The high performance pigments (HPP) and special effects pigments market has had a rough few years. The recent economic downturn, declining U.S. housing starts and automobile crisis have had an undeniable impact on the HPP market, but there are indications that this trend is reversing. HPPs have experienced increased demand in China and other emerging regions, where automotive and consumer goods production and consumption are booming. HPP manufacturers Coatings World spoke with have reported a rebound and hope that this upswing will continue.
“While there continues to be positive strong trends toward the usage of high performance and effect pigments, the downturn in the coatings markets in Europe and North America and the worldwide economic crisis in 2009 strongly affected the overall market demand for pigments,” said Mehran Yazdani, vice president, marketing, performance pigments, Sun Chemical. “However, we have seen an upswing in the high performance and special effect pigments markets during the first and second quarters of 2010. This improving economic situation coupled with our focus on quality, service and innovation has put us in an excellent position for long term growth in high performance and effect pigments. Although we are off to a strong start in 2010, there is still a high degree of uncertainty regarding demand and there are continuing reports of the recession ‘double dipping’ this year.”
“Although the economy continues to present uncertainties and challenges, we are encouraged by a noticeable improvement in overall market demand versus the same time last year,” said Brian Marsicano, business manager, pigments, for BASF in North America. “Market demand for high performance and special effect pigments continue to rebound, but remains highly correlated with the global economy and tied to critical segments such as automotive and durable goods.”
Reiner Martens, managing director, Heubach GmbH reported that there was some recovery in the second half of 2009 so the performance of the second half of 2010 versus 2009 should be a good indicator for 2011. “Automotive OEM has clearly improved over 2009 and the agricultural and industrial markets are also showing signs of life,” he continued. “Construction is improving but low interest rates, high foreclosure rates and low home values are impacting the market often in varying directions.”
Although the outlook is generally optimistic going forward, high raw material prices and supply chain issues continue to be a challenge for the HPP market. Companies continue to combat these challenges by controlling costs and improving and optimizing operations, although in some instances these costs must be passed on to the customer.
“At Sun Chemical, we’re working to control our own costs closely with our supply chain partners and to improve our internal manufacturing operations,” said Yazdani. “These efforts have helped offset some of the rising operational costs. However, we are again seeing raw material cost increases in selected pigment areas that have outpaced our ability to offset them. As a result, we have needed to pass some of these costs on to our customers. We will continue to invest in those areas that provide our customers with innovative products and services, allowing them to be more competitive and present the best value propositions in the market.”
“As indicated, raw materials have continued to rise,” said Martens. “Heubach has attempted to minimize the impact to our customer base through cost control and working capital reduction. However, due to their magnitude in certain product areas, these costs must be passed on.”
According to Rick Campbell, president, Trust Chem USA, there have been significant shortages of several high performance pigments in recent months mostly caused by supply chain problems. “In some cases it has been a critical raw material, in some cases increased demand, in some cases production problems and or low inventory levels and in a few cases it has been interest in having new sources,” Campbell said. “These issues have helped cause supply problems mainly for the large traditional sources for high performance pigments but in some cases where it is raw material related, all suppliers have had issues. These supply problems have created significant opportunities for new suppliers of high performance pigments like Trust Chem. As a result of very high demand, we have moved quickly to increase our capacity, which will be done gradually over the next several months and results in a doubling of our capacity for benzimidazone, azo condensation, quinacridones and several other key high performance pigments within the next two to five months. These expansions are mainly at our joint venture factories, but also at a partner factory.”
“The main pressure from customers on Trust Chem is to expand capacity and further refine the quality to meet specific customer requirements,” said Campbell. “Trust Chem and our JV factories have combined our research and technical capabilities to stay a step ahead of their competitors. Trust Chem will also be moving our labs in a few months as we are making space for additional equipment to improve our support and capabilities for coatings, especially automotive coatings and plastics customers.”
