Pigments Market Panel Discussion

Coatings World (CW): How did the pigments market perform in 2009? How does this compare to 2008 and what are your predictions for 2010?

Mehran Yazdani, vice president, marketing, performance pigments, Sun Chemical: There continues to be strong positive trends toward the usage of high performance and effect pigments, but overall, 2009 was a challenging year for the pigments market worldwide and had comparable results to the end of 2008 when the economic downturn officially began. While there are now signs of recovery in the third quarter of 2009, the struggling automotive market and housing slump led to a decline in auto sales, home building and paint use worldwide. It is difficult to predict when the economy will fully turn around but we are cautiously optimistic that the economy will show some improvement in 2010. Until then, Sun Chemical Performance Pigments is committed to fulfilling our obligation as the leader of the industry. We will take appropriate measures to ensure that we can effectively weather the storm. At the same time, we remain committed to investing in our strategic imperatives and providing value to our customers.

Uwe Liebelt, group vice president, dispersions and pigments for BASF in North America: The difficult economic circumstances that began to impact the pigments market during the second half of 2008 continued throughout 2009. The general erosion of the economy and particularly the large downturn in the automotive industry significantly affected the market. We have begun to see some indication of stabilization in key coatings sectors, and 2010 is expected to be better than 2009. Any improvement this year will be fueled by a recovery in the general economy and the impact of innovative products launched during 2008-2009.

Yu Adachi, Toyo Ink Mfg. Co., Ltd.: Both domestic and overseas sales of commodity pigments remained lethargic, given the sluggish demand for printing inks.Moreover, the economic slowdown impacted pigment demand and production in emerging markets.

Robert Poemer, business manager, Heucotech, Ltd.: Overall the pigment market was weak in 2009. Pigment sales were down in all areas including decorative, automotive and industrial.The hardest hit areas for pigments were in the automotive industry and the building construction area of the decorative market. Predictions for 2010 are for a mild recovery in the two to three percent range over 2009 but not reaching 2008 levels.

Falko Orlowski, North American business manager, Clariant: Compared to 2008 the company is seeing the demand for pigments down by approximately 20%. The automotive market continues a down trend but recovery in the industrial and decorative markets helped us offset the decline in automotive. Our expectations for 2010 are similar to 2009 with a slight increase.

David Woolven, head, sales and operations, Sudarshan North America Inc.: The pigments market in most parts of the world faced challenges resultant from the global economic contraction. This was a continuing trend that mirrored the performance of 2008. Interestingly, Sudarshan's domestic market performed extremely well fuelled by India's economic growth. We are optimistic for 2010-Sudarshan is presently expanding rapidly in global markets that we never sold direct into before-we believe our value proposition and timing is right for those customers seeking a logical alternative to their traditional suppliers, while fostering a level of confidence that is missing from Asian suppliers.

Rick Cambell of Trust Chem USA: Sales in 2009 were down between 20-30% compared to peak sales in the middle of 2008 in most of Europe and the Americas. However, in the second half of the year, sales started to improve and further growth is expected in 2010. Trust Chem USA started our business in 2009. Sales are meeting expectations and significant growth is expected for 2010.

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

Yazdani, Sun: 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. It was then followed by a rapid decline in demand starting in the fourth quarter of 2008. While some of the pressures have eased since then, true year to year improvement will not be achieved until all of these inventory effects completely work through the supply chain. It will take some time to recoup the magnitudeof the increases that pigment suppliers absorbed in 2008 and we are now starting to see the price of raw materials go up again.

At Sun Chemical Performance Pigments, we continue to work on controlling our own costs closely with our supply chain partners, to improve our internal operations,and to develop new value oriented products that can help customers grow their business. 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.

Liebelt, BASF: Certainly key trends that have emerged recently are sustainable and eco-friendly solutions, and we expect these to continue to strengthen. Developments in heat management solutions and zero and low volatile organic compound (VOC) pigment dispersions are helping coatings manufacturers meet legislative requirements and growing demand from environmentally conscious consumers. Coatings manufacturers are focusing more resources on evaluating innovative solutions. Although the expectation is that the economy will improve in 2010, the ability to differentiate products and offer more value to consumers will ultimately help coatings manufacturers to be more successful.

Green technologies continue to be a key driver for growth in the pigments market. This is expected to continue as both legislative bodies and consumers demand green products with increasingly lower levels of VOCs. The challenge that is emerging is for color manufacturers to develop low/no VOC colorants that achieve other functionality requirements, such as heat management.

Poemer, Heucotech: The major challenge remains the depressed global economy and the potential to recover from 2009. Suppliers and coating companies will all have to adjust to the "new" norm that will be our baseline economy moving into the future.

Another major factor continues to be the influx of pigments from Asia across essentially all pigment indexes. The quality of the products continues to improve while pricing typically re�mains very aggressive. Coatings customers also continue to want higher performance pigments (lightfastness, weatherfastness, alkalai resistance, improve color space, etc) at prices equivalent to or below that of current offerings. The "green" movement is also a major challenge for the pigments industry. Customers are concerned about a diversity of factors when purchasing pigments including are the products APE-free, VOC-free or what is the heavy metals content?Pigment manufactures are therefore challenged to provide environmentally responsible products with higher performance properties at pricing that is equivalent to current offerings.

