Douglas Bohn, Orr & Boss Consulting Incorporated09.06.22
Introduction
Asia Pacific continues to be the most dynamic region in the global paint and coatings market. Strong economic growth along with favorable demographic trends have made this market the fastest growing paint and coatings market globally for a number of years.Since the start of the pandemic, growth in the region has been uneven with periodic lockdowns resulting in large swings in coatings demand. For example, the lockdown in China this year resulted in slower demand. Despite these ups and downs in the market, the market has continued to grow and we expect growth in the Asia Pacific coatings market to continue to outpace global growth for the foreseeable future.
Global and Asian Coatings Market
We are estimating that the 2022 global paint and coatings market is $198 billion. Asia is the largest region at an estimated 45% of the global market or $90 billion.Within Asia, the largest sub-region is Greater China which is 58% of the Asian paint and coatings market. China is the largest single country coatings market in the world and is about 1.5X as big as the second largest market which is the United States. Greater China includes mainland China, Taiwan, Hong Kong and Macau.
The next largest sub-region in Asia Pacific is South Asia, which includes India, Pakistan, Bangladesh, Sri Lanka, Nepal and Bhutan. Japan and Korea and Southeast Asia are also significant markets within Asia.
As is the case in other regions of the world, decorative coatings is the largest segment. General industrial, protective, powder and wood round out the top five segments. These five segments account for 80% of the market.
Growth Rates
Over the last several years, India has been the strongest growing major economy in the world, and it has resulted in the Indian paint and coatings market outpacing others in Asia and the world. The graphs below provide GDP growth rates. As can be seen, the World Bank forecasts that South Asia will be the fastest growing economy in the world.The next graph provides forecasted GDP growth rates for the various countries of Asia. As noted, India is expected to be the fastest growing. Also, the economies of Southeast Asia are also expected to be fast growing with Vietnam, Philippines, Indonesia and Malaysia growing at strong rates. China is also expected to grow at above global GDP rates for the next couple of years.
The Orr & Boss rule of thumb is that in developing countries, coatings volume grows at 1.25 to 1.5X that of GDP. The reason for that above average GDP growth rate in the paint and coatings markets is that the population is moving more and more to the urban centers resulting in a higher percentage of the population adopting a middle-class lifestyle. Furthermore, the populations in these countries are growing and are young. The combination of an urbanizing, growing, and young population that is adopting a middle-class lifestyle is resulting in increased demand for housing for other manufactured products that is driving paint and coatings demand.
The graph below provides our estimates for the growth of the Asia Pacific paint and coatings market by major sub-region through 2027.
The growth rates by sub-region very much follow the GDP growth rates. South Asia is expected to be the fastest growing region mainly due to strong economic growth in India. We also expect Bangladesh to grow strongly in South Asia. Pakistan is currently facing some economic uncertainty but is set to receive IMF assistance. The hope is that this will keep the economy moving forward. Certainly, over the longer term, we expect the Pakistan economy to do well.
One country that is having trouble this year is Sri Lanka. The World Bank expect Sri Lankan GDP to decline by 7.8% this year. The Sri Lanka is estimated to be about 2.75% of the South Asian paint and coatings market so a decline in its market does not have a significant impact on the overall growth of the sub-region.
In addition to South Asia, Southeast Asia is expected to be a fast-growing region due to strong growth in Indonesia, Vietnam, Philippines and other countries of the region. China is the world’s largest paint and coatings market. It is expected to continue to grow faster than the global average but not as fast as in previous years. This year, we expect volume growth to be 2.8% and value growth to be 10.8%. The COVID lockdowns in the first half of the year reduced demand for paint & coatings in China but demand is returning, and we expect continued growth in the paint & coatings market. Nonetheless, we do expect growth in China to continue to moderate versus the very strong growth years of the 2000s and 2010s.
Economic and Demographic Trends
Orr & Boss tracks the top 50 paint and coatings markets. Within these top 50 markets, we have applied several criteria to understand where the largest opportunities exist for growth in the mid to long term (next 5-10 years). The criteria that we use are:1. Size of the Paint & Coatings Market: Size of each country’s paint & coatings market in US dollars
2. GDP Growth Rate: 2022-2027 Forecasted annual GDP growth rate by country
3. Current Population: Current number of people living in each country
4. Project Population Growth: 2022-2032 projected annual population growth
5. Median Age: Median age of the population
6. Urbanization Rate: The percentage of the population that is moving to the city centers
7. Per Capita Paint Consumption: Total consumption of paint & coatings divided by the total population
8. Ease of Doing Business: The World Bank Ease of Doing Business Index.
By analyzing the above filters and indicating whether or not a country has an above average score or a below average score, we have rated the top 50 paint & coatings markets around the world. The 10 best paint & coatings markets using this methodology through 2032 are:
1. India
2. Malaysia
3. Indonesia
4. Pakistan
5. Bangladesh
6. China
7. Brazil
8. Vietnam
9. Egypt
10. Philippines
India is rated as the best market since it is large and growing. Its economy is growing as is its population. Also, its population in urbanizing and is relatively young. Finally, at $7.3 USD per person, its per capita paint consumption is low. For these reasons, it is rated as the top country in the world using these scorecard metrics.
By looking at the list of countries, eight of the 10 are in Asia with only Brazil and Egypt being outside of Asia. South Asia, with India, Pakistan and Bangladesh, scores well, as does Southeast Asia with Malaysia, Indonesia, Vietnam and the Philippines.
