Results of Paint Contractor/U.S. Architectural Coatings Industry Research Report

Each quarter, Northcoast Research surveys a large sample of paint contractors to get a sense of current business trends while United Mineral & Chemical Corp. (UMC) provides insight into coatings raw material trends.

Note that of the three primary architectural paint channels (paint stores, home centers, and independent distributors), the contractor survey results are largely a proxy for the paint store channel.

Contractor Sales — DIFM Sales Grow 3%-4% for Contractors in 4Q20; DIY Grows 20-25%
The cumulative responses to the question of how contacts’ sales thus far in 4Q20 compared to the same period last year show that sales growth turned positive in 4Q20 after 2 quarters of declines.

Specifically, 55% of contractors experienced a higher level of sales y/y, 18% described their sales as “Flat” and the remaining 26% experienced a y/y sales decline in the period.

These metrics produce a net increase (percent of contacts who experienced higher sales in the period minus the percent of contacts who experienced lower) of 28.9% in the quarter. On average contractors saw sales grow 3.1% in 4Q20. 

The improvement is primarily being seen by those with greater exposure to residential end markets while those seeing declines still tend to have greater exposure to non-residential end markets. 

Furthermore, DIY end markets remain incredibly strong with our checks suggesting DIY grew 20-25% again in 4Q20 which is consistent with growth rates seen in 3Q20. 

We suspect DIY markets will continue to grow at similarly strong rates through February 2021 before hitting more challenging comps in March 2021 when we start lapping the surge in demand seen when shelter-at-home orders first took effect.

Price of Paint from Suppliers — Pricing Remains Positive in 4Q20; Manufacturers Announce Pricing for 2021
To get a gauge for the pricing environment surrounding the paint contractors, we asked a few questions related to said topic.

When describing paint purchase prices y/y, 82% of respondents noted pricing as being higher compared to the prior year while 18% described pricing as flat from the prior year.

No contacts indicated pricing is down. 

This led to a net 82% of contacts seeing the price up y/y. 

On average, contacts indicate pricing is up 3.3% y/y in 4Q20. 

Additionally, paint store manufacturers have begun announcing price increases in the 3-5% range for 1Q21 which we expect to gain traction as raw materials are likely to start seeing some inflation (see below). 

Raw Materials Pricing and Supply Update
The Coatings industry in the US has survived and, in many cases, thrived during the COVID-19.

DIY architectural paint sales have hovered around a 30% increase for much of the last 3 quarters. 

Once effective safety protocols were enacted, Pro Painter sales roared back after shutting down for the early months of the pandemic.

New housing builds are running very strong going into 2021. Packaging and Coil coatings have been positive the entire year. Industries like OEM automotive have begun to rebound. There is an optimistic vibe for the coatings industry going into 2021.

We are beginning to see price increase announcements. 

Numerous basic raw materials are on the rise as is Sea freight. 

Especially hit hard is the cost to ship products from Asia to the US. These shipping lanes have a shortage of vessel space, shipping containers and once the cargo arrives at the ports in the US they are welcomed with congestion and a shortage of chassis to move from the port to your dock.

There is mounting pressure to raise resin prices.

Monomers have begun to increase.

We are seeing some tightening in the supply of MMA again. 

Some acrylic emulsion suppliers have initiated a 3-5% increase for Jan. 1, 2021.

Others have not formally announced but have raised deeply discounted prices by the same 3-5%.

If the trend continues, most certainly we will see a widespread increase of 3-7% no later than April 1, 2021. Crude Oil prices have been steadily increased for the last quarter pushing Propylene prices higher.

We actually see the prospect for higher TiO₂ prices for Q2 next year. 

Demand has strengthened and the days inventoried by the major producers have shortened.  This will be an interesting tug of war. 

TiO₂ producers have remained profitable. Some like Tronox are positioned well for the coming year. 

Of course, some of this could go by the wayside if the tariffs on Chinese goods are eliminated.

3-Month Outlook — Contractor Outlooks Continue to Rebound
At 50%, half of the contractors we surveyed believe that business trends are improving/will improve over the coming months.

Additionally, 31.6% described their outlook as “Neutral” (business trends will stay about the same) while 18.4% of respondents describing their outlook as “Negative” (business trends will worsen over the coming months).

In asking this question, we attempt to gauge actual expectations for the coming months based on how the business has been trending as of late and based on leading indicators such as contractor backlogs, bidding activity, and any other relevant factors.

To that end, a net 32% of contacts are optimistic about the upcoming months, which continues to improve since the lows seen in 2Q20.

Those with positive outlooks tended to be more skewed towards residential end markets and cited the reopening of the economy and higher backlogs as the main drivers of their optimism.

Those with neutral outlooks largely cited the continued uncertainty of whether the situation with COVID-19 will improve or not and competition, while those with a negative outlook tended to be non-residential focused and commonly cited bidding and quoting activity as still being low, extended shutdowns, and economic uncertainty.



For inquiries regarding the results of the survey, contact Kevin Hocevar at (216) 468-6924 or kevin.hocevar@northcoastresearch.com. For inquiries regarding raw materials, contact Dave Kotowski at (216) 577-1982 or dkotowski@umccorp.com.