Pigments Market Panel Discussion

Coatings World (CW): How did the pigments market perform in 2008? How does this compare to 2007 and what are your predictions for 2009?

Thierry Chevrier, director of performance chemicals-coatings, plastics and specialties-for BASF in North America: The second half of 2008 was difficult as the economic situation began to impact consumers, especially in the automobile and housing sectors. For 2009, pigment suppliers will have to continue to offer value-added solutions that take into account the "total cost" mindset of coatings producers. The ability to innovate and bring cost-effective solutions to the industry will be the key to success going forward.

Bernadette Corujo, director of NAFTA marketing, coatings, Ciba Corporation: The pigments market tracks the coatings market overall. 2008 was a difficult year for several segments of the coatings market and by extension the pigments market. Pigment growth slowed in 2008 versus 2007 mainly due to the slowdown in coatings demand in the fourth quarter of the year. 2009 will likely remain challenging through the first half of the year.

Falko Orlowski, coatings business manager, North America, Clariant Corporation: Clariant experienced the first three quarters of 2008 flat against 2007 year. A significant downturn was seen in the fourth quarter, which we expect to continue into 2009.

Don McBride, COO, Heucotech Ltd.: Globally, the first half of 2008 fared much better than expected despite challenges related to escalations of energy and raw material costs. Industrial applications in the area of corrosion protection continued at the brisk growth pace of 2007 while all markets related to the building industry were down more than ten percent in Southern Europe and NAFTA. This obviously had a negative effect on pigment sales to the related decorative coatings, construction and plastic applications. Specialty areas, such as powder, coil and high performance coatings, continued to grow in the eastern regions of the world, however at a slower pace than the prior year. The last two months of 2008 based on the present economic climate have affected us globally, with NAFTA slower than other regions for 2008.

Mehran Yazdani, vice president, marketing, performance pigments, Sun Chemical: While there continues to be positive strong trends toward the usage of high performance and effect pigments, overall 2008 was a challenging year for the pigments market worldwide. The U.S. is currently one of the most challenging regions of the world for the pigments market thanks primarily to a struggling automotive market and housing slump that has led to a decline in automotive sales, home building and therefore paint use. Similar challenges in the automotive and architectural markets can be found in Europe and Asia as well.

Chris Whiston, marketing manager, pigments, Toyo Ink Mfg. America: Toyo Ink Mfg. America did not increase pigment prices to coatings manufacturers in North America in 2008 nor add fuel surcharges. We are watching 2009 carefully and it is difficult to make forecasts but we believe price volatility will be high and currency exchange rates may be important.

CW: What are the major trends and challenges influencing the global pigments market today?

Chevrier, BASF: One of the key trends in the market is the increasing demand for heat management solutions. BASF has a broad portfolio of pigments and additives that 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. Another trend is the need for universal high performance pigments that are compatible in broad applications.

Corujo, Ciba: A major challenge for the pigments market today is the continued slowdown in the economy depressing demand for durable goods that require coatings during manufacture. The decline in the U.S. housing market also impacted pigment demand. Additionally, in a down economy consumers and businesses will delay non-essential expenditures like coatings. This decreased demand in addition to the unprecedented increases in raw material costs we saw in 2008 has impacted every level of the value chain for pigments. Likewise currency fluctuations have advantaged some suppliers and disadvantaged other suppliers of pigments. This has led to both consolidation and new entrants in the pigments market as suppliers try to predict the future. Pigment manufacturers that have a global footprint have the best ability to weather these dynamic conditions. The changing landscape of pigment suppliers will likely continue in 2009.

Orlowski, Clariant: The two influencing issues are volatility and availability of intermediates for pigments and the slumping global economy within the housing and automotive industries.

McBride, Heucotech: Obviously the global economy is probably the single major factor impacting the pigments market today. In terms of performance customers are looking for improved value at equivalent or lower prices based on current economical circumstances. This would include properties such as lightfastness, weathering, heat resistance, ease of dispersion and IR reflection.

Yazdani, Sun Chemical: Many of the challenges that the pigments market is currently facing began in 2007. However, the pigments market in 2007 was generally healthy. Globally the industry was impacted by the well-publicized issues that occurred in 2007 regarding products made in China, leading to concerns about product safety. The sudden and strict enforcement of environmental compliance by Chinese officials on local industry addressed most safety concerns, but led to instability in the supply chain.

Whiston, Toyo: The focus on environmentally friendly innovation will continue. Toyo Ink will further development of more environmentally friendly alternatives, such as zero-VOC dispersions. Shrinking demand, however, caused by current recessionary pressures will lead to stronger price competition for organic pigments.

CW: How are the bad economic conditions in the U.S. affecting the market and what is your company doing about it?

Chevrier, BASF: With the current economic situation, BASF believes it is even more important to remain focused on our customers' needs. We are investing in research and development to help us develop solutions to our customers' needs, and to produce products that are sustainable. BASF is investing in a state of the art technical service facility to respond to customer needs and be closer to the market. On a product basis, we are working to develop pigments that are more universally accepted and perform better. These new pigments are being engineered to anticipate future market needs. In 2008, for example, we developed our Sico Yellow L 1252HD to compete in a higher-performing pigment category.
Corujo, Ciba: The slowdown in demand has been particularly striking in the U.S. During these times it has been critical for Ciba to continue to focus on operational excellence, improved supply chain initiatives and commitment to investment in a strong R&D pipeline. In 2008 Ciba changed its Americas organizational structure to be even more customer focused and ensure that our customers will be successful in these difficult times. Color and effect pigments have the unique ability to enable paint manufacturers to differentiate themselves to their customers. Being a partner to our customers and ensuring their success will enable us to continue to grow together.

