Asia Pacific report: China: amid its economic boom, China has become the world's second largest paint producer.
China's economic growth continues to be a remarkable story. The growth of China's coatings industry also continues to be a major success. Coatings output increased from 2.98 million tons in 2004 to 3.82 million tons in 2005, while sales revenue rose by 21.84% to $9.14 billion in 2005. Total profit reached $550 million, a rise of 19% over the previous year.
The world's top ten coatings companies now have at least one manufacturing base in China, while the presence of innumerable joint ventures for raw material products are providing support to the industry.
As the world's business community watches China's miraculous growth, the Chinese coatings industry has, meanwhile, achieved remarkable growth. One important driver is the continuing shift of industrial manufacturing of consumer goods from Western Europe and the U.S. to China, including manufacture of IT, domestic appliances, furniture and automotives.
The need for coatings in China is clear. After all, the country is undergoing the world's largest construction boom. The 2008 Beijing Olympics this summer, plus the 2010 World Expo, to be held in Shanghai, and the 2010 Asia Games to be held in Guangzhou, will showcase China to the world, and have led to massive investment in urban infrastructure. It is anticipated that the Beijing Olympics is expected to spend $4 billion for coating and allied products.
In addition, home ownership has seen explosive growth since the closure of the government backed welfare housing scheme in 1998, and the real estate market is officially estimated to maintain its current growth rate of ten percent over the next five years.
"We have witnessed a strong migration of the industrial business base to the lower labor regions of the world," said Terry Francek, business unit controller for Akzo Nobel's industrial finishes business unit.
The Chinese automotive coatings market is expanding in the wake of larger investments in car manufacturing plants. Car production is growing four times faster than the rest of the world, while all major multinational produccers of automotive coatings are active in the country, supplying leading international automobile manufacturers.
PAINT MAKERS CONTINUE TO INVEST IN CHINA
The vast majority of the investment in both acquisition and capital investment in the coatings industry is flowing into China. In the period 2005-2007 there were 43 investments in added plant and equipment capital among paint manufacturers, according to the Chemark Consulting Group. For this period a total of 880,600 tons per year of annual capacity capital was added. Of that total, 76.2% was invested in China, Chemark said.
In terms of mergers and acquisitions, clearly there has been increasing activity in the emerging markets, especially China. Chemark reports that there are approximately 8,000 paint companies in China and local consolidation will play a major role in improving the ability of the market to compete in the future. The Chinese market is expected to grow 63% to $12 billion by 2010, a rate that exceeds 12% per year, Chemark said. Architectural coatings will be the fastest growing area due to the billions of dollars being invested by the Chinese government in infrastructure and housing.
Consolidation in China, combined with double digit annual growth, will probably create one to two global competitors by 2012, the firm said.
Akzo Nobel, the world's largest paint and coatings company has been extremely bullish on China. Last year, Akzo's CEO Hans Wijers announced new strategic targets for China, outlining the company's goal to achieve revenues totaling $2 billion by 2012.
Rapid expansion in recent years has seen the company significantly increase its presence and its sales in China, and the chairman--who expects 20% of revenues to originate from the Asia-Pacific region by 2012--expressed confidence that this accelerated growth momentum will gain further impetus as the investment continues.
"China is clearly fundamental to our global strategic vision and we are fully committed to expanding our activities in what is one of the world's most important emerging markets," Wijers said in a statement.
"By hitting our targets we will have quadrupled our revenues in China in well under ten years," he continued. "We also expect the Asia-Pacific region to have almost doubled its contribution towards the company's global revenues in the next five years."
The last few years have seen significant Akzo Nobel activity in China, where the company's 2006 revenues totaled $800 million. As well as announcing a 250 million [euro] investment for a new chemicals multi-site in Ningbo, Akzo Nobel has also opened new coatings facilities in Suzhou, Langfang, Tianjin and Jiashing, bringing the total number of plants to 22.
The new Langfang site in northern China that opened last year is dedicated to boosting the company's presence in the country's decorative coatings market.
The addition of the new facility, situated just south of Beijing, means that Akzo Nobel now operates three deco production sites in China, the other two being located in Suzhou in the east and Guangzhou in the south.
