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    Features

    Resin Update

    Despite the absence of dominant new technologies, the resins market iscontinuing to evolve in 2001.

    Tom Williams08.09.05

    A primary component of any successful coating, resins have advanced to where, generally speaking, wholly new technologies are not being introduced into the market. Rather, the majority of technical advancements being made at this time are occurring within existing technologies such as radiation-cure and self-crosslinking systems.

    This is not to say, however, that the market is stagnant. In fact, trends currently sparking both conversation and activity include pricing pressures, resins and coating industry consolidation, existing and impending environmental regulations, as well as the slowing of the general economy. With all this happening at once, resins suppliers need to be even more focused to remain leaders.

    "Line extensions, incremental improvements and broader acceptance of existing technologies has occurred in the past few years," said Greg Ross, industry manager at Johnson Polymer. "Resins are a fairly mature market as far as technology is concerned. But at the same time, the performance of the market is driven by a variety of factors and you still have to work hard to stay on top."


    Up and Down in 2000
    Nearly every company Coatings World spoke with described the performance of the resins market in 2000 as two distinct periods. Buoyed by the strength of the U.S. economy, the beginning of 2000 proved strong for the resins market. Sales were solid in most sectors and growth was exceedingly strong in others.

    "In 2000, the market was quite strong," said Pepe Carnevale, global market manager, powder coatings, Dow Epoxy Resins. "There were some applications which were particularly strong. Powder coatings grew around 12% from the previous year and the entire epoxy resin market grew between five and six percent."

    "If you look at calendar year 2000, the first half of the year was extremely strong, specifically in certain segments of the market," added Mr. Ross. "However, conditions really began deteriorating in July and August and never came back."

    That mid-year decline mirrored the general economy in the U.S. As it began to slow, the resins market changed dramatically, so much so that despite a strong first half, most companies described 2000 as flat to poor in terms of growth.

    "While waterborne, high solids, powder and radiation-cure segments all experienced growth, the resins market as a whole was fairly slow in 2000," said Gail Pollano, coatings market manager for NeoResins. "The growth that occurred in those select segments wasn't because more opportunities opened up. It was because those systems have taken existing market share from solvents."

    Another factor that contributed dramatically to the poor performance of the resins market in the third and fourth quarters of 2000 was the external price pressures levied upon resin suppliers. These came primarily in the form of energy and raw material cost increases.

    "The resin market performed poorly over the past year," said Bill Currie, business director, SSP, Nacan Products Limited. "The major factors influencing this have been escalating raw material prices and the inability to pass the increases on to customers in a timely fashion."

    "Due to the strong increase in raw material prices, the strong upward trend of the dollar and oil as well as the resistance of the paint industry towards price increases from resin suppliers, resin margins went down considerably," concurred Scott Borst, director of global marketing for Eastman Chemical Company.


    Rising Costs Equal Shrinking Margins
    During the late 1990s, when the economy was cruising like a high-powered touring sedan, the resins market performed at such a high level that many companies were able to maintain their margins despite their increasing costs. However, the current economic slide has meant shrinking margins, and companies have begun to look elsewhere in order to maintain profit levels. The chief response has been to attempt to pass along price increases. However, while this has helped soften the overall blow of the market slowdown, it has not wholly deflected the impact. The overall effect on the resins market has been an industry-wide decrease in margins. "Energy costs have gone up significantly in the past year. When combined with raw material cost increases, this has a big effect on the resin market," said Ms. Pollano.

    "Together with the growth, there has also been a growth in prices," added Mr. Carnevale. "This was triggered by an enormous increase in raw materials and energy costs. Thus, we have achieved higher prices, but they have unfortunately not been at the same level as the increase in our costs. As a result, our overall margins deteriorated in 2000 compared to 1999."

    Mr. Borst of Eastman Chemical noted the necessity of being able to pass along some of the increases, stating, "Margins must improve for resins suppliers. Raw material prices are staying high and increases have to be passed on."


    Two-Fold Consolidation
    Another factor adding to the prevailing mood among resin suppliers has been the rash of consolidations that have taken place on both sides of the supply chain. In addition to consolidation within the paint and coatings industry, resin suppliers have also been sold and acquired at a record pace. These events have upset the balance of both markets, and denote a trend that seems far from over. "The consolidation process is far from over and more acquisitions will be announced from the paint side as much as from the resin side," Mr. Borst said.