Orlowski, Clariant: With the two major industries-housing and automotive-being down the demand for colored pigments are drastically reduced. Clariant is offering easy dispersing (ED) pigments to reduce processing costs for our customers.

McBride, Heucotech: Heubach will continue to provide both quality products and technical service at a high level that creates value for our customers. Our portfolio is well balanced with innovative technology in organic and inorganic pigments, and preparations that have been carefully consolidated to keep only the products with the best offerings for the markets we service at competitive pricing. We believe our approach will differentiate Heubach from the competition and enhance our market position.

Yazdani, Sun Chemical: A number of trends and challenges are affecting the pricing and supply issues in the pigments market. First, the price of raw materials increased at an unprecedented rapid pace in 2008. Although some of the pressures have eased, it will take some time to recoup the magnitude of the increases that pigment suppliers absorbed in 2008. At Sun Chemical, we're working to control our own costs closely with our supply chain partners and to improve our internal operations. These efforts have helped offset some of these rising raw material costs. However, the increases seen in many areas have outpaced our ability to offset them. As a result, we have had to pass some of these costs on in the way of price increases 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.

Whiston, Toyo: 2009 is going to be very tough. Toyo Ink Mfg America will be monitoring inventory and operating expenses very carefully in line with demand.

CW: How is the down economy affecting the demand and production of pigments in emerging markets? How would you describe the pigment markets in these emerging areas (China, India, etc.) and will we continue to see this shift to Asia from the developed world moving forward?

Chevrier, BASF: Emerging market producers will continue to play a role in the pigment market. Their challenge is to move beyond being a low-cost supplier and transition into being an innovative solutions provider.

Corujo, Ciba: Demand in emerging markets has slowed but still outpaces most of the developed world markets. As mentioned before in addition to demand, currency effects also come into play. Currency effects can determine how favorable a particular source point will or will not be for a manufacturer. A global network of supply and the ability to make the same quality of product regardless of source point is critical for a pigment supplier to remain competitive. Likewise, understanding the type of color preferences in each region is essential.

Orlowski, Clariant: The effect of the global downturn is also recognized in the emerging markets. The reduced product demand is causing manufactures to either reduce or shut down production facilities. Expecting this trend to continue Clariant has established ventures in the Asian region.

McBride, Heucotech: The shift from production of pigments and intermediates to emerging markets such as China and India has obviously been significant over the past several years. With recent disruptions of supply coming from these emerging market countries, there are now longer-term concerns over continuity of supply. Heubach is expanding both our sourcing capacities as well as production of key raw materials to ensure better supply into the future.

Peter Carey-Yard, marketing director, coatings, performance pigments, Sun Chemical: Demand in the emerging markets is still closely tied to their exports to Europe and North America. The financial crisis is a global one and their growth will be severely impacted by the lower demand in the developed world. In China, tighter environmental controls, and less available credit, on top of lower demand will most likely make pigment producers there both less competitive and fewer in number. As a consequence, we are exploring potential opportunities to better utilize our North American and European pigment manufacturing operations.

Whiston, Toyo: The current economic crisis has also led to slowing demand in emerging markets, and we believe production of pigments will continue to shift to developing countries such as China and India.

CW: What end market areas are driving growth in pigments? Conversely, what areas are flat?

Chevrier, BASF: Green technologies are a key driver of growth, which led BASF to develop dispersions that are low-VOC and alkyl phenol ethoxylates (APEO)-free. The market demand for flat or traditional solvent technologies that do not have a green nature is currently slowing down. Another growth driver is the demand for heat management pigments and additives. Dark surfaces such as roofing, automotive interiors and composite decking retain heat, experience material contraction and expansion stress, and can have a negative environmental impact as well.

Corujo, Ciba: Unique pigment color spaces and effect pigments are driving the market as customers seek to differentiate themselves from their competition. When customers are making changes in architectural coatings they are looking to upgrade their pigment choices to more high performance pigments. Coatings for non-durable goods are also growing as consumers are becoming more selective in their spending. Effect pigments that help attract a customer to a product on the shelf are increasingly popular. As expected, the automotive area is down to flat for pigments as fewer cars are being produced. However, even in this sector, there continues to be a high level of interest for novel pigments that will help sell cars when the economy turns around.

Orlowski, Clariant: With all major markets being flat or down we only see growth in special niche applications, such as intumescent coatings and environmentally friendly paint formulations.

McBride, Heucotech: Coatings applications in transportation, powder and wood coatings were forecast to grow before the financial crisis struck the world economy. Pigments for high performance plastic applications, such as polyamide for automotives to reduce weight and thus gas demand will most likely grow in the long-term, but the immediate expectation is the market will be flat in the next year based on the current situation.

Carey-Yard, Sun Chemical: From a geographical viewpoint, 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. Related to the GDP growth of these emerging markets will be the growth in the demand for high performance pigments for the coatings of durable goods, buildings and the automotive sector. 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. From the market segment viewpoint, we expect continued growth in cosmetics, specialties and niche markets. We also expect flat to declining market conditions in automotive, architectural and ink markets. 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.

Whiston, Toyo: Basically, China, India and other emerging areas will be driving growth, while Japan and North America will be flat at best.