The Powder Coatings Market

By Tim Wright | September 19, 2007

Combining the dual advantage of durability and low environmental impact, powder coatings are poised for positive growth in the years ahead. While powder coatings continue to grow even in the mature markets of Western Europe and North America, major powder coatings producers like DuPont and Akzo Nobel are looking to the emerging markets of China and Eastern Europe for the greatest growth opportunities.

Throughout the coatings industry powder coatings have been widely embraced for the advantages this coating process offers. Proof is in the fast rate this finishing technology is growing around the world. Often referred to as 'dry painting,' the popularity of powder coatings continues to spread as an alternative to traditional coating processes.

In large part, the reputation of powder coatings continues to gain favor for the high level of durability offered along with minimal impact on the environment compared to older coating process counterparts. In an industry guided by evolving, stricter VOC legislation, and the need for finishes to resist chipping, scratching, fading and wearing, powder coatings have risen to the top of the heap because this finishing process accomplishes both tasks.

This is why manufacturers spread across many industries have adopted the powder coating process to finish their products and parts. Around the house appliances such as refrigerators, washers and dryers, among many others are powder coated. In the automotive industry it used to be that powder coatings were only used for small parts, but now powder coatings technology has evolved to the level where entire car bodies are being powder coated. The furniture and architectural decorative coatings segments are other areas also benefiting from the use of powder coatings technology.

Combining the dual advantage of durability and low environmental impact, powder coatings are poised for continued growth in the years ahead.

Global Market Trends

According to The Chemark Consulting Group, the global powder coatings market grew in value from $4.317 billion in 2005 to $4.547 billion 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%."

The current state of the powder coatings market is healthy, according to Stephen Houston, global marketing director, industrial coatings, DuPont. "We should continue to see global growth, however, powder continues to be the most under valued coating sold today," he said. "In the last two years we have seen moderate growth in the mature markets of Western Europe and North America, but have seen much higher growth rates in Asia and specifically China."

Discussing trends, Houston said consolidation is occurring on both sides of the fence-for raw material suppliers as well as powder producers-in part because of rising raw material prices. "With the cost of petroleum and other necessary feed stocks used in powder coatings today we have seen price increases at a rapid rate. These have been difficult to predict and unprecedented," he said.

One way for powder producers to maintain margins is to pass these costs through, which causes some challenges in an over crowded market. "Another alternative would be to reduce raw material costs by optimizing the appropriate ingredients for the application. In short, do not over engineer products," Houston added.

"But, we have seen an interesting dynamic taking place where producers are simply shopping the market daily and changing raw materials batch to batch in an effort to improve margins," he continued. "This is not good for the consumer and if not stopped could give powder coatings a black eye. The impact is not immediate and in some cases it could mean products that did last five years may only last two or three today. Application characteristics can also be negatively affected as a result of this trend."

Over capacity is another issue powder producers must face in the market. "Today, no matter where you go in the world, you will likely find more powder production capacity than demand," Houston said. "This dynamic itself creates a very competitive environment. Powder producers must find ways to look outside the current market space, stop simply exchanging customers, and enlarge the powder pie, which means finding new ways where powder coatings can be used. This is the only way to utilize the excess capacity and improve the business conditions for everyone.

"We have the penetration of powder coatings in the architectural market within the U.S., more conversion from liquid to powder in the global ACE market and expansions in the automotive market space as well as heavy duty truck and body builders," Houston continued.

Emerging Markets Offer Major growth

As the paint and coatings industry has matured in the U.S. and Western Europe, most Western companies are focusing on three markets for growth-Eastern Europe, India and Asia, particularly China.

"The emerging markets such as China, India and Eastern Europe are where the growth is," Houston said. "The mature markets-Western Europe and North America-will continue to grow but be impacted much more by economy and business losses moving to lower cost countries."

During 2006, DuPont consolidated some of its plants in Europe while at the same time expanded its powder operations in South America, Asia and North America. "This asset management has allowed us to put the asset's where the market growth opportunities are and at the same time improve the service to our customers in mature market spaces," Houston added.

The stability and growth of Eastern European countries has encouraged many large international manufacturers of vehicles and consumer goods to transfer production facilities to these countries, representing a growing market for powder coatings.

Akzo Nobel's powder coatings business recently opened its first production plant in Russia on a site that offers capacity for future expansion. The facility is situated in the industrial belt surrounding Moscow at Orekhovo-Zuevo. The 13 million investment places the company at the heart of the Central and Eastern European market for industrial coatings, of which Russia has a 46% share.

"This plant is part of an ongoing expansion of our activities in key geographic regions," said Akzo Nobel CEO Hans Wijers. "We realized some time ago that local production was necessary in order to supply the service expected by our customers, and to keep up with rapidly growing demand. The beauty of this site is that two-thirds remains free for future development, which opens up further strategic opportunities for all our businesses."

Akzo Nobel's powder coatings business has been very active in Central and Eastern Europe during the last few years, an area which has a GDP equal to that of China, according to the company. As well as recently expanding its site at Opava in the Czech Republic-the first phase of a 5 million refurbishment-the business has also inaugurated a dedicated state-of-the-art distribution warehouse in Poland, while another warehouse has been established in Hungary.

Opening a production facility in Russia, however, is perhaps the most significant development, given that in 2006, 80% of the powder coatings used in the country was imported.

"Many of our multinational customers have been investing in Russia and this plant will be able to produce to the high standards demanded by the automotive, domestic appliance and construction sectors," added Akzo Nobel's powder coatings general manager, Rob Molenaar. "This investment continues our strategic goal of locating production close to our customers and will further consolidate our status as the largest global manufacturer of powder coatings."

