Latin America Reports

International Report

February 15, 2008


REACH: Preparing for the pre-registration phase

Industry gets ready for the first phase of REACH to begin later this year.

By Sean Milmo
European Correspondent

The European Union’s REACH scheme for the registration, evaluation and authorization of chemicals goes through its first vital stage later this year with the pre-registration of substances.

The registration of the 30,000 chemicals covered by the project will take ten years to complete but already suppliers of substances to the coatings sector and other downstream industries are having to take precautionary action well in advance to ensure their products are not severely affected by the legislation.

In the six-month pre-registration process starting in June producers and importers will have to give minimal details of the chemicals they plan to register. Various deadlines for registration have been set through to 2018, depending on the total output of the substance.

Pre-registration will alert downstream users and coatings producers and other downstream users as to which chemicals will be withdrawn from the market because their producers or importers do not want to register them, probably because the registration costs no longer make them commercially viable.

However coatings companies are not only worried about which chemicals they use will be registered with details of their applications. They are also perturbed that some of those which are registered will have to go through REACH’s authorization procedure for substances about which there is a ‘very high’ level of official concern because they are a potential hazard to human health and the environment.

Uses of chemicals which are authorized will almost certainly be restricted but more significantly will in most cases be expected to be substituted within a specified period by safer alternatives.

Chemical producers aim to ensure, if possible, that their products are not even subject to evaluation for authorization. Even borderline substances could be placed on the candidate list for authorization, which could amount to as many as 1500-2000 substances and which will be accessible to the public.

The Helsinki-based European Chemicals Agency (ECHA) is expected to recommend next year its first authorization candidates to the European Commission, the EU executive, which is ultimately responsible for what is on the list.

There are fears among chemical companies that the candidate list will effectively be a black list on which substances will languish for years because of the slow pace of the authorization procedure.

Some coatings companies have already indicated that they will try to find alternatives to chemicals on the list. In order to give paint makers plenty of opportunity to look for replacements, some trade associations representing coatings companies, particularly those in Scandinavia, have already drawn up their own lists of chemicals which they believe will be authorization candidates.

Coatings producers want to ensure that if a key chemical is to disappear from the market they will have as much time as possible to reformulate their paints. With the coatings sector estimated to use a total of approximately 10,000 different chemicals—approximately a third of that covered by REACH—the industry will almost certainly have to do a relatively large amount of reformulating.

Some of the chemicals which have to be authorized will be minor components of paints. But others will have a much greater influence on the performance of a coating.

Certain pigments may have to go through the process. Manufacturers of organic pigments have had to be quick off the mark because of the threat of relatively large numbers of pigments being classified as persistent, bioaccumulative and toxic (PBT) or very persistent and very bioaccumlative (vBvP) which would mean their automatic inclusion on the candidate list.

Pigment makers have been worried that as a result of existing testing systems for PBTs and vBvPs they would be classified as hazardous because of their intrinsic insolubility, particularly with azo, diarylide and naphthol groups of pigments.

The Ecological and Toxicological Association of Dyes and Organic Pigment Manufacturers (ETAD), Basle, Switzerland commissioned jointly with the UK Environment Agency a study by Atkins Environment, a UK-based consultancy, on more accurate testing methods for organic pigments. In a report issued in the summer of 2006 Atkins suggested a screening process for isolating compounds with the highest potential for bioaccumulation for which a testing technology would be developed.

Now ETAD is endeavouring to find a test method for making sure that pigments regarded as high risk are not unnecessarily categorised as PBTs. “We are aiming to develop a reliable and robust testing system,” said Walther Hofheer, ETAD’s technical manager. “It will be a big job and will require a lot of discussions with the Commission and the European Chemicals Agency.”

There is a similar threat hanging over certain resin ingredients. Makers of formaldehyde, which is used in automotive, wood and other coatings, as well as adhesive and a variety of other applications, have been moving fast to combat any official initiatives to place the chemical on the candidate list.

Research has shown that formaldehyde could be carcinogenic. The World Health Organization’s International Agency for Research on Cancer (IARC), Lyon, France, has, however, classified it as a category three carcinogen because the agency considered the evidence inadequate. However as a result of further studies IARC recommended that formaldehyde be raised to category one on the grounds that there is sufficient evidence of carcinogenicity. If this recommendation was accepted within the EU, formaldehyde could be immediately placed on the candidate list.