Woolven, Sudarshan: The trends driving the market are lower costs, better quality and service-certainly not new trends. With consolidation in the traditional supplier base, and manufacturing operations and other overheads in high value currency markets, our customers are seeking alternatives who can provide economic value, while maintaining focus on what's important-the customer-a challenge the large global players have while they spend time looking in the mirror.

Li Zhi, Trust Chem China: Governments are putting increasing pressure in India and China to improve environmental protection. This has already created and may continue to create spot supply problems and may effect pricing on selected pigments. Trust Chem has been investing in their own factories and monitoring this situation with their partner factories to minimize price and supply instability for their customers. An increasing number of high performance pigments are being made in China and Trust Chem is a leader with significant investments made in 2009 and additional expansion planned for 2010. The REACH program in Europe will increasingly become an issue for Asian pigments suppliers and their customers in 2010and 2011. Trust Chem has made the financial commitment to register for REACH a wide range of pigments from multiple factories to support their European customers. In the U.S. the competition is intense and Trust Chem USA has positioned themselves to be a leader in quality, service and value.

CW: Have you seen any improvement in the economy? Do you think there will be improvements for 2010?

Liebelt, BASF: There is evidence that the economy has begun to stabilize, although any growth is likely to occur at a low rate. Some segments have begun to turn around, and the suppliers that have brought innovation to their customer base over the past few years will be in a better position to succeed.

Falko, Clariant: Clariant has seen increased business in the third quarter of 2009 and some spike in the fourth quarter. We expect that the economy will recover partially in 2010 but not all the way to 2009 levels.

Adachi, Toyo: When compared to the robust first-half of 2008, revenues of high-performance pigments for LCDs will post a decline.Demand, however, is now rapidly rebounding. We expect hikes in raw material prices as well as a shift in demand from developed nations to emerging ones to continue in 2010.

Woolven, Sudarshan: Sudarshan's business is presently largely based in India, as such, we have experienced double digit growth, a testimonial to our value proposition in a competitive marketplace. We are certain there will be improvements for us in 2010 as we gain traction in new markets previously not served by us.

Campbell, Trust Chem USA: Trust Chem expects improvements in the U.S. and European economies in 2010 and of course improvements in our business. In Europe we are expecting a slow recovery of the existing business and more importantly because of the development of many new quality pigments, we are optimistic we will see recovery back to 2008 sales levels. In the U.S., although we expect economic improvements to be gradual, we are expecting rapid growth of the Trust Chem business. Pigment users are generally slow to change, but an increasing number of customers are responding favorably to our products and the value they offer.

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

Yazdani, Sun: 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 growth 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.

Adachi, Toyo: Due to growth in LCD demand in countries like China and Japan, demand for pigments is also bouncing back. Toyo Ink is also seeing business growth in pigments for LCDs through the acquisition of new customers and other methods. The printing inks market, however, continues to slump in developed countries such as Japan, Europe and the U.S.

Woolven, Sudarshan: We see durable goods, such as construction and transportation, most negatively impacted by the economic downturn, while consumables continue to grow due to improvements inliving standards in developing countries.

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

Yazdani, Sun: 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.

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.

Poemer, Heucotech: The emerging economies slowed even more than initially expected in the first half of 2009. The Indian and Chinese coatings market had to deal with a double-digit reduction in sales in the first half of the year. The situation in these markets has improved in the second half of the year due to the tremendous rescue packages, but will record only marginal growth in 2009.Even though the shift of the pigments market to Asia has slowed down due to the global economic impact this trend will continue.

Woolven, Sudarshan: The demand and production of pigments for domestic consumption in India and China has continued to grow due to market improvements. The trend will continue to improve as domestic markets continue with their organic growth, while customers in mature markets look for logical alternatives which will fuel exports.

Trust Chem Opens European Warehouse for Organic Pigments

Trust Chem Group opened a European warehouse for organic pigments in Rotterdam, The Netherlands. From this 4,000 square meter Rotterdam hub an extensive range of organic pigments will be supplied to the European market. The Rotterdam warehouse will be operated by Forvision Fritom, a full service logistic provider.

"We want to work with a logistic provider who has a vast knowledge of logistics, an extensive network and one whom shares the same customer philosophy as Trust Chem," said Robert Paul Wielinga, managing director of Trust Chem Europe. "When supplying dry powder pigments working with our own drivers and avoiding the hub and spoke model is important too."

The company reports that despite the global economic situation Trust Chem has faced moderate growth of its activities in Europe. Further growth is predicted for 2010, also based on new product lines to be introduced. Based in Hangzhou, China, Trust Chem Co. Ltd. has four manufacturing sites, an international R&D center and a state-of-the-art application lab in Hangzhou. Main applications are in inks, plastics, coatings and specialties.