The Powder Coatings Market

By Tim Wright | September 11, 2006

A look at key trends and issues impacting and influencing the powder coatings market.

For powder coatings manufacturers in the U.S. and Western Europe, gone are the days of double digit growth rates, which lured customers and attracted significant industry investment during the 1990s.

"Since the new millennium the powder coatings markets in North America and Western Europe have plateaued as metal product manufacturers drove costs offshore in order to remain competitive on the global stage," said Thomas P. Frauman, global marketing director, powder coatings, Rohm and Haas Company. "This dynamic continues to fuel a rebalancing of growth to favor Asia, Latin America and Eastern Europe."

According to The Chemark Consulting Group, the global powder coatings market grew in value from $4.317 billion in 2005 to $4.547 in 2006. Ten years ago the world consumption of powder coatings was valued at $2.1 billion, 46% of the dollar value today. In terms of tonnage, powder coatings grew from 1.696 billion tons in 2005 to 1.785 billion tons in 2006.

"The global market for powder coatings will continue to grow at rates higher than liquid coatings as a group at approximately 4.5-5.1% annually on a pounds basis, with Asia-Pacific leading the way driven primarily by growth in China," said Phil Phillips, managing partner, The Chemark Consulting Group. "Asia-Pacific will grow between 8.2-10% while China will grow at over 12% in the next five year period. Western Europe and North America will grow at 3.5%."

"Growth in developed regions will be largely technology led with new chemistry enabling the powder coating of articles that could heretofore only be finished with liquid paints," said Frauman. "These areas will include automotive body coatings, continuous steel coil, architectural metal and coatings for engineered wood and plastic. Additionally, speed and agility will become increasingly important differentiators as the customer landscape reshapes to serve higher-end, more specialized and more customized end applications."

In order to grow in the future, the powder market must find ways to bring innovation that competes well in more areas of the vast industrial liquid coatings marketplace, according to Stephen Houston, vice president of sales and marketing for DuPont Powder Coatings Americas. "Currently there is a great deal of energy directed at technology for heat sensitive substrates such as wood, plastic and MDF. However, other areas must be addressed as well," he said. "This includes robust product offerings for AAMA 2605, clear topcoat for automakers, coil coatings and high temperature resistant coatings. It is also important to recognize the ability to respond quickly for small batch color matching which mirrors the focus many powder application equipment companies are targeting with quicker and more cost effective ways to change colors."

In North America powder coating extruded aluminum profiles, common in Europe, will see significant growth in the years ahead, according to Frauman. Additionally, high performance automotive body and specialty component parts continue to represent attractive opportunities for powder, while job coaters serve the segment of the market that continues to grow above market rates in both Europe and North America.

"We must not lose sight of the fact that powder coatings represents only roughly 12% of total OEM product finishing in Europe and North America, with nearly endless headroom for technology led growth," Frauman said. "Engineered wood, plastics and specialized metal applications represent a wide open frontier for growth."
emerging markets

Whatever strides are made to fuel matrue domestic markets, the fact is that in the years ahead, production of fabricated metal goods will continue to leave Western Europe and the U.S. in favor of lower cost operations in Asia, Latin America and Eastern Europe. This trend will also become more prominent as these developing markets become more sophisticated.

"Local demand will increase in developing nations with increases in disposable incomes and higher awareness and enforcement of environmental issues," said Frauman.

For the long term, Jotun Powder Coatings' Knut ivind Malmin, group executive vice president, agreed that the developing regions of South East Asia, China, India and Eastern Europe appear to have the most growth opportunities. "This is due mainly to the migration of western manufacturing companies to those areas, looking to lower their labor and raw material costs, as well as tapping new markets," he said.

However, for the short- and mid-terms, Jotun Powder Coatings, with its headquarters in Dubai, UAE, is eyeing the Middle East for growth opportunities. "The Middle East is scoring high demand for architectural powder coatings due to the increased number of monumental, commercial and residential real estate projects in the Arab Gulf region due mainly to the diversion of investments from the west to the east following 9/11," said Malmin.