Because of the added cost associated with high performance and specialty pigments, customers expect outstanding performance. “An investment in high performance pigments can yield more in return for our customers than standard pigments,” said Yazdani. “High performance pigments make products that are more appealing to consumers, help businesses become more competitive, grow sales and improve margins. From a technical standpoint, the most important property exhibited by high performance pigments that distinguishes them from other pigments is their durability in the applications. Some examples of this include light fastness and resistance to chemical attack and high temperatures.
“Use of effect pigments allows customers to highlight their products in terms of design and appearance, drawing the end use customer to their lines and providing consumer appeal,” he continued. “In addition, the metallic series of pigments provide functional properties to end use applications such as improved anti-corrosion, thermal stability and UV reflectance.”
“These pigments meet specific customer needs,” added Marsicano. “High performance pigments, for example, offer enhanced durability, opacity and higher hiding. Special effect pigments provide exceptional brilliance and ultra-high chroma that enable the creation of novel designs and differentiation.”
“The goal for the customer is to attain increased performance for demanding applications while still being competitive,” said Martens. “High performance pigments provide performance advantages including heat resistance, ease of dispersion, weathering, lightfastness and IR reflection. Competition in the HPP area has been strong which has resulted in a reduction in the pricing gap between HPPs and conventional pigments. As a result, additional applications for HPP pigments are being unlocked.”
HPPs gain popularity in niche applications
While HPPs are traditionally used in automotive and industrial coatings, they are also making inroads into some new markets.
“Traditional markets such as automotive and industrial coatings will continue to be primary consumers of high performance and special effect pigments,” said Marsicano. “However, we continue to see interior and exterior decorative applications as a high growth area for HPP as increased interest for materials with improved durability, opacity and weatherfastness properties are being requested by our served markets.”
“For high performance pigments, the automotive and industrial markets will have the greatest potential for growth as these industries recover through 2010,” said Marten. “There is also potential in the architectural market for niche applications where either improved color space or durability are desired.”
According to Yazdani, from the market segment viewpoint, Sun expects continued growth in cosmetics, specialties, and niche markets. “We also expect flat to declining automotive, architectural and ink markets,” he added. “The trend for more efficient cars in the automotive market will see a reduction in paint consumption, however, it will also increase the demand for color. This trend will help to fuel the continued growth in high performance and effect pigments. In the graphic arts market, the increasing use of non-impact printing methods such as ink jet means increased demand for high performance pigments at the expense of those conventional pigments used in traditional printing inks.”
Increased demand in Asian markets
The market for HPP pigments has been impacted by increased growth in manufacturing and consumption in Asian markets, particularly in China. According to various news reports as of November 2009, China has become the biggest auto market in the world. Consulting firm, McKinsey and Company estimates that China’s automotive market will grow tenfold between 2005 and 2030.
“Most of the major paint companies have come to visit Trust Chem in China in the last 12 months seeking a new source for high performance pigments,” said Campbell. “Demand within China and for export are putting pressure on Chinese pigment factories to respond to new business opportunities forcing production expansion.”
“The emerging industrial giants—China, India and Eastern Europe—are seen as the markets where per capita gross domestic product (GDP) is expected to grow most rapidly,” said Yazdani. “Related to the GDP growth of these emerging markets will be the growth in the demand for high performance and effect pigments for the coatings of durable goods, buildings and the automotive sector. Sun Chemical and our parent company, DIC, have a strong manufacturing and market presence in China and have the capability to supply pigments to global multi-national and local Chinese coatings customers.”
Heubach has established Hangzhou Heubach Co., Ltd. in Hangzhou, China. “Hangzhou Heubach complements and expands our presence in China in order to ensure short delivery times and the utmost in technical service to our global and local customers. In the near future, the facility will be expanded to manufacture new products for the Heubach portfolio,” said Martens. “The emergence of China as a major consumer of pigments has had a significant impact on the global market for pigments and raw materials. With the build-up of infrastructure within China and the emergence of a middle class, the quantities consumed in China are significant enough to impact pricing and supply in the balance of the global market.”