The new Suzhou site is operated by Akzo Nobel Aerospace Coatings (ANAC) and will support existing sales and distribution operations in Asia Pacific.
Akzo Nobel Car Refinishes (ANCR) formed a partnership with Great Wall Motor, a major Chinese car manufacturer. ANCR will provide a wide range of paint refinish products and related services to Great Wall's franchise of dealers and bodyshops.
In addition, last year Akzo purchased decorative paint manufacturer Guangzhou Toide and in 2006 it purchased paint maker Chang Cheng.
A new DuPont Performance Coatings plant has begun manufacturing operations in the Jiading district of Shanghai.
The new DuPont Jiading plant, near Shanghai, will supply automotive refinish coatings and industrial finishes to China and other Asia Pacific markets.
"The on-time opening of the Jiading plant is another major milestone in the transformation of our performance coatings business into an organization with strong global capabilities," said Terry Caioghiris, group vice president, DuPont Coatings & Color Technologies. "The Chinese automotive collision repair market is one of the fastest growing in the world, so this plant positions us to serve it in a responsive and efficient manner."
The new plant currently employs 160 people. Employment is expected to grow to approximately 250 once manufacturing operations reach capacity. The plant is the company's tenth finishes-related investment in China. It was designed with a "lean manufacturing" layout, a comprehensive term referring to manufacturing methods based on maximizing value and minimizing waste while operating safely.
"This facility enables us to supply our customers quickly and effectively with the most technologically advanced coatings in the world," said John McCool, vice president and general manager, DuPont Refinish Systems. "In addition to collision repair products, this plant will supply the rapidly growing economies of the Asia Pacific region with coatings specially designed for trucks, heavy equipment and a variety of industrial applications."
In an interview with Forbes.com, PPG's chairman and CEO, Charles Bunch, discussed the company's focus on trying to get better positioned in Asia. "There are smaller to midsize companies in Asia that we would hope to be able to look at in the coming years," he said. "So I think you're going to see our focus shift a little more, in terms of our merger and acquisition strategy, to Asia."
In China in 2005 PPG acquired Crown Coatings and in 2006 it acquired Shanhai SunPool.
In addition, PPG boosted annual production capacity of its factory in Tianjin, a municipality in North China, from 30,000 tons to 70,000 tons. Its new factory, which started operations October 30, 2007 covers an area of 60,000 square meters with total investment of $10 million.
In total, PPG has invested more than $60 million in Tianjin and more than $300 million in China. It will expand its Tianjin factory again in the next few years to enable annual production capacity to surpass 100,000 tons.
PPG also made plans to open an athletic footwear coatings application center in southern China.
SigmaKalon and Shanghai IVY formed a joint venture last year for the sale of decorative coatings in the Chinese market. The joint venture company is called SigmaKalon IVY (Shanghai) Paints Co. Ltd (SK IVY).
IVY has contributed its coatings business, run by Shanghai IVY Chemical Co. Ltd, to the joint venture, while SigmaKalon contributed its Chinese decorative business, run by its affiliate SigmaKalon Shanghai Co. Ltd.
The SK IVY joint venture is 85% owned by SigmaKalon and 15% by IVY.
Tikkurila, the company responsible for Kemira's paint and coatings business, increased its market position in Asian paint markets by establishing a sales company in China this year. Tikkurila (Beijing) Paints Co., Ltd began operating on May 22, 2007 in Beijing. At the same time, Tikkurila acquired the sales company CEIEC-Feelings operating in China from its owners CEIEC, CEIEC-OTC and a number of private investors.
CEIEC-Feelings has been operating since 2002 as the importer of Tikkurila's decorative paints in China. Net sales for 2007 are estimated at approximately 2 million [euro].
The acquisition aims at consolidating a basis for a development of Kemira's market position in the rapidly growing decorative paint market in China.
On Jan. 18, 2008, Tikkurila held a press conference in Shanghai where the president of Tikkurila industrial coatings, Ilpo Jousimaa, said that the Tikkurila industrial coatings would march into the Chinese market this year to produce metal coatings, wood coatings, floor coatings, anti-corrosion coatings, machinery and protective coatings, architectural coatings and coatings for steel structures.