In terms of China, "The appliance market is growing very rapidly while other segments such as architectural and job coaters are running at a high pace," said Houston. "We have also found markets such as agricultural and construction equipment (ACE) show great opportunity. Other areas that fall under the general industrial segment represent the largest part of the market and have niche sub-markets that are very attractive and offer very good growth potential."

Raw Material Trends

As a powder coatings manufacturer faced with the challenges of unprecedented raw material cost increases that serves a customer base that struggles to pass these increases through to the end-consumer, Rohm and Haas has placed considerable emphasis on raw materials to fully understand the universe of substitutes and performance tradeoffs in support of its global procurement objectives, according to Frauman. "The tragedy of current economics in our industry is that R&D budgets have been cut at many of our suppliers.," he said. "Given these suppliers' recent success in passing through increases to powder formulators like ourselves, it is my hope that we will see a renewed look toward shaping the future and growing the industry."

Also addressing the issue was Jotun's Malmin. "From one side, raw material price increases are decreasing profitability, while from the other side, the heightened competition among the powder coating manufacturers to gain market share in existing and new markets is eroding the selling prices," he said. "It's a complex dilemma that will probably end by having the big players absorb the smaller players by consolidation and/or acquisitions."

Within this environment, Jotun is focusing on quality and on long-term relationships with its customers. "However, we are noticing that even loyalty is being affected, so this situation usually stimulates the introduction of high value new products to make a difference and divert the attention of the buyer from price to value," he said.

For U.S.-based Hentzen Coatings, whose market focus for conventional powder coatings has been the Midwest region, facing raw material cost increases, raw material shortages and freight costs requires offsetting some of the cost increases through improved manufacturing efficiencies and reformulations. "Passing on price increases to our customers is also necessary to avoid excessive margin erosion," said Mike Tonn, marketing manager, Hentzen Coatings powder division.

Vertical integration is the solution for DuPont. "As raw material suppliers continue to consolidate, we find ourselves looking at ways to vertically integrate," said Houston. "DuPont continues to strive for competitive advantages on both ends of our product line and that begins with raw materials."

Recent raw material innovations that have or will soon benefit the powder coatings market are multi-functional resin systems, and pre-colorant resin systems, according to Tonn. "Development of improved heat resistant, and low temperature cure products is needed. Also, continued research and development is needed with nanotechnology additives that have the potential to radically change the functionality of powder coatings."

Whereas raw material price increases are affecting markets in all regions of the world, Dave Heflin, market manager, architectural and furniture at Interpon, which is part of Akzo Nobel, said one major issue currently facing powder coatings manufacturers in North America is over capacity of supply. "To address these issues as a whole, we try to look at efficiencies internally and then try to find ways of developing new products that can bring greater value to the table for the customer," he said.

New Technologies and Value-Added Services

Getting their customers to convert from liquid-based systems to a powder-based system has more to do with education then cost conversion issues, according to Interpon's Heflin. "For example, currently we are able to complete very fast color changes," he said. "Equipment capability now allows for very short color change over time where as in the past it was perceived that powder was a much longer process than liquid. While technology has minimized that difference, it's now a matter of educating both manufacturers and the architectural community about what's available from the standpoint of powder technology."

Hentzen Coatings has developed innovative formulations that address customer application, throughput and reject problems. "Our customers have expressed a need for stocked products that would allow them to expand their market offering," said Tonn. "To meet their needs, we introduced a stocking program with some very innovative products rather than offering the same old run of the mill standard colors. Our stocking program includes products such as Star Resistant wrinkles, Combat Grade primers, and Non Skid coatings that are ADA compliant.

Going into further detail about the company's Star Resistant wrinkles, Tonn said the product yields consistent wrinkle formation over varying masses and welds, without starbursts and glossy areas. "These coatings reduce customer costs by minimizing rejects," he said. "Our wrinkles allow customers to coat products with a wrinkle texture that have typically been restricted to sand type textures due to curing inconsistencies experienced with traditional wrinkles."

