PAINT INDUSTRY by KAZI SUJAN

MARKET PULSE OCTOBER-2018

PAINT INDUSTRY: EXPLORING THE SPECTRUM OF COLOURS The global paint industry has witnessed significant growth over the last decade. The global paint and coating market is prominently influenced by many market-driven factors. Some of the market-driven factors, which are slated to fuel the global market growth include significant increase in construction activities, rising disposable income, and rapid urbanization in the developing regions. Apart from these factors, growing automotive production in Asia Pacific region and rise in general industrial sector across the globe is projected to trigger global paint and coating market growth. By: Farahnaz Zarrin & Mithila Chowdhury

GLOBAL PAINT INDUSTRY

aint and coating market plays a major role in the chemical industry and represents massive numbers in terms of global production and consumption. Growth in this market is highly attributed to strengthening production of supplementary industries, such as automotive, marine, aerospace and general industrial. Rise in the number of construction projects, globally, is another major factor that sets the enhanced consumption of paint and coating. Industrial manufacturing involves extreme cold and hot processes wherein high-temperature coatings are highly adopted, which are functional in extreme environmental conditions and are used largely. Apart from these growth influencing factors, the market growth is restrained by the high prices associated with the paint and coating raw material. Moreover, as the raw material is basic chemicals and are commodity dependent, its prices are expected to keep on increasing with increase in commodity prices year by year and limit the global demand. 18

MARKET PULSE OCTOBER-2018

Market Overview According to analysts, the paint and coating market is projected to grow from US $160.54 billion in 2017 to US $209.36 billion by 2022, at a CAGR of 5.45%. Global paint and coating demand was 45.40 million tons in 2016 and is expected to grow with a CAGR of around 4.2% to reach a total volume of 65.81 million tons by 2025. The global paint and coating market is prominently influenced by many market-driven factors. Some of the market-driven factors, which are slated to fuel the global market growth include significant increase in construction activities, rising disposable income, and rapid urbanization in the developing regions. Apart from these factors, growing automotive production in Asia Pacific region and rise in general industrial sector across the globe is projected to trigger global paint and

coating market growth. Overall, the paint and coating is slated to exhibit an increased demand from the architectural industry. Among the architectural segment, the residential construction activity is expected to increase across the globe due to growing urbanization, increasing construction output, and population expansion. Furthermore, a number of ambitious programs launched by the government of the developing countries in Asia would act as a big push for residential construction activities in the region. Paint and coating has been a standard choice among the consumers to make the interior as well as exterior wall and floor decorative. As a result, the architectural segment with residential activity is the leading segment in global paint and coating market. Industrial segment includes general industrial, automotive, packaging, marine and wood among others. An industrial paint and coating is

typically defined by its protective, rather than its aesthetic properties, although it often provides both.

Rise in the number of construction projects, globally, is another major factor that sets the enhanced consumption of paint and coating.

COVER STORY Market Value of Paint and Coating Industry Worldwide from 2017 to 2022 (in billion U.S dollars)

160.54

169.29

178.52

188.24

198.5

209.36

2017

2018

2019

2020

2021

2022 Source: Statista

Market Dynamics Overview Building & construction is one of the primary application areas for the paint & coating, wherein, they are used in architectural applications. Coating form the basic compound used in the construction industry to coat exterior and interior walls. Moreover, the availability of several types of coating products such as metal coatings, concrete coatings, wall & ceiling coatings, floor coatings, wood coatings, and roof tile coatings enhanced the market consumption. While, addressable change in the global population and economic growth which is strengthening the commercialization,

Global paint and coating demand was 45.40 million tons in 2016 and is expected to grow with a CAGR of around 4.2% to reach a total volume of 65.81 million tons by 2025.

is fuelling the demand for paint & coating market. The rise in population is resulting in a high demand for residential and commercial infrastructure. Some of the regions such as North America and Asia Pacific are considered prominent growthcentric markets for paint & coating as they are part of the core construction industry. North America has established infrastructure wherein demand is largely seen for construction and repair projects. On the other hand, Asia Pacific is one of the prime markets and has a great demand for paint & coating. Factors such as fast population growth lead to the demand for residential projects, industrialization, and government initiatives such as “Make in India” by India government, to support commercial infrastructure. This, in turn, creates more demand for paint & coating products in Asia Pacific region. As per the industry experts, spending on the construction industry is rising drastically and is anticipated to provide high growth opportunities for paint & coating market. China and India collectively accounted for the majority of the paint & coating demand in Asia Pacific and they expect to further dominate the region in the coming years. Therefore, in these markets, investment is high on new construction projects and in commercial infrastructure. Therefore, growth is highly anticipated in these markets. Rising prices of raw materials is a major restraint for the industry. Commodities costs are very important for paint manufacturers, because more

