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Coatings raw materials--recent developments.

In the past few weeks, the CHEMARK Group has seen reports indicating that the economic recovery currently being experienced in Asia has stimulated sales of coatings and, with it, demand for the raw materials that go into paint and coatings formulations. For example, there have been several reports of shortages of epoxy resins, various grades of PVC, several plasticizers, titanium dioxide, acrylic acid and butyl acrylic, phthalic anhydride, China clay, raw wood oil, plastic packaging materials, and even tin plate, among others--all materials that are used in paint manufacture.

This impact on raw materials from increased demand in Asia is not exclusively affecting U.S. producers. Tony Mash, the chief executive of the British Coatings Federation, recently issued a statement to his members explaining that "the economic recovery currently being experienced by the Far East has stimulated sales of coatings and, with it, demand for the raw materials that go into paint and powder coatings formulations." Mash added that "we are also beginning to see this increase in demand reflected elsewhere in the world and, as a result, suppliers of raw materials are under pressure to increase production rates."

As a result of the global recession that began in 2008, raw materials for coatings have generally been available. In recent months, however, the recovery in coatings sales and, with it, demand for the raw materials that go into paint and powder coatings formulations in Asia, has intensified the level of shortages. At the same time, there have been geographic areas where a particular raw material may be somewhat difficult to acquire in a timely fashion.

One example of such a raw material is acrylic acid. This key material is one in which there has been considerable consolidation among U.S. producers in recent years. The result of this acquisition is that today there are only three producers of acrylic acid and esters in the U.S. Although import of acrylic acid/esters from Asia is feasible, there are two issues that work against this as a short-term workable solution. First, the demand for acrylic acid/esters in China continues to be strong, while at the same time acrylic acid producers are experiencing difficulties in acquiring sufficient levels of a key feedstock, propylene. Secondly, it is difficult to transport acrylic acid/acrylate esters in bulk without first securing long term customer contracts tied to adequate onshore storage tank scenarios and related infrastructure.

Another example is methyl methacrylate (MMA), a key raw material for coatings manufacturing. The coatings industry is a large user of MMA, as most emulsions/resins used in paint formulations contain this monomer. Consumption of MMA generally correlates with GDP. Overall, demand for MMA has also grown because of the increasing prominence of acrylics, particularly in architectural coatings, as well as the rapid growth of MMA usage in Asia (especially in China). Further, increasing demand for ultra-flat screen televisions has resulted in increased demand for Asian PMMA for use in flat-screen manufacturing applications. This rising demand for PMMA appears to have had an impact on the overall MMA supply chain.


The MMA shortage appears not only to have been brought about by a combination of higher than expected demand for MMA/PMMA, but also the need to take various MMA production units offline for routine maintenance or catalyst change out, as well as a recently announced "Force Majeure" for MMA. As a result of all these factors, many MMA customers are being placed on allocation and are getting only 60-70% of their normal requirements--or less, in some cases.

The current situation with MMA and acrylate shortages would be worse if the global economy were not depressed. Neither the MMA nor the acrylic acid situation described are expected to be long-term issues. However, users of these products should not expect short-term relief.

by Dan Watson, CHEMARK Consulting Group, Inc.
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Title Annotation:SPECIAL REPORT
Author:Watson, Dan
Publication:JCT CoatingsTech
Date:Jun 1, 2010
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