Sean Milmo, European Correspondent02.09.18
European coatings producers should be more optimistic than for many years about prospects for 2018 after many of them enjoyed a buoyant 2017.
Average GDP growth in the European Union’s 28 member states is currently at its highest since the 2008 financial crisis. At the same time world GDP growth is at its highest for several years, which is good news for European coatings companies with exporting customers.
Increased economic growth ought to result in above-average rises in coatings demand in Europe after many years in Western Europe of overall stagnation in the sector, with intermittent periods of decline. By contrast, demand in most Eastern Europe countries has been on the whole increasing consistently.
The divide between the two parts of Europe should persist this year. Western European coatings markets should generate higher than usual sales but the Eastern Europe will enjoy even higher revenue rises than previously.
However, some coatings producers and analysts are being cautious about 2018. They believe there will be a period of mixed performances across Europe with a likelihood of weakening sales later in the year.
The marked improvement in GDP growth, which started in the first half of 2017, is already showing signs of peaking so it will be gradually losing momentum through 2018.
Also there are indications that the impact of economic expansion on specific coatings sectors will be varied because levels of GDP growth are often not matched by similar rises in private consumption. Spending on DIY paints, for example, may remain flat or even decrease despite higher GDP.
“The outlook for the European coatings sector is definitely positive overall this year,” said Jose Bottino, head of coatings research at the London-based research organization BRG Group. “Higher GDP levels will help boost demand for industrial coatings. But in sectors like construction, which are less closely linked to GDP levels the impact will be less uniform.”
This has been the case in Germany, where, according to preliminary figures from the European Commission, the EU’s executive, GDP rose by 2.2 percent in 2017 and is predicted to increase by 2.1 percent this year – the highest levels for several years.
Demand for construction coatings in Germany, by far Europe’s largest coatings market, went down last year by 1.9 percent while wood coatings went down by 1 percent, the German Paint and Printing Ink Association (VdL) estimates. On the other hand coatings for machinery, electrical products, and anti-corrosion coatings went up by three percent, 3.5 percent and 1,4 percent respectively.
This year VdL is forecasting a small recovery in constructions coating with a one percent demand increase with wood coatings going up two percent. In the three key industrial coatings segments of machinery, electrical and anti-corrosion the average rise will be 2.8 percent.
“Overall we are quite optimistic that the coatings market in Germany in 2018 will increase by 1-2 percent in volume terms, (with) turnover being 3-4 percent higher,” said Christoph Maier, head of economic and financial affairs at VdL. “We believe that the industrial coatings sector is doing again a bit better (in 2018) than the architectural market which was quite weak last year.”
The German industrial coatings sector has been bolstered by the ability of German engineering and manufacturing exporters to take advantage of more vigorous growth in global GDP.
Producers of construction coatings on the other hand have been hit by continued restraint in expenditure on building renovations, particularly on insulation projects despite a drive to make buildings more energy efficient.
A divergence in performances between construction and industrial coatings sectors has also been taking place in other leading Western European economies.
“The main trend in the UK coatings market in 2017 has been the slowdown in the decorative paints sector and the continued robust growth of industrial coatings sales,” said Tom Bowtell, chief executive of the British Coatings Federation (BCF). “The total UK coatings market in 2017 was down 1.5 percent in volume terms with lower decorative and woodcare sales being partially offset by a fairly strong improvement in sales of industrial coatings.”
Retail decorative coatings suffered from weak consumer confidence in the wake of a slowdown in spending power. Total retail paint sales fell by 6 percent following 1-percent higher sales in 2016. Growth in the professional trade segment – accounting for just over half all decorative sales – has also been softening.
“Although (trade) sales in 2017 were still slightly higher, the rate of growth is well down on recent years reflecting much slower construction output and continuing fragile confidence in the housing market,” Bowtell said.
Like in Germany, demand for industrial coatings in the UK has been helped by increases in the country’s manufactured exports with much of the impetus coming from a lower-valued UK pound.
“It has been a good year for industrial coatings sales,” Bowtell said.“ In volume terms, sales in 2017 increased by five percent following a two percent fall in 2016 with recent figures for manufacturing output suggesting that the improvement may continue into 2018 and beyond.”
“Underlying much of the latest optimism (in the UK coatings sector) is the view that the world economy seems set for a good year in 2018 with business output now growing simultaneously in all three main engine rooms of Europe, North America and Asia,” he continued. “This upbeat mood is reflected in BCF’s latest own business confidence survey where all the main indicators on UK sales, exports, gross profitability, employee numbers and investment point to a better year in 2018 than in 2017.”
Eastern Europe’s has the attraction of having sturdy growth in both industrial and construction coatings.
The relatively fast growth n construction coatings in the area is continuing to be driven by rising living standards. “The Polish coatings market in 2017 was quite stable in terms of volume while slightly growing in terms of value (due to ) consumers switching to more expensive products and premium brands,” said a spokesperson for the Federation of Polish Paints and Adhesives Industry (PZPFK), Warsaw. The association is expecting that in 2018 increases in wages and child welfare benefits will lead to more home renovations and thus paint sales.
Eastern European countries like Poland, Hungary, Czech Republic, Slovakia and Hungary are also centers of European manufacturing, particularly in transportation and engineering. They and other states in the area will benefit from rising consumer spending at home and increasing expenditure in global export markets.