than 50% of operating costs are allotted to raw materials. Commodity price increases thus impact the product‘s final price more severely than other positions in the business calculation. Since more than 12 months, prices for all key-commodities have increased dramatically. Basic chemicals such as solvents, monomers for resins, acrylic monomers, resins and other raw materials are strongly affected. Aceton and Butylacetat so far unbelievably increased by 100%, Xylol and Toluol are 20% more expensive than 12 months ago, Methylmethacrylate did rise by 30%, epoxy, polyester and polyurethane resins did increase in the two-digit percentage range – the list goes on and on. But one of the strongest pressure is on titanium dioxide, an essential component of most paint formulations, which was faced with several huge price increases during the past year and this development will continue also in 2018. The chemical industry has to expect even more price increases on raw materials, further uncertainties and fluctuations also on other fields. Strict regulations is the biggest challenge for the industry. Stringent governmental regulations as the coatings contain Volatile Organic Compounds (VOC) that are harmful for the environment. Clean air act amendments, EPA guidelines, Region specific federal regulations, OSHA and certain other agencies have made standard regulations for the exposure of toxic coating components to environment.

MARKET PULSE OCTOBER-2018

Market Dynamics Overview

Drivers

Restraints

Opportunities

Challenges

Growing construction industry growth

Rise in prices of raw material

Technological innovation in product development

Stringent regulatory policies

Growth of automotive production rise in Asia Pacific & Europe

Emerging country level markets

Augmented demand for high performance coating Source: Internet

Industry Segmentation Paint & Coating

By Resin Type

By End User

By Technology

Architectural Resins

Architectural

Waterborne

Other Resins

Automotive

Solvent-borne

Wood

Powder Coating

Industrial

UV- cured Coating

Transportation Packaging The global paint & coating market report is segmented on the basis of product type, end user, and technology. •

The resins considered under the study are classified into architectural resins and other resins. Architectural resins include Vinyl Acrylate, Pure Acrylic, Acetate, Styrene Acrylic, Alkyd,

Others (Fluorinated urethane). Other resins include Acrylic-based, Epoxybased, Vinyl Ester, Polyester, and Polyurethane. •

Based on end-user, the global paint & coating market has been segmented into architecture, (interior and exterior), automotive, wood

coating, protective coating, general industrial coating, transportation, and packaging. •

Based on the technology employed, the market has been segmented into waterborne coating, solvent-borne coating, powder coating, and UVcured coating.

Among the architectural segment, the residential construction activity is expected to increase across the globe due to growing urbanization, increasing construction output, and population expansion. 21

COVER STORY

Resin Type The global paint and coating market can be segmented based on the resins type. The global resins in paint and coating market is estimated to experience significant growth. Asia-Pacific is expected to hold the largest share of the market during the forecast period, owing to rising number of architectural activities in the region. SEGMENTATION – BY RESIN TYPE

Acetate

Alkyd

Pure Acrylic

An acetate is a salt, which is formed by the combination of acetic acid with an alkaline, earthy, or a metallic base.

Alkyd resins are complex oil-modified polyesters, which serve as a film-forming agent in paint and coating. These resins are produced by condensation reactions between oil or polyols, acids, and alcohols.

Acrylic resins are thermoplastic resins, produced by the polymerization of methacrylic acid esters (methacrylate) or acrylic acid esters (acrylates).

Styrene Acrylic

Vinyl Acrylate

Others

Vinyl acrylate holds the largest share in of the North American architectural resin segment, as it is resistant to water and ultraviolet light, and can be widely used in many outdoor applications.

Resins, like fluorinated urethanes are considered under the ‘others’segment.

Styrene acrylic copolymer emulsion is a water-based dispersion emulsion of styrene acrylic copolymer. It is used to produce semi-gloss to matt finish emulsion paint, interior, and exterior architectural structure. Acrylic accounted for the largest market share in 2017, while Epoxy was the second-largest market in 2017. Acrylics are one of the fastest growing sectors in the paint and coating industry. The global acrylic based paint and coating market was valued USD 57,042.1 million in 2017 and expected to grow at highest CAGR of 5.41% during the forecast period to reach USD 78,230.3 million by 2023 end. AsiaPacific accounted for the largest market share of 45.2% in 2017, with a market value of USD 25,755.3 million and is projected to grow at the highest CAGR of 5.74% during the forecast period. Europe was the second-largest market in 2017,

valued at USD 13,431.9 million in 2017; it is projected to grow at a CAGR of 5.08%.

