Pigments Market Update

By Kerry Pianoforte, Associate Editor | January 24, 2012

Although still not back to pre-recession levels, the pigments market has continued to recover. Pigment companies are reporting a decrease in supply issues and an increase in demand for certain market segments, such as automotive coatings.

Generally speaking, the pigments market has shown some signs of improvement in 2011, although it still has not reached pre-recession levels. Pigment manufacturers are reporting increased demand and a positive outlook for 2012.

“In general the word of 2011 was ‘volatile’,” said Badal Shah, president, Aakash Chemical and Dye Stuffs, Inc. “The global pigments market performed well. We saw a 30 percent increase in organic pigment sales, however there were also price increases that contributed to this. We saw demand to be very strong, and an overall positive outlook, contrary to what publications and economic forecasts were telling us. With that said, we did see the trend of just in time requirements where customers were hesitant in keeping traditional inventory levels.”

In terms of production, Shah said Aakash produced more organic pigment in 2011 by volume compared to any previous year, and this was directly due to global diversification and demand grown in LATAM and Asia.

“Overall, market demand for pigments tracked economic activity within the NAFTA region,” said Ron Lee, business director, pigments and colorants, BASF North America. “Although the economy continues to present challenges and uncertainties, we have seen consistent overall demand for pigments in 2011.” 

“Due to continued, although slow, growth in the global economy, we have seen an upswing of the pigments market in 2011, but still not to pre-recession levels,” said Mehran Yazdani, vice president, marketing, performance pigments, Sun Chemical. “That being said, we still face economic uncertainty due to the European financial crises and the slow U.S. economic recovery. As a leading global pigment manufacturer, we are optimistic that Sun Chemical Performance Pigments will overcome these global economic challenges and see continued growth for the pigments market in 2012.”

According to Frank Lavieri, executive vice president and general manager, Lansco Color, 2011 was divided into two distinct periods in terms of the pigment market performance. “The first third of the year was similar to 2010 in that sales were increased by customers filling their supply chains,” he said. “This was largely completed by May and the remainder of the year saw more normal demand.”

While the U.S. has shown signs of recovery from the recession, demand in Europe has slowed down due to their economic woes.

According to Bill Gray, business manager, Sincol USA Corp., the first half of 2011 showed strong growth, especially in the U.S. market. “The second half has proven more challenging due to global issues and sliding demand,” he said. “Global sales were down sharply beginning third quarter, especially in Europe. U.S. sales have slowed dramatically in the fourth quarter.”

“The pigment market performed well in the first half of 2011, but since July the market has slowed due to the bad economic situation, especially in Europe,” said Li Wu, technical director, Trust Chem Co., Ltd. “A lot of companies have focused on cutting inventory. We have seen the biggest slow down in the printing ink area, the plastic market has also been slow, with the coatings market performing the best of the three key markets.”

“We see a hat shape trend this year, up and then down, in Chinese pigment pricing,” said Josh Liu of Houchi. “The turning point occurred roughly from July to August. Particular pigments increased more than others. Violet 23 is in my opinion the highest price up-swing pigment of all allegedly due to the raw material coming from steel side product. And the very weak housing market has led to stalled steel production, which in turn led to a shortage of this material.”

Optimism for 2012

The improvements seen in 2011 are expected to carry over into 2012. Pigment manufacturers Coatings World interviewed expressed optimism for 2012.

“For 2012, BASF is cautiously optimistic regarding the business outlook as we continue to improve upon our position by utilizing our broad portfolio,” said Lee. “No single supplier can offer the full spectrum that we can – to focus on target market sectors.”

“Aakash Chemicals saw another growth year of 40 percent growth and tremendous improvement in business relationships focused on flexibility of supply combined with being able to cater to a variety of product requirements as we have expanded our lines,” said Shah. “We are looking forward to an even stronger 2012 as customers are becoming more loyal to suppliers who are loyal to them. As we focus on continuous improvement and nimble solutions for our customers, they are rewarding us with large increases in business globally.”

Sincol USA reported that it expects 2012 will be a good year. “Sincol USA has continued to achieve market penetration in the coatings, ink and plastic industries,” said Gray. “Our parent company, Sincol Corp., will achieve the sales targets set for 2011 due to the strong first half growth in and also new business gained from new industries. The domestic coatings market in China was one of the strongest sectors.”

“Trust Chem will see 10 percent worldwide growth on sales in 2011 compared with that of 2010 even based on this bad economic situation,” said Wu. “It has been an even stronger year for Trust Chem USA which continues to show rapid growth. According to the current economic situation, we do not foresee any improvements in sales in the first half of 2012.”

“Our company has suffered from weak demand in the second half of the year,” said Liu. “I think we will improve in 2012. The global economy definitely plays a big role but we are doing things that make us more effective and competitive to meet the challenges. It is difficult to say that 2012 will be a good year but we are hoping our actions and plans will put us in a competitive mode at least to stay ahead of the competitors.”

“Shepherd Color looks for 2012 to be an exciting year,” said Mark Ryan, marketing manager, Shepherd Color. “We will be launching a number of new products that range from extensions and improvements over our current offerings, to new and exciting products and chemistries that greatly expand our color space.”