Average GDP growth in the European Union’s 28 member states is currently at its highest since the 2008 financial crisis. At the same time world GDP growth is at its highest for several years, which is good news for European coatings companies with exporting customers.
Increased economic growth ought to result in above-average rises in coatings demand in Europe after many years in Western Europe of overall stagnation in the sector, with intermittent periods of decline. By contrast, demand in most Eastern Europe countries has been on the whole increasing consistently.
The divide between the two parts of Europe should persist this year. Western European coatings markets should generate higher than usual sales but the Eastern Europe will enjoy even higher revenue rises than previously.
However, some coatings producers and analysts are being cautious about 2018. They believe there will be a period of mixed performances across Europe with a likelihood of weakening sales later in the year.
The marked improvement in GDP growth, which started in the first half of 2017, is already showing signs of peaking so it will be gradually losing momentum through 2018.
Also there are indications that the impact of economic expansion on specific coatings sectors will be varied because levels of GDP growth are often not matched by similar rises in private consumption. Spending on DIY paints, for example, may remain flat or even decrease despite higher GDP.
“The outlook for the European coatings sector is definitely positive overall this year,” said Jose Bottino, head of coatings research at the London-based research organization BRG Group. “Higher GDP levels will help boost demand for industrial coatings. But in sectors like construction, which are less closely linked to GDP levels the impact will be less uniform.”
This has been the case in Germany, where, according to preliminary figures from the European Commission, the EU’s executive, GDP rose by 2.2 percent in 2017 and is predicted to increase by 2.1 percent this year – the highest levels for several years.
Demand for construction coatings in Germany, by far Europe’s largest coatings market, went down last year by 1.9 percent while wood coatings went down by 1 percent, the German Paint and Printing Ink Association (VdL) estimates. On the other hand coatings for machinery, electrical products, and anti-corrosion coatings went up by three percent, 3.5 percent and 1,4 percent respectively.
This year VdL is forecasting a small recovery in constructions coating with a one percent demand increase with wood coatings going up two percent. In the three key industrial coatings segments of machinery, electrical and anti-corrosion the average rise will be 2.8 percent.
“Overall we are quite optimistic that the coatings market in Germany in 2018 will increase by 1-2 percent in volume terms, (with) turnover being 3-4 percent higher,” said Christoph Maier, head of economic and financial affairs at VdL. “We believe that the industrial coatings sector is doing again a bit better (in 2018) than the architectural market which was quite weak last year.”
The German industrial coatings sector has been bolstered by the ability of German engineering and manufacturing exporters to take advantage of more vigorous growth in global GDP.
Producers of construction coatings on the other hand have been hit by continued restraint in expenditure on building renovations, particularly on insulation projects despite a drive to make buildings more energy efficient.
A divergence in performances between construction and industrial coatings sectors has also been taking place in other leading Western European economies.
“The main trend in the UK coatings market in 2017 has been the slowdown in the decorative paints sector and the continued robust growth of industrial coatings sales,” said Tom Bowtell, chief executive of the British Coatings Federation (BCF). “The total UK coatings market in 2017 was down 1.5 percent in volume terms with lower decorative and woodcare sales being partially offset by a fairly strong improvement in sales of industrial coatings.”
Retail decorative coatings suffered from weak consumer confidence in the wake of a slowdown in spending power. Total retail paint sales fell by 6 percent following 1-percent higher sales in 2016. Growth in the professional trade segment – accounting for just over half all decorative sales – has also been softening.
“Although (trade) sales in 2017 were still slightly higher, the rate of growth is well down on recent years reflecting much slower construction output and continuing fragile confidence in the housing market,” Bowtell said.
Like in Germany, demand for industrial coatings in the UK has been helped by increases in the country’s manufactured exports with much of the impetus coming from a lower-valued UK pound.
“It has been a good year for industrial coatings sales,” Bowtell said.“ In volume terms, sales in 2017 increased by five percent following a two percent fall in 2016 with recent figures for manufacturing output suggesting that the improvement may continue into 2018 and beyond.”
“Underlying much of the latest optimism (in the UK coatings sector) is the view that the world economy seems set for a good year in 2018 with business output now growing simultaneously in all three main engine rooms of Europe, North America and Asia,” he continued. “This upbeat mood is reflected in BCF’s latest own business confidence survey where all the main indicators on UK sales, exports, gross profitability, employee numbers and investment point to a better year in 2018 than in 2017.”
Eastern Europe’s has the attraction of having sturdy growth in both industrial and construction coatings.
The relatively fast growth n construction coatings in the area is continuing to be driven by rising living standards. “The Polish coatings market in 2017 was quite stable in terms of volume while slightly growing in terms of value (due to ) consumers switching to more expensive products and premium brands,” said a spokesperson for the Federation of Polish Paints and Adhesives Industry (PZPFK), Warsaw. The association is expecting that in 2018 increases in wages and child welfare benefits will lead to more home renovations and thus paint sales.
Eastern European countries like Poland, Hungary, Czech Republic, Slovakia and Hungary are also centers of European manufacturing, particularly in transportation and engineering. They and other states in the area will benefit from rising consumer spending at home and increasing expenditure in global export markets.