    "Consolidation at the level of our customers has affected the market for our products," Mr. Carnevale said. "At the level of resin producers, there have been major sell-offs to financial institutions.

    "In the field of our customers, consolidation brings higher purchasing power into play," continued Mr. Carnevale. "On the other hand, the market is still very fragmented. So even though this consolidation certainly impacts the purchasing power, there is a long way to go to have an extremely consolidated market. I believe that consolidation will continue in coming years."

    According to Jim Aloye, market manager for coatings resins at Cognis, coatings industry consolidation has had a variety of effects on the resin market. "With the consolidation of paint and coatings companies comes the consolidation of product lines," said Mr. Aloye. "As these product lines are pared down, volumes become bigger and therefore pricing becomes more competitive. The resin supplier left standing may enjoy more volume but at reduced margins. Additionally, while these companies are going through the consolidation process, the laboratory efforts are focused on things other than evaluating and developing the new products that generally bring higher margins or a better competitive position."


    Evolving Sales Strategies
    A secondary result of the wave of consolidations has been the expeditious nature at which many customer/supplier relationships have been forced to advance. Resin suppliers have had to become more malleable and evolve sales strategies at a quicker pace. Most have been closely examining their business structures in search of synergies.

    "You have geographical considerations when it comes to consolidation," said Ms. Pollano. "If you are now dealing with global companies, you need to focus on things like supply chain management and price resource planning. The consolidation of the customer base has a big effect on resin sales strategies. You have to understand your customers and their needs globally, as well locally, in order to move forward."

    Johnson Polymer, for one, has adjusted to this situation by reaffirming its emphasis on the industrial market. "We continue and will continue sell to the general house paint market," said Mr. Ross. "But generally speaking, Johnson Polymer sees itself as offering value to industrial markets that require some value-added material. We don't consider ourselves a broad-based commodities resins supplier."


    Environmental Regulations
    No matter which market they focus on, all resins suppliers have turned a watchful eye to California. In spite of the fact that Rule 11 and the California Air Resource Board recommendations for VOC emission levels for architectural and industrial maintenance coatings don't come into effect until 2002, many believe they will eventually become the nationwide standard. "Lower VOC regulations have and will continue to drive the market," Mr. Aloye of Cognis said. "As it goes in California, so will the rest of the nation�not immediately but in time."

    Unlike some other resin market trends, however, this is not entirely bad news for suppliers, especially those that specialize in resins for waterborne, powder and radiation-cure systems. "Environmental regulations will always have an impact on the epoxy business because all of the applications are quite delicate," said Mr. Carnevale of Dow. "Some representing a threat, while others, like the ones related to VOCs in coatings do offer opportunities.

    "Environmental regulations will also have a positive impact in terms of powder coatings usage," he added. "Powder coatings are a solvent-free application. Therefore, the stricter the regulations are regarding solventborne coatings, the better it is for the growth of powder coatings. It is a stress on one side and an opportunity on the other."

    Ms. Pollano of Neoresins predicts that powder, waterborne and radiation cure systems in particular will experience growth in the next three years, but at the expense of solvent-based and high solids systems.

    With this in mind, a number of companies are looking to take advantage of the opportunity presented by low-VOC systems. Among these is Solutia, which opened a new production unit in Suzano, Brazil in July 2000. The production capacity of this facility, which manufactures Alftalat polyester powder resins used to make environmentally friendly powder coatings, was recently doubled.

    "This capacity expansion will extend our leadership in supplying performance ingredients for powder coating resins," said James Bowler, business manager for powder coating resins in the Americas.

    With the E4 million expansion of tin-free resin production at its Felling, UK facility, Akzo Nobel Resins has also made a significant investment in environmentally-friendly resins. "Proprietary resins are a key success factor in any coatings technology," said Rudy van der Meer, a member of the board of management responsible for coatings. "Our investment in this area underlines our dedication to stay ahead of our competitors with state-of-the-art technology."