While Tikkurila's decorative paints have been in the Chinese market since 2002, this marks its entrance in the industrial coatings sector.
Morwear Paint expanded its presence in China as well. As part of a major advertising and promotional campaign, all Home Depot stores (formerly Homeway) in China are featuring Morwear PURE Fresh Air Odorless Formula paint.
Morwear PURE was formulated to be 100% environmentally friendly and is ideal for the home, hotels and for commercial uses where no odors or VOC emissions are desired. The introduction marks the first imported tintable paint in China since 1995, according to the company.
Lord Corporation, manufacturer of MetalJacket coatings, added a new MetalJacket custom coater in China. The coater, Wuxi Zhongjie Vibration Isolators Co., Ltd., will help Lord Corporation's customers meet the growing demand for Lord MetalJacket coatings for both automotive and industrial applications. The Zhongjie application line installed a traditional hoist transfer process and applies the Lord MetalJacket 1100-2110 system.
On the marine coatings front, Jotun Cosco Marine Coatings (JCMC) has signed a paint contract for 80 vessels to be built at Dayang Shipyard. This is not only the first NB contract Jotun China secured in 2008, but also the biggest contract ever in the history of Jotun. The total contract value is approximately $50 million, and includes a total volume of 10 million liters of paint to be supplied for 75 x 58,000 DWT bulk carriers and 5 x 16,500 cubic meter LPG.
THE ASIA-PACIFIC PAINT INDUSTRY
Information Research (IRL) has launched the eighth edition of its Profile of the Asia-Pacific Paint Industry, which provides a detailed overview of ten paint markets across the Asian region.
Collective paint demand for the ten countries covered has been estimated at 10.6 million tons. The individual market sizes are summarized in the chart below.
Average annual growth for the paint and coatings markets across these countries is placed at 8.8%, which will add another 5.5 million tons of paint demand by 2011. This reflects double-digit growth in the Chinese and Indian paint and coatings markets, tempered by more modest growth in other key locations such as Vietnam, Thailand, South Korea and Malaysia. Selected trends, which are highlighted in the report include:
* Strong demand for architectural and wood coatings in China as a result of the booming construction sector;
* Rising demand for architectural and protective coatings in India through ongoing investment in construction and infrastructure;
* High marine paint demand in South Korea through large numbers of orders for the shipbuilding industry;
* Rising consumer awareness of health and environmental matters, with particular emphasis on R&D in this area in mature economies such as South Korea and Japan;
* Greater competition in some economies where China has wooed the local manufacturing industry from other low-cost manufacturing economies.
For more information on this report contact Terry Knowles at firstname.lastname@example.org.
ASIAN ADDITIVES MARKET
Consumption of seven leading coating additives in Asia was 655 million pounds worth $1.5 billion in 2008, according to "Asian Coating Additives," a report from the consulting firm of Kusumgar, Nerlfi & Growney. This compares to U.S. consumption of $800 million for the same additive types, which include biocides, rheology modifiers, dispersants, foam control, wetting, and slip and rub materials. Coating additive growth in Asia is forecasted to be nine percent per year through 2012, more than four times that of the U.S.
As shown in Figure 1, China is the largest consumer of coating additives in Asia, taking 37% of the dollars. Continued growth in building and manufacturing activity will give coating additives a robust 13% annual rate of growth in China. Figure 2 shows additive consumption by type in Asia. Biocides are the largest type with 28% of the additive value. Most is consumed in marine antifouling coatings, with architectural in-can preservatives and dry film fungicides the other major outlet.
For more information on this report you can find Kusumgar, Nerlfi & Growney on the web at www.kusumgar-nerlfi-growney.com
Figure 1: Asian Coating Additives By County China $560MM Japan $425MM Korea $215MM India $100MM Other $225MM Note: Table made from pie chart. Figure 2: Coating Additives By Type in Asia Biocide $425MM Rheology $350MM Foam Control $220MM Dispersant $200MM Wetting $160MM Other $170MM Note: Table made from pie chart.
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|Date:||Jun 1, 2008|
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