Demand for powder coatings in Europe showed strong underlying growth before the recession. But it was a rise that was subject to sharp fluctuations.
In fact, after a rapid increase in sales from a low base in the 1990s, the growth rate in powder coatings consumption in Europe began to decline in the first half of the 2000s—although the rise remained well above the average increase for the whole coatings sector.
At the start of the post-recession period in Europe, however, powder coatings demand is displaying a greater robustness based on a broader foundation than before. The wide application of innovative technologies is giving powder coatings producers the opportunity to attack new segments.
Prior to the 2008 financial crisis the main impetus behind the growth in demand came from powder coatings applied to metal substrates in architecture, domestic appliances and automobiles.
Now a much bigger role is being taken by powder coatings with low temperature coating processes which is opening up inroads into sectors like wood and plastic coatings.
Also producers are being more successful is exploiting the sustainability advantages of solvent-free powder coatings, particularly at a time when new European Union legislation is restricting the emissions of VOCs. Powder coatings can help to reduce energy consumption and waste.
After a drop in sales in the first half of 2009, powder coatings sales are returning to their pre-recession levels, according to industry sources. This is around four to five percent globally, bolstered by powerful growth in emerging economies, and around two percent in mature markets such as Western Europe, in line with GDP but ahead of average coatings demand. In the medium term the sector in the whole of Europe is seen as having a potential for even faster growth especially due to an increased need for powder coatings in Eastern Europe.
“Apart from GDP, the main driver is environmental not only because of the VOCs issue but also energy and waste,” said Barry Tomlinson, AkzoNobel’s marketing director for powder coatings. “Other factors are also important including performance, cost and fashion and special effects.”
The Western European powder coatings market still faces problems of overcapacity in the wake of an exodus of manufacturing capacity in sectors like domestic appliances to Eastern Europe.
In Europe as a whole the sector remains relatively fragmented so that it is constantly being squeezed between multinational raw material suppliers and large customers with global operations. Petrochemical companies are constantly driving up the costs of key derivatives used in powder coating formulations.
A capability in research and development has become a key to competiveness in powder coatings, which has largely favored the bigger players. R&D has helped companies push the expansion of new technologies.
It has also stemmed the pre-recession trend to commoditization. Through their R&D activities producers have been able to differentiate their products and to tailor them to meet the specific needs of customers.
As a result R&D orientated companies in Europe, most of whom supply markets across the world, particularly in the Middle East and Asia, have tended to be benefiting the most from the post-recession recovery in demand.
Power coatings was the best performing business in AkzoNobel’s performance coatings division in the first nine months of this year with a 36 percent rise in sales to €574 million ($786 million). Much of this rise was due to AkzoNobel’s takeover earlier in the year of Dow Chemical’s powder coatings operation, formerly Rohm and Haas’. Nonetheless, after excluding the acquisition, the sales rise was 18 percent in the third quarter.
“The Western European powder coatings market has partly recovered from the decline due to the recession,” said Tomlinson. “Eastern Europe, by contrast, continued to grow in most regions throughout the recession and is still growing strongly. In Eastern Europe we’re increasing our production capacity in our plants in Russia, Czech Republic and Turkey.”
Jotun, another major European powder coatings producer, is expecting “solid growth” in powder coatings this year after reporting increased profitability in the business in the first eight months of 2010. It has also been experiencing improved powder coatings sales in Eastern Europe.
In line with their strategy to differentiate their powder coatings and to expand in higher value markets, European research-focused producers have been enhancing low temperature curing technologies for application in the wood and plastics sectors. They have been resolving problems of loss of gloss and of chemical and mechanical resistance when curing temperatures are reduced from 150°C to 140°C or even as low as 120°C.
These low-temperature processes are helping powder coatings to become an attractive alternative to laminates in the manufacture of medium density fiberboard (MDF) for furniture and segments like kitchen fittings. The Nordic countries and parts of Eastern Europe and Russia are global centers for MDF production.
AkzoNobel sees MDF as a big spur for future growth in powder coatings with the aid of both low-temperature and UV curing processes. “We have products that meet the performance requirements of the market,” said Tomlinson. “In the immediate future the focus will be on optimizing application technologies and developing the best product and application combinations.”
Jotun has just launched a range of furniture powder coatings called “Era-Coat MDF” which it says will open up new frontiers for its powder coatings business in the wood market. The range comprises a primer and topcoat, which is formulated for curing temperatures of 140°C for eight to 10 minutes.
In the development of new technologies, formulators have been putting a lot of effort into reinforcing or at least retaining the aesthetic qualities of powder coatings. Jotun’s new MDF range allows flexibility of design because it can be applied to any shape, as well as to rounded corners and contoured angles.
“The range opens new horizons for the furniture industry in terms of design and creativity,” said Olaf Conreur, Jotun Powder Coatings’ divisional industrial product manager.
Producers are encouraging greater creativity among their customers by not only providing a wider range of colours and even metallic effects for wood and plastic substrates but also metal ones in the architectural, automobile and domestic appliances sectors.
With the wider choice of appearances and greater opportunity for sustainability through technologies like low-temperature curing, the big challenge now for producers is persuading potential customers to make the necessary capital investment in powder coatings application equipment to switch from liquid coatings. This may continue to be difficult while banks in Europe are still restricting lending.
Powder Coatings Bounce Back
A wider array of applications is helping the powder market return to pre-recession levels.
By Sean Milmo