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Chinese Coatings Market Moves West.

Since 2017 Sichuan has become the fourth largest coatings province in China, behind Guangdong, Shanghai and Jiangsu. The coatings output in Shanghai and Jiangsu province dropped dramatically in 2018, mainly because of environment control and inspection. Following continuous adjustments of domestic industrial structure, the coatings industry has concentrated its capacities even further and the trend has been even more clear. Chongqing and Sichuan have become large coatings areas and are satisfying the demand of the southwestern area in China. Additionally, the northwest region, which includes Shaanxi and Gansu provinces, also enjoys a faster growth period than other regions in China.

Architecture coatings capacities moves west faster than other varieties

Due to transportation restrictions, emulsion coatings producers need to be closer to their customers. Regulation changes in coastal cities and provinces also push coatings companies to move their production bases towards inland and west areas such as Sichuan and Shaanxi provinces.

Nippon Paint (Sichuan) Co., Ltd started operation on June 28 after approximately one year construction. The new company will be Nippon's sales headquarter in west China, covering Sichuan, Chongqing, Yunnan, Guizhou, Xinjiang and Tibet. With a total investment of 1.11 billion yuan, the new production base can produce 230 thousand tons of coatings per year and provide 200 jobs. Nippon Paint (Kunming) Co., Ltd will also soon open for business. The new company will mainly produce emulsion coatings and dry powder mortar, etc and have a total capacity of 100,000 tons per year. In addition to these two new plants, Nippon Paint opened its first Sichuan company in 2005.

The central government has implemented the "Go West" strategy for 20 years. This, in another way, has facilitated the coatings companies' move in recent years. Not only in southwest area but also in northwest area Nippon Paint will increase presence and investments in the near future. The economy development of west China increases demand for high quality products, including coatings.

AkzoNobel opened its Dulux plant in Chongqing three years ago, and this plant has become AkzoNobel's fourth plant for decoration paint and its largest in China. In addition, domestic coatings companies, such as Asia Cuanan and 3Trees, also have set up production bases in west regions to catch up the local demand growth.

Waterborne experts grab more market share and realize business growth

Although the water trend in the coatings industry is clear, the performance limitations of waterborne coatings restrict their fast growth in specific sectors, such as industrial coatings and floor coatings. Companies operating in China know that if they do not develop waterborne formulas, it will be pushed out of the market eventually.

Currently China's floor coating market is still controlled by solvent based formulas, which have approximately 80 percent market share, in the hands of foreign brands mainly. Domestic brands, mainly represented by small companies, split the left market. But with the development of the waterborne trend deepening further, the domestic floor coatings market is facing the need for change. Small companies, estimated to be thousands, will retreat from this market sector.

More and more companies put new investments to produce waterborne coatings. Carpoly and Puntium Paints both invested new waterborne floor coatings production bases. Puntium Paint said that due to the increase of environment protection regulations small coatings resin producers were pressured to shut down operation. Puntium Paint's resin business increased its sales by 68 percent. Puntium has around 35 percent business relying on its resin operations and their resin products include acrylic resin and alkyd resin. Puntium achieved sales growth of 20 percent in 2018 and a big profit increase of 175 percent, mainly originated from their resin business. According to its annual report, Puntium's floor coatings business is still very small.

Domestic companies enter floor coatings war zone

Technically waterborne epoxy coatings is considered to be a good alternative for solvent-based varieties in the floor coatings market.

Many new players are developing this market and introducing new products.

Besides epoxy formulas, polyurethane varieties are also frequently introduced by domestic companies such as Carpoly. The car parking market is an important segment on which Carpoly pays attention. It is estimated that China needs around 330 million car parking spaces in 2019. Both new parking lots are needed and old ones are upgraded to meet the fast growing demand, providing good market potential for floor coatings producers. Right now there are solvent free formulas to target high end official building market and waterborne formulas to target normal residential buildings.

According to a media report, Carpoly said it will enter the top 10 floor coatings list in 2019. Foor coatings are relatively new to Carpoly, who established a joint venture to target this specific market in 2017.

Domestic coatings companies want to develop new market segment, and floor coatings is a clear target. Compared with industrial and automotive coatings market, floor coatings market does not have a formidable barrier.

With environment friendly trend kicking in, the market provides new opportunities to every player. The starting point sometime is back to zero. The future success will be for those companies who have the right technology and marketing expertise.

by Arnold Wang

China Correspondent
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Title Annotation:International Coatings Scene: China
Author:Wang, Arnold
Publication:Coatings World
Geographic Code:9CHIN
Date:Aug 1, 2019
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