End Users The paint and coating market can also be categorized by its end users. Architectural accounted for the largest market share of 43% in 2016. Industrial was the secondlargest market in 2016 with 28%. The demand for paint & coating is growing at a steady rate owing to increase in consumption from architectural applications and end-use industries such as oil & gas, aerospace, marine, steel industry etc. The demand for paint and coating is increasingly attributing

to an increase in disposable incomes, innovated products, and increased market penetration. The two primary functions that a paint or coating provides are for decorative or protection purpose and these parameters are also of considerable economic significance. The coatings are manufactured and marketed worldwide as the applications are also global, approximately 40%-45% of the paint & coating produced globally are used as decorative or protective paints for the architectural sector. These can be used for existing or newly constructed structures, which include residential buildings, monuments, public buildings, private offices, plants & factories.

MARKET PULSE OCTOBER-2018

BY END-USER INDUSTRY Percentage Share in 2017

43%

28%

Architecture

Paint and coating are used in exterior and interior of houses, offices, and buildings to give them a visually appealing look, and protect the walls and the fundamental structures.

General Industries

These paint and coating have applications in various manufacturing industries, and are capable of modifying surface tension, improving finish appearance, skinning control, pigment stability improvement, impart antifreeze properties, and control foaming, among others.

Automotive

13%

Automotive coating are used as protection against sunlight, material corrosiveness, and environmental effects, and add an aesthetic appeal to vehicle.

Protective Coating Market These are used in various industrial sectors, such as oil & gas, power generation, electrical & electronics, infrastructure, and heavy equipment and machineries. Paint & coating are also used in marine, railway and aerospace to provide protection against fouling, corrosion, extreme weather condition, friction, and wear.

Packaging

Coatings are used in the packaging industry for plastic, glass, and metal containers to provide design, aesthetic appeal, quality, reliability, sustainability, and protection to the products packaged.

Others

Source: Internet

The architecture segment can be divided into two parts: residential and nonresidential. Residential accounted for the largest market share of 75.1% in 2017,

with a market value of USD 58,555.2 million and is projected to grow at the highest CAGR of 5.42% during the forecast period. Non-residential was the

Building & construction

Global Architectural Paint And Coating Market, 2015-2023 (USD Million)

Architectural Residential

second-largest market in 2017, valued at USD 19,446.7 million in 2017; it is projected to grow at a CAGR of 5.04%.

2015

2016

2017

is one of the primary

53410.4

55911.3

58555.2

application areas for the paint & coating,

Non-Residential

17869.0

18637.1

19446.7

Total

71279.4

74548.4

78001.9

wherein, they are used in architectural applications. Source: World Paint and Coatings Industry Association

COVER STORY In terms of revenue, Asia-Pacific accounted for the largest market share of 46.5% in 2017, with a market value of USD 36,308.7 million and is projected to grow at the highest CAGR of 5.66% during the forecast period. Europe was the second-largest market in 2017, valued at USD 18,323.7 million in 2017; it is projected to grow at a CAGR of 5.00%. Paint and coating are applied on exterior of the house to not only to give them a new look but also to protect from seasonal impacts and the daily of UV

radiation without fading, peeling away, and cracking. Modern advancements in paint technology, specifically in the acrylic formulations have offered a wide range of weatherproof coating. Elastomeric coating that retain their flexibility and strand etch ability over a wide range of temperatures are becoming popular solutions for homes, worldwide. However, moisture causes problems for paint. Dew, rain, snow and ice on the outside, or vapor and moisture buildup from the inside can cause problems

Global Architectural Paint And Coating Market by Region, 2015-2023 (USD Million)

Architectural Asia-Pacific

2015

2016

2017

32967.6

34590.5

36308.7

with exterior paint. When moisture penetrates the paint, blisters can form and can subject the paint to peeling. Moisture blisters, unlike temperature blisters, go through all the coats of paint down to the wood. Besides this, paint and coating are also used in interiors of houses to add colors or decorative purposes, along with a wide range of other functions. Their functions vary depending upon the type of environment and room that they are used on.Â

