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Suppliers discuss the effects of the bad economy on the additives market.
January 8, 2009
By: Kerry Pianoforte
Editor, Coatings World
The additives market, as is the case for the coatings market as a whole, has continued to feel the effects of the bad economy. “In general, the additives industry enjoyed volume growth during the first months of 2008 and started to feel the economic slowdown as of mid-year depending on the region,” said Joachim Diem, marketing manager, specialty additives, Europe, Middle East and Asia, Air Products. “During the fourth quarter business conditions in important markets like automotive, residential housing and commercial construction deteriorated and have yet to improve.” “A critical factor affecting the additives market is the continued slowdown of the North American housing market and its impact on the building and construction industry,” added Shruti Singhal, group market manager for field marketing, North America, Rohm and Haas. “VOC regulations and issues of paint odor are also factors not only for additives, but for other paint ingredients as well. These issues present opportunities to the additives supplier who is best positioned to help paint formulators select the right product to meet current requirements.” “Additive sales into architectural coatings are very much a function of construction and remodeling activity,” said William Woods, marketing manager, industrial biocides, International Specialty Products (ISP). “This sector of the economy is down and until a turnaround occurs, additive sales will remain flat to down.” According to David Deters, VP and general manager of King’s coatings additives division, the additive business has been negatively impacted by the economy. “After an extremely robust business for the first nine months of the year, it now is tracking the economic conditions worldwide,” he said. “This downturn not only reflects the more traditional end of the year reductions, but more importantly mirrors the state of the business for specific application areas. A good example is obviously the auto industry that has experienced close to a 40% reduction in production this quarter. Perhaps what is unique with this particular slowdown is the fact that it is global.” “Because of the financial and economic crisis, there is a decline in orders for almost all applications compared to the previous year,” said Suzanne Beckmann, marketing analyst, Clariant. “Our customers are suffering from over capacities due to the decrease in global demand. We do expect any improvement until the end of Q2 2009, beginning of Q3 2009.” Most additive suppliers Coatings World spoke with agreed that business has slowed overall, particularly in the last quarter, but there are some specialized coatings segments that have not slowed to the extent of the majority. “Coating formulators are still typically looking for one of three driving factors: innovation, ease-of-use formats and lower cost,” said Maria Nargiello, senior technology manager, inorganic materials-SI Coatings for Evonik Degussa Corp. “Form�ulation developments continue to move towards environmentally friendly technologies; be they waterborne, high solids, radiation cure or powder. As these technologies move forward, more solutions are sought to address the hurdles these technologies encounter. We still see formulation development, particularly in NAFTA even in the standard solvent-based coatings arena, where solutions are being sought for additives that are compatible with VOC exempt solvents and offer innovation, ease-of-use characteristics and lower cost.” Additives suppliers must use these challenges to develop innovative products that will set them apart from their competition. “In the past, an economic downturn automatically meant R&D budgets were slashed and companies were downsized,” said Andrea Nap�lowski, marketing manager, Tego Coating Additives and Specialty Resins. “Presently, more companies are taking a long-term view that the economy is cyclical and that they need to be ready to compete when conditions improve. We actually have seen an increase in interest from the research community. On the other side, fewer housing starts and an overall poor economic performance makes business very tough on the smaller paint companies. We are certain that some will find it very difficult to find the resources necessary to keep up with the changes the market is demanding. Our expectation is that we will see further consolidation of the market.” Additionally, rising raw material prices continue to plague the industry. “I think a very consistent trend over 2008 was as oil prices escalated over the first six to seven months of the year, raw material price increases dominated the market news and as the dollar per barrel price receded, so have many of those prices,” said Nargiello. “Mirroring the general economy, it was a very volatile year for raw material prices. I think with this volatility in the market place, formulators have sought different solutions, outside the typical go-to products and this has opened opportunities for new, less traditional solutions to be considered.” “Raw material prices have been volatile to say the least,” said Deters. “From a period of seemingly daily price increases as crude oil drove to record levels to some minimal reductions as the price of crude has retracted. I think practically everyone in the additive business absorbed those increases until it became economically unfeasible to do so and had to pass along a portion of those and escalating energy costs onto their customers. While select raw material costs rose as much as 226% by mid-summer, none have receded close to that extent by year-end. Reductions have been slow.”
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