Rohm and Haas recently opened its second customer support laboratory in China, to complement its existing manufacturing plant and research facility. "The new laboratory is located in South China and provides customers faster color matching and more responsive technical support," said Frauman. "Our China plant near Shanghai is exceeding all projections and currently embarking on a major capacity expansion."

Jotun Powder Coatings has recenlty introduced new products in the markets it serves including hyper durable powders for the architectural market and antibacterial powders for the industrial market.

The company also provides applicators and coaters with a training program called the Jotun Powder School. "This is an educational technical program aiming to provide applicators and coaters' workers with the essentials on powder coatings, the benefits of using powder coatings and the importance of choosing the right powder for the right job," said Malmin. "The program is conducted through custom-designed two-day work shops.

Interpon recently introduced its Express Service blend base system for powder. "It's similar to the blend base system for liquid and allows us to match and manufacture powder within hours," said Heflin. "It's a blend base, which means the powder particles are blended together. We have a patent on the blending process in which we're able to achieve a homogenous color match.

"We also have a patent on a particle management system in which we are able to control the charging characteristics of the powder particles," Heflin said. "This technology is designed to improve efficiency in more fluid powders."

New Technologies Improve SMC

An OEM-led research collaboration is developing new interrelated technologies that allow sheet molding composite (SMC) parts to be powder-primed without sacrificing the quality of the SMC Class A surface. Key technology participants include General Motors Research and Development, Tier One supplier Meridian Automotive Systems, resin supplier AOC and coatings supplier Red Spot Paint & Varnish.

Powder primers help improve the workplace and environment by reducing volatile organic compound (VOC) emissions and overspray waste. OEM facilities want to apply powder primers to steel and SMC body parts that are sent side-by-side through E-coat and paint coating cycles.

When powder primed, conventional SMC develops a leather-like surface appearance during the powder primer high-temperature cure cycle. At General Motors R&D, the issue came under the full technical scrutiny of Hamid Kia, principal researcher and renowned automotive SMC authority.

"GM research concluded that the failure mechanism was a combination of air and moisture that is released when a common low profile additive (LPA) is used," said Jeff Robbins, director of R&D for SMC supplier Meridian Automotive Systems. "After defining the problem and determining the thresholds, Kia challenged companies in the automotive supplier value chain to work together toward a synergistic solution."

To evaluate different SMCs, Meridian Automotive provided tooling and molding equipment that are used in regular production. Full-size parts molded with different SMCs were sent to GM assembly plants for standard powder primer application and cure. These production-scale trials validated laboratory data and ensured that the solution could be implemented without changing process or equipment parameters.

AOC's role was to develop a special, low-moisture content formulation, which incorporated new LPAs in a synergistic fashion. The new additives continue to provide the traditional LPA function of contributing to reduced shrinkage and improved surface finish.

"All our new low moisture content SMCs are based on high performance Atryl TCA resins," said Ed Kleese, technical services manager for AOC. "SMCs made with Atryl TCA are bringing increased toughness, reduced surface waviness and superior Class A finishes to a host of car and truck applications."

To achieve even greater surface quality in powder primed parts, Kia encouraged automotive plastics coating manufacturer Red Spot to develop a new SMC primer. The Red Spot primer is applied by Meridian before SMC parts are shipped to the GM facility. The Red Spot primer is conductive so that the electrostatically-charged solid particles of the OEM powder coating process will be attracted to the SMC part surface.

"Red Spot research led by Dr. Keith Cannon results in a conductive powder-capable SMC primer with a unique patent-pending technology," said Marilyn Bara, new product marketing director for Red Spot. "In essence, the new low-permeability coating technology forms a layer that significantly controls the release of moisture from the SMC into the powder primer. Combining our proprietary primer with low moisture composite takes the surface quality of powder-primed SMC to extraordinary levels."

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