulated for the hot and humid climate of the Southeast, and may be marketed up the Eastern seaboard toward Atlanta, Child suggested. Color Wheel’s paints already are exported to the Bahamas, but would not compete with Comex exports to the Caribbean.
Sales for Comex this year will reach $1.4 billion, Child projected, including the latest acquisition. Production for Comex last year amounted to 60 million gallons, while PPI produced 36 million gallons, making Comex the fifth-largest North American paint manufacturer, according to the company. Comex purchased PPI in 2004, and according to a Mexican press report quoting Alfredo Achar Tussie, the corporate director general of Grupo Comex, the company spent a total of $300 million that year on PPI and other North American acquisitions.
Comex operates four manufacturing facilities for a wide range of brands including Durex and Vinimex as well as a polymer research unit, and has four distribution centers in Mexico. Comex also operates a network of 3,000 retail outlets, including its Color Center mixing units. PPI production units in North America apart from Color Wheel include Frazee Paint, San Diego, CA; Kwal Paint, Denver, CO; Parker Paint, Tacoma, WA; Stellar Kwal Paint, Dallas, TX; General Paint, Vancouver, British Columbia, Canada; Ideal Paint, Toronto, Ontario, Canada; and Duckback Products, Chico, CA. PPI’s strategy of creating a national network of regional paint producers seeks to optimize the formulation of each line for the local climate.
At the time of the PPI purchase, Marcos Achar, the chairman of Comex said, “If our markets like what PPI’s companies are doing, we can bring the products to Mexico, but they would come under the PPI brand names.”
This year, Comex also is investing in a 60% share of a $32 million plaster plant to be built in Mexico with partner Lafarge, according to press reports. The investment will make the operators the third-largest plaster producer in the country, the report indicated. Production from the new plant will be sold through the Comex network of retail stores in Mexico.
Comex is a family-owned business, but in 1995 struck a joint venture with Akzo Nobel for manufacturing products for the automotive refinish market in Mexico. Comex also has an agreement in place with Amercoat—Amercoat Mexicana—for the production of industrial and marine coatings in corrosive environments. In addition, Comex participates in the Nova Paint Club.