Two production lines have been installed and are operating at the new facility, with another two scheduled to be up and running by mid-2008.

During the year Akzo Nobel Powder Coatings further consolidated its leadership in powder coatings after it opened its fifth manufacturing plant in mainland China-the first to be located in the west of the country.

The company is already the biggest powder supplier in China and the new facility-situated in Chengdu, Sichuan province-will further improve service to the architectural, general trade coater and functional markets.

"China's powder coatings market is the world's largest and continues to enjoy double digit growth," explained Molenaar. "Akzo Nobel has already stated its aim of growing the company's total sales in China to $1 billion by 2010 and this new investment is an integral part of that strategy."

Akzo Nobel-the biggest global manufacturer of powder coatings-already operates Chinese powder sites in Bao An (in the south), Ningbo and Suzhou (central China) and Langfang (in the north). The new Chengdu plant is located in a part of the country where markets have grown strongly in recent years, reflecting the Chinese central government's policy of encouraging investment in less developed areas, away from the prosperous eastern and southern coastal provinces.

"We have been manufacturing powder coatings in China since 1991," said Alan Kwek, general manager for Akzo Nobel Powder Coatings' Asia Pacific business. "The new Chengdu plant is not only a testament to our belief in continued strong market growth, but also demonstrates our ability to follow our customers into new geographic areas."

VOC Legislation Leads the way Forward

Since powder coatings are one of the most environmentally friendly coatings, it is an attractive market to operate in. "The more stringent our regulatory VOC restrictions become, the more opportunity there will be for powder coatings today and in the futrue," said Houston.

Harald Mller, head of the Relius Group's industry unit, said powder coatings is a field for which he predicts a positive trend. "This is due to VOC legislation," he said. One of Relius' product lines in this area is specialty solutions, such as powder coatings that are permitted for coating drinking water pipes. This means the inside of the pipes can be coated to ensure corrosion resistance and longer durability, and yet remain safe for drinking water. "Other advantages include our wide range of colors, quick delivery and our metallic powders, especially for facades," Mller added.

Earlier this year the Relius Group, with its architectural and industrial coatings business units, was integrated into BASF Coatings, enhancing its already robust powder coatings operations.

As the world's fourth largest supplier of powder coatings, Jotun Powder Coatings is continually developing new technology. The company recently launched Corro-Coat Durasol to the architectural segment. It is a hyper-durable powder coating based on fluoropolymer technology, engineered to meet the aesthetic and functional needs of certain segments of the industry, which has traditionally relied on a fluorocarbon solvent-based wet coating technique known as PVDF. The official launch took place in four main markets including the United Arab Emirates, Indonesia, Thailand and Egypt.

Rohm and Haas Powder Coatings recently launched its latest color collection-RTS Gen II-following the success of the first generation of Ready to Ship (RTS) products in 2004.

The Generation II RTS Color Palette is comprised of more than 244 ready to ship products. The collection has been enhanced to include forecasted trend colors and appearances, as well as approved OEM and end-use specified products. In addition, new product and technology offerings have been added such as Britebond Soft Metals, three metallic effects offered in gold, nickel and copper, and fourteen of the top selling RAL colors in low-ETM TGIC polyester. There are six new Britebond reverse hammer tone products that have also been added in response to the popular look and feel of a by-gone era. Customers can also choose from a series of newly formulated metallic-vein look finishes in a hybrid chemistry that overcome several of the appearance and application issues previously associated with this finish, according to the company.

The collection contains many traditional technologies such as epoxy, polyester, hybrid, acrylic, silicone and nylon powder coatings, as well as many of the innovative powder coatings products developed from Rohm and Haas Powder Coatings such as Britebond, HY, Mor-Temp, The Original Wrinkle, Textra and Grafaway.

DuPont Lignacoat is a powder coating breakthrough and is designed for use on Medium Density Fiber Board (MDF). "This European-produced technology has shown great results thus far," said Houston. "Powder with anti-microbial characteristics has provided many customers with product enhancements differentiating them in the markets they serve."

Some of DuPont's other innovative technologies include high temperature resistant coatings, new functional coating developments in single, dual and three layer systems for gas transmission lines and recently develop products for ID pipe as well.

Moving forward Houston said longer lasting, more durable systems will continue to be needed. "We hear the need for extended UV protection with improved corrosion resistance everyday," he added. "But the ability to use powder on alternative substrates such as wood, MDF and plastics are always on the radar screen. Breakthroughs here will launch powder into new arenas needed to expand the market space for powder."

New Report

Research and Markets has published a new report titled, "Global Coatings Industry: Automotive and Powder Coatings Driving Growth."

Major growth opportunities are in the Chinese and Indian coatings market, according to the report. It said while the Chinese coatings industry has grown by a whopping 30% in 2006, backed by continued and rapid development in its economy in 2006, the Indian paint industry has huge growth potential as per capita current consumption of coatings is very low compared to the developed countries. Supported by strong growth in new house construction coupled with robust growth in the automotive industry, the Indian paint industry is expected to grow at 16-17% over the next few years.

The automotive coatings market is growing on the back of increasing new car sales in Europe and growth in car manufacturing in China. After years of difficult market conditions related to new car sales and low consumer spending, European car sales are improving with improving consumer confidence.

The Chinese automotive coatings market is expanding in the wake of larger investments in car manufacturing plants. Car production in China is growing four times faster than the rest of the world. All major multinational producers of automotive coatings are active in the country, supplying leading international automobile manufacturers, which have been setting up or acquiring plants in China.