FormaCare, a sector group for formaldehyde producers in the European Chemical Industry Council (Cefic), has been collating evidence to rebut claims the chemical is carcinogenic.

Together with downstream user association, it has also just published a report on the socio-economic benefits of formaldehyde within the EU. This is the sort of social and economic assessment which will be taken into account when a chemical undergoes investigation for authorization.

The report estimates that EU consumers would have to spend an additional  €30 billion per year if formaldehyde-based products were replaced by substitute materials.

If any of the EU’s 27 member states wanted to press for formaldehyde’s inclusion in the candidate list, as allowed under the REACH legislation, the report could be an effective counterweight.

“If any individual countries want to do their own evaluation of formaldehyde, this report will be useful evidence on our behalf,” Detlev Clajus, FormaCare’s manager, told a press conference on the report at Weybridge, England. “The assessment provides figures not only on the EU as a whole but on individual countries.”

The report, drawn up by the U.S.-based research organization Global Insight, provides a country-by-country breakdown of the 1.7 million workers employed directly in the formaldehyde processing and downstream user sectors in the EU, like coatings. This is the sort of political ammunition which chemical companies will need to find to protect their products from the threat of REACH.

Latin America

Foreign investors fuel Panama construction boom

Panama city is a hotbed for construction activity, creating a healthy market for paint and coatings.

By Charles W. Thurston
Latin American Correspondent

Panama City’s skyline is being pierced by hundreds of new commercial and residential projects in what may be Latin America’s fastest growing real estate boom, expanding by an estimated 25% during 2007, according to the Panamanian Chamber of Construction. The boom is expected to increase the demand for a wide range of construction materials, including paint and coatings, providing opportunities for U.S., Mexican and other Latin American suppliers.

Real estate investments are hot in Panama City now, particularly for upscale residential buildings, which are attracting foreign investors to a country where U.S. foreign investment already is estimated at over $25 billion. Close to 30,000 living units were completed in Panama during the twelve months up to July 2007, and another 40,000 units are being developed, according to one estimate.

While more plans may be afoot now than will actually be financed and built, one estimate of the market suggested Panama City would have nine out of the ten tallest buildings in Latin America by the end of the decade. The boom would produce over 10,000 new apartments in Panama City alone. Indeed, the development of one project, the $200 million Ice Tower, in downtown Panama City, would be the tallest structure in Latin America at 104 stories, and sell residential units priced at $300,000 and up. Trump Associates, among other U.S. real estate companies, is developing a $220 million hotel/resort on Panama Bay.

The building boom has tightened materials supplies and inspired foreign products manufacturers to increase investments. Mexico’s Cemex, for example, is building a $200 million cement plant in Panama. The private sector demand for construction materials and qualified contractors reportedly has led the national Ministry of Public Works to pressure domestic builders to complete projects with the threat of opening more new work to international builders.

Paint and coatings suppliers also have been active in helping restore the historic areas of Panama City. Glidden Paint, for example, has donated paint for the restoration of the National Theater. The architectural splendor of Panama City’s Casco Antiguo area earned its designation as a World Heritage Site by UNESCO in 1997, as well as a loan from the Inter-American Development Bank for reconstruction assistance.

Part of the boom in construction in Panama also is coming from the $5.2 billion widening of the Panama Canal, which voters approved in late 2006. Industrial and marine coatings demand will increase with this work, benefiting established providers like Akzo Nobel’s International Paint. In addition, vast tracts of land once controlled by the U.S. military now are being converted to civilian use by the InterOceanic Region Authority.

As U.S.-Panama trade increases, income from the canal may soon rival tourism as the country’s top source of foreign dollars. A U.S.-Panama Free Trade Agreement has been ratified by Panama, and awaits U.S. Congressional approval.

Panama’s gross domestic product (GDP) expanded by eight percent in 2007—the fastest rate in Latin America—and is expected to hold in that range during 2008, according to a forecast by the United Nations Economic Commission for Latin America and the Caribbean, or ECLAC. More importantly, with only 3.3 million inhabitants, the country’s per capita GDP level is approximately $8,200, among the highest in Latin America. Thus while the expansion of the paint and coatings market in other countries may be largely dependent on lower-cost products, Panamanian consumers can be more oriented to higher-quality products.

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