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    Business Corner

    Raw Material Cost Increases Vs. Alternatives

    ...

    Raw Material Cost Increases Vs. Alternatives
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    Phil Phillips, Contributing Editor06.04.18
    Researching our industry dynamics over the past several months, we have learned that although the growth in sales & demand is at an all time high for paint, coatings, adhesives, sealants & the overall specialty chemical industry, there continues to be a rise in traditional raw material costs, which, we believe, will eventually lead to a dreaded shortage situation. This is not a regional trend but a global one. European coatings manufacturers, are bracing themselves for a prolonged period of shortages in key raw materials as well. Our industry is currently being hit by double–digit rises in prices for resins, pigments, additives, solvents and packaging materials as demand for paints begins to pick up in Europe, while there is continued strong growth in coatings demand in China, India and other emerging economies.

    “Our members are being told by their suppliers they cannot have the raw materials they want,” said Tony Mash, chief executive of the British Coatings Federation. “What has happened is that raw materials have been shipped to the Far East because of the increase in coatings sales in countries like China while at the same time there has been an upturn in demand in Europe, particularly the UK. The suppliers, on the other hand, have been cutting back their stock levels since the recession. For a number of raw materials, there have been production outages and plant shut downs, which have made matters worse. Now many suppliers are saying they are sold out for the present and are having to delay some shipments.”1

    Consequently, we believe that there is now and will continue to be an increasingly serious investment and a focus on alternative lower cost sources for key raw materials in our industries.

    The literal backbone of and the single largest raw material cost in a paint or adhesive is the resin. According to SpecialChem’s community insight on various plant-based industrial oils used for coatings application, soybean oil has the best chance of being used as a renewable raw material for commercial sustainable coatings, followed by linseed oil, castor oil, coconut oil and tung oil.

    Although some pressure placed on EPA to back-off of some and eliminate other regulations exists, we see little of this occurring in the next 5-10 years; therefore, our industries cannot count on and plan around any real loosening or reopening of old, previously outlawed products provided in the past with inherent high performance capabilities versus today’s more EPA friendly alternatives. Therefore, our industry participants along their respective value chains of activity will be obligated to keeping up with the environmental regulations.

    This being said, there are two other trends that seem to have remained a topic overall: Job shortages & job opportunities.

    1. Historic job shortages for college graduates as well as for trained labor. That is, employees lacking the skills and having the opportunity to gain same.  This lack of training, and education, has driven many companies to open their own technical institutes closer to their plants & offices.

    2. With alternative training, Jobs are opening up; college grads are finding positions they want not.

    3.  Paint, coatings, adhesives and sealants value streams of activity seem to be committed to allocating funding towards analytics jobs and are predicted to be highest estimated change in occupations across all industries according to the Bureau of Labor Statistics, over the next 10 years.  At the same time the operational jobs are going to be stagnate for the U.S. due the continued outsourcing of manufacturing.

    4. Retail and now, B to B companies are seeking more scientific techniques of analyzing their own internal data while combining & coordinating same with so-called BIG DATA, thus helping to building the Data Lake and Data platform for Analytics solutions.

    From a formulators’ point of view, the gap between significant unchecked increases in major raw material costs thus lower formulator profitability, lays not only in alternative or new supplier innovations but, through the adoption of Analytics solutions. Analytics is the discovery, interpretation and communication of meaningful patterns in data. Organizations may apply analytics to business data to describe, predict and improve business performance.

    Providing expert “data lakes” of professional services, Cloud Implementations and Big Data based analytics solutions and deployments can make a major impact on a formulators profit picture. The ability to provide specialized (in real time) data Analytics and data science along with expertise in setting up data security and Data governance practices which, in turn, helps the users’ critical data while enhancing the users’ abilities to maintain current while winning over new more profitable customers. 
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