“Lansco Colors had a strong year and record sales results driven by a greater acceptance of our value proposition and a deeper appreciation for our high level of on-time-delivery,” said Lavieri. “The last two years have been a showcase of the effectiveness of pigment companies’ supply chain management and we have been told that ours is excellent.”

There are several trends reinforcing the feeling of optimism for pigment manufacturers, although supply issues do remain a serious challenge. One key positive trend is the increased use of high performance and special effect pigments.

“The increasing demand for high performance, special effect and heat management pigment solutions represent key market trends,” said Lee. “BASF has a robust portfolio of pigments that provide unique performance characteristics and benefits that address each of these three trends. High performance pigments (HPP) enable enhanced durability, opacity and higher hiding, and are compatible across broad application areas.  Special effect pigments provide exceptional brilliance and ultra-high chroma needed for the creation of novel designs and product differentiation. Heat management pigments provide solar energy management solutions, including near-infrared (NIR) reflective pigments, NIR transparent organic pigments, and stir-in pigment dispersions and additives for transparent applications.”

“One major trend continues to be the strong positive usage of high performance and effects pigments in virtually every market,” said Yazdani. “Another key trend and challenge we saw in 2011 was the sustained high costs of raw materials. After two years of rapid decline in demand, we saw a significant increase in demand in 2010 and 2011. Unfortunately due to raw material shortages and increased environmental and regulatory compliance costs, we saw a significant amount of cost increases in raw materials.

According to Ryan, raw material availability and costs will always be an issue, but the company manages these challenges through supply-chain management and clear conversations with customers about the realities of the situation. “Without a doubt rising costs in certain metals and particularly Tio2 have created significant challenges,” he said. “We also are always looking at alternative technologies and products to meet market needs.

“In 2012, we expect that the magnitude of supply issues that have led to these price increases will decline,” Yazdani said. “Capacities for some raw materials should increase as incremental new capacity is restarted. However, where there are still fundamental imbalances in supply and demand, we would expect to see continued tightness in 2012.”

“The Euro and Rupee will be relatively weaker versus the dollar and the Chinese yuan will continue to strengthen versus the dollar in 2012,” said Shah. “This will directly impact raw materials depending on their origin. Many raw material prices will fall as demand in Europe continues to soften. Pollution factors in India will still keep Phthalocyanine prices volatile.”

“Since Sincol USA is part of a major pigment producer in China, we are very aware of the challenges facing the pigment and chemical industry inside China,” said Gray. “Environmental issues to the whole chemical industry in China will cause the raw materials shortage and cost increase throughout 2012. Coupled without doubt, the cost of organic pigments will continue to increase in 2012. Spot shortages of select Color Index pigments will increase as the consolidation and downsizing of traditional pigment suppliers continue in 2012.”

“The global pigments production capacity is in surplus, while the demand is shrinking, which has caused keen competition in the market,” said Wu. “Some factories in China are selling some materials below cost to try to keep factories active. For some key raw materials, such as Bon Acid, 4B acid, 2B acid, Triple A, and DCB, the selling price is very close to cost, some raw material factories even sell at a loss. The inventory levels of raw materials are very low, and when the market gets better, there could be price increases and some supply shortages.”

“China remains strong in azo pigment while Indian dominates blue and green,” said Liu. “Raw material price and supply did not prove to be the biggest shaping factor of the Chinese pigment supply landscape. They had big fluctuations in the past two years and we are still seeing every supplier at the same ranking position still in China. If we talk about China I think it will be interesting to watch who will emerge as the dominant supplier. So far we are seeing one or two bigger ones but far from being dominant.”

Growth Markets

While some markets remain flat for pigments, there are several areas that present growth opportunities. With its demand for high performance and special effect pigments, the automotive coatings market drives growth in the pigments market.

“From the market segment viewpoint, we expect continued growth in automotive, architecture, fiber, nylon, specialties and niche markets,” said Yazdani. “The automotive market has seen an increase in demand for unique color and effects. This trend continues to help fuel the continued growth in high performance and effect pigments.”

“There will continue to be large growth in the packaging markets,” said Shah. “As consumers globally expand their preferences and more products are brought to market, this area will continue to grow. We see large potential over the next five years and are very focused here. Some areas that may be flatter are the automotive markets due to heavy inventories currently. However, we do forecast an important uptick in new automotive business with the announcement of new plants in North America.”

“Traditional markets such as automotive and the industrial segment will continue to be primary consumers of high performance and special effect pigments,” said Lee. “Similar to last year, we see interior and exterior decorative applications as a high growth area for HPP based on increased interest for materials with improved durability, opacity and weatherfastness properties by our customers.

“Used in a wide range of end market applications from automobiles, house exteriors to electronics and many more, special effect pigments address demands for brand and product differentiation as the range of aesthetic color values continues to expand,” Lee said. “Further, we anticipate growth in demand for heat management pigments as rising energy costs and global warming concerns increase the need for solar management solutions within architectural and construction applications.”

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