As per the industry experts, spending on the construction industry

Europe

16847.3

17566.3

18323.7

is rising drastically North America

12825.6

13405.2

14017.6

and is anticipated to Latin America

5151.0

5360.7

5581.3

provide high growth Middle East & Africa

3487.9

3625.8

3770.7

opportunities for paint & Total

71279.4

74548.4

78001.9

coating market. Source: World Paint and Coatings Industry Association

MARKET PULSE OCTOBER-2018

Technology The paint and coating industry can be segmented on the basis of technology too. Waterborne paint and coating hold the major share in the overall paint & coating market. The major reason for its gain over solvent-borne is environment friendly nature, as it is generally lower in volatile organic compounds (VOCâ&#x20AC;&#x2122;s), which degrade the environment. Also, other properties, like low odor, more durability, and block resistance make waterborne paint more preferable. The increasing environment-friendly nature, and the versatile properties of waterborne coating are increasing the demand for waterborne coating across the globe. Waterborne coating are majorly required in automotive paint. Hence, with the increase in automotive production, the market for waterborne coating shall also benefit. Waterborne coating are mostly preferred in developing economies for interior and exterior doors, windows,

and door frames. Recently, there has been a propensity to seek coating with low odor, usability, and water clean-up characteristics among the end users. Waterborne coating meet the requirements, and facilitate low viscosity, without the addition of lowmolecular weight monomers. However, water-based coating cannot be as easily applied as solvent-borne coating and they pose other challenges, which include complexity of fluids, system compatibility as per application, and higher reactivity. Due to the favorable properties, such as mild odor, increased availability, and fast drying, the market share of waterborne systems has grown rapidly. Apart from these, the UVcurable technology for waterborne coating has received widespread attention in industrial research. The initial developments were witnessed in the graphic arts industry. The UVcurable technology for waterborne coating has received widespread

attention in industrial research. The initial developments were witnessed in the graphic arts industry. This market continues to have the highest usage of UV formulations in parts of North America, where, overprint varnish is the largest single application.

As per the industry experts, spending on the construction industry is rising drastically and is anticipated to provide high growth opportunities for paint & coating market.

Paint Classification Based on Technology

Waterborne

Solvent-borne

Powder Coating

UV Cured Coating

Waterborne coating use water as a solvent to dispose a resin rendering it ecofriendly and easy to apply.

Solvent-based paints are made using liquefying agents that evaporate during a chemical reaction with oxygen.

Powder coating is the technique of applying dry paint to a part. The final cured coating is the same as a 2-pack paint.

Radiation curable formulations are cross-linked by high-intensity UV-light or electron beam energy sources.

The increasing environment-friendly nature, and the versatile properties of waterborne coating are increasing the demand for waterborne coating across the globe.

COVER STORY Supply Chain Analysis of Global Paint & Coating Market

Raw Materials Pigment

Paint & Coating Manufacturers

Distribution Channel

Applications

Solvent

PPG Industries

Wholesalers

Architectural

Resin

AkzoNobel N.V

Retailers

Residential

Binder

Axalta Coatings

E-Commerce

Non-Residential

Additive

Asian Paints

Distributors

Industrial

Curing Agent

Sherwin William Company

Automotive

Dispersant

RPM Internationl

General Industrial

BASF Coatings Gmbh

Wood

Kansai Paints

Marine

Nippon Paints

Aerospace

Others

Packaging Others Source: Internet

The paint and coating value chain consists of its manufacturers and processors, distribution

channels,

and

end-use

industries.

The growing demand in

application industries such as industrial, marine, building & construction, consumer goods, automotive and aerospace is expected to have a positive impact on the utilization of paint, coating, primer, adhesives, binders and sprays, which is, in turn, is expected to drive the market growth. Most of the

manufacturers

here such as PPG industries, Sherwin Williams

company, Akzonobel,

Sika

AG, Henkel are integrated through two stages of manufacturing and distribution in the value chain. The end-products of the value chain are distributed by various companies and vendors and are finally utilized as paint and coating in major industries such as oil & gas, metal processing, aeronautics, building & construction, steel industry etc.

Asian coating market will be $68

Region Wise Paint and Coating Market

the second largest coating market in

Asia is the largest coating market in the world. As per reports, the 2017

increased growth in its coating market.

billion which makes it nearly 45% of the global coating market. Within Asia, there are three countrie that drive most of the demand; China, India and Japan account for 78% of the Asian Coating demand.