    In addition to facility investments, resin suppliers have also been introducing a host of new low-VOC products into the market. One such company is Goodyear Chemical, whose Pliotec 7300 water-based resin permits the formulation of high-performance coatings for horizontal and vertical masonry applications while reducing paint VOC emissions.

    Akzo Nobel Resins recently introduced its Setalux 6773 VOC compliant resin for stable clear and pigmented waterborne coating compositions. According to the company, this product can be used at VOC levels below 100 g/l. Additionally, after drying, Setalux 6773 allows for coatings with excellent hardness and good flexibility and prevents the migration of tannins from tannin-containing wood substrates, according to the company.

    Other companies introducing low-VOC resins into the coatings market include Lyondell Chemical, U.S. Polymers/Accurez, Air Products and Chemicals and Reichhold.

    W2K 2001 resin technology from U.S. Polymers/Accurez will produce water-reduced coatings with excellent adhesion to a wide variety of substrates, according to the company. U.S. Polymers/Accurez also contends that W2K 2001 offers benefits including dry to touch in six hours, pot life of five to six hours, excellent gloss and chemical resistance and no HAPs.

    Acryflow P120 from Lyondell Chemical is a new acrylic polyol for high-solids urethanes and baking enamels. Liquid at 100% solids, P120 is compatible with most resins and its unique properties help lower VOCs and isocyanate demand while improving coatings' appearance, performance and durability, according to the company.

    Air Products and Chemicals' Ancarez AR550 epoxy resin technology for two-component, ambient-cure, zero-VOC waterborne coatings offers performance and handling characteristics equal or superior to coatings based on epoxy resin dispersions, according to the company. Advantages of this product include fast dry speed, excellent universal colorant acceptance and early water resistance.

    Sta-Clad 5900 from Reichhold is an acrylic polyol emulsion designed to react with water-reducible polyisocyanate. According to the company, Sta-Clad 5900 is suitable for use in two-component low-VOC waterborne finishes and offers excellent gloss and flexibility, high DOI, good hardness development and good chemical resistance.


    Relief on the Horizon?
    Taking into account the myriad of factors affecting the resins market at the beginning of 2001, most notably the unstable nature of the U.S. economy, industry sources declare it somewhat difficult to forecast how the market will perform throughout the rest of the year. Unfortunately, they all seem to agree on the fact that it will certainly not be as strong as in the late 1990s or even the first half of 2000.

    "I think that the economic downturn will continue at least through the second and third quarter of 2001," Mr. Ross said. "If any improvement occurs, it will be in the fourth quarter of this calendar year. At this point, however, I wouldn't argue with anybody who said it was going to continue through the entire year."

    Not all predictions are entirely negative. Mr. Currie of Nacan Products believes that a modicum of help is on the horizon in 2001. "There are indications that the monomer and feedstock prices have leveled off and we may see some decline later this year," he said. "This will help resin suppliers gain back some of what they lost last year." He concluded, however, that this would not be enough to turn the market entirely upward, stating, "We still expect the market to be sluggish. The pending recession in the U.S. will certainly not help the situation."


    New Products
    The somewhat dour predictions for the rest of 2001 have not slowed the number of products being introduced into the market. Among these is Hauthane L-2393, an aliphatic, water-borne polyurethane dispersion developed by Hauthaway Corporation for use on flexible and rigid PVC. According to the company, coatings containing this polymer form hard, tough, hydrolysis-, chemical- and stain-resistant films. In addition, superior adhesion to PVC makes it suitable for automotive interior parts, vinyl furniture and components, according to the company.

    Recently, UCB Chemicals, Smyrna, GA, introduced Ebecryl 2001 and Ebecryl 2005 UV curable products for the coatings market. According to the company, Ebecryl products have flourished in the automotive industry because of their superior scratch/abrasion resistance and their ability to adhere to metal with low energy consumption.

    Jacksonville, FL-based Arizona Chemical has also introduced Sylvacote 7021, a maleic modified rosin ester developed for use in wood coatings as a plasticizer in nitrocellulose-based systems. Sylvacote 7021 offers lower viscosity than other plasticizer products and should demonstrate enhanced compatibility with nitrocellulose, according to the company.

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