China is by far the most

important country. It accounts for 56% of the coating demand. India is now the region. As discussed it is a growing economy and that is resulting in Japan is the third.

MARKET PULSE OCTOBER-2018

2017 Global Coating Industry (Estimated)

45%

30%

18%

Asia

EMEA

North America

Latin America Source: Internet

The market for Asia-Pacific is driven majorly because of the growing construction industry in the region. The industry is expected to benefit from the increasing demand, triggered by a rebound in the residential construction and infrastructure projects. Moreover, in the past few years, countries, such as Indonesia, China, Malaysia, Singapore and South Korea, owing to their business potential, have become the major hosts of numerous national and international events. This, in turn, has increased the demand for hotels, shopping malls, high-rise buildings, arenas and stadiums, boosting the construction industry in the region. Thus, construction activity has steadily increased in the region. Europe is the second largest market for coating, taking a projected 30% of the global volume in 2017. Growth remains low in most EU countries with the decline in the Russian economy a drag on consumption. The prospect of waning growth in Turkey is a headwind for the near future. North America was an outlet for 18% of the global coating volume in 2017 and has mature growth prospects. The South and Central America region represents 7% of the global demand in 2016. Growth in the region has slowed significantly with the recession in Brazil the leading cause.

Competitive Landscape The global paint & coating market consists of a large number of industry players

operating globally. Highly fragmented nature of this market is operating at a high degree of competition with increasing penetration of new industry players year by year. Most of the Tier-1 industry participants operating in this market have acquired a substantial share by offering broad-spectrum products. Their primary focus is the expansion of production capacities to reach the desired organizational growth driven by the flooded construction projects in some of the regions. Asia Pacific and Europe are among the dynamic markets consisting of growth-centric regions, with most capacity expansions and acquisition activities. Global players are majorly focusing on these two regions and are launching new product formulations to cater application specific product demand. With increasing growth of this market, global rivalry is also expected to get higher year by year.

for paint and coating due to the growing demand from architectural and industrial coating has encouraged companies to adopt this strategy. Market players are focusing on entering new markets by acquiring companies thus, enhancing their paint and coating product portfolio for different applications. Besides new product development, companies adopted the strategy of acquisition, and expansion in order to expand their market share and distribution network. These market strategies by the leading players will increase their market share, thereby enhancing their global presence in the paint and coating industry.

The key companies in this market are Akzo Nobel NV (Netherlands), BASF SE (Germany), PPG Industries Inc. (U.S.), The Sherwin-Williams Company (U.S.), The Valspar Corporation (U.S.), Nippon Paint Co. Ltd (Japan), and Kansai Paint Co. Ltd. (Japan) and others. They are the most active and major players in the paint and coating market. Expansions and New Product Launches were the key strategy adopted by industry players in order to achieve growth in the paint and coating market. This strategy accounted for major share of all growth strategies adopted by market players. The high demand

COVER STORY Global Market Strategy Overview

37%

31%

20%

Expansion

Acquisition

Product Launch

Agreement

Joint Venture Source: Internet

Market Share of Top 10 Global Paint Manufacturers 2016

13%

10%

AzkoNobel

PPG Industries

Sherwin-Williams

Axalta

Valspar

RPM International

BASF

Kansai

Jotun

Masco Source: Statista

For paint and coating, consolidation has become a long-term trend, especially in Western markets with limited organic growth. In North America, for example, the industry has been consolidating for decades. In certain end market segments, fewer than ten players (and in some cases, five or less) control over 90% of the market. In most other North American markets, fewer than t e n

companies maintain at least 75% of value. Worldwide, however, the markets are still very fragmented overall. According to 2016 data gathered by PPG, the global industry is led by ten companies, but approximately 50% of the global market is controlled by smaller companies, many of them at the regional or local level. In 2017, the biggest deal for paint and coating was the Sherwin-Williams/ Valspar merger. Sherwin-Williams has a prominent market position in architectural paint in North America, South America, China, Australia and the UK. In industrial coating, the combined company will be a global

market leader in packaging coating, coil coating, general industrial coating and industrial wood coating. Successful consolidations can help paint and coating companies to seize growth opportunities, enter new markets, improve capabilities, increase efficiencies through scale or improved processes, diversify their products, and rationalize their asset portfolios. However, challenges remain for a paint and coating company considering a consolidation. As with any industry, a sellerâ&#x20AC;&#x2122;s market can turn into a buyerâ&#x20AC;&#x2122;s market before the deal is done.