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The SED's impact on SMEs: already struggling with higher raw material costs and low margins, how will the cost of conversion impact small- and medium-sized industrial coatings customers?

Industrial coatings users in Europe have been or are currently drawing up solvent management plans on how they will comply with new tough European Union legislation on solvent emissions. But many of them are preparing for the restrictions with a great deal of trepidation about the size of the impact on their businesses.

The plans have to be submitted to inspectorates and enforcement authorities before the first phase of the regulations on limiting solvent emissions comes into effect in October of this year.

Users of coatings in industrial installations have three main options. They can switch from solvent-based paints to ones which have a low solvent content or are solvent-free. They can install solvent abatement equipment to enable them to continue to use solvent coatings. Or, they can use a combination of both measures.

The legislation, issued in the form of a directive by the EU so that it can be incorporated into national laws of the Union's 25 member states, differs from a later EU regulation covering emissions of VOCs from decorative paint and automotive refinishes.

Unlike the earlier solvent emissions directive (SED), the decorative coatings legislation, which was approved last year and will start to be implemented in 2007, relies entirely on the imposition of VOC limits on the contents of paint.

The SED rules will affect a wide variety of operators including automobile manufacturers, furniture makers and suppliers of metal and plastic products.

However, many small and medium companies involved in coatings applications have been delaying their preparation for the SED legislation which, after its introduction this year, will come fully into force in 2007.

They have, in particular, been deterred by the extra cost of moving out of solvent-based systems at a time when many of them are struggling with the pressures of higher raw material costs and low margins.

A CONTRACTING CUSTOMER BASE?

Many of these companies are also having to deal with a contracting customer base. In a lot of Western European countries, the end-users of industrial coated products are shrinking in numbers as manufacturing is transferred to lower-cost locations in Eastern Europe and Asia. In the UK, for example, the number of manufacturing jobs has declined by a million since 1997.

"This solvent emissions directive is one of a number of factors which could be the straw breaking the camel's back with a lot of businesses," said Tony Newbould, deputy director at the British Coatings Federation (BCF).

"Coatings producers in the UK could find that they have even fewer customers after the implementation of this legislation," he added. Even companies which have or are planning to change to waterborne coatings are being confronted with higher costs, both because of more expensive paints and the need for additional drying equipment.

"In terms of consumption of paint per square meter, waterborne coatings are on average around 10-20% more expensive at the moment than solvent-based products," said Petri Jarvinen, distribution manager for industrial coatings at Tikkurila Coatings, Finland. "This higher cost has a lot to do with the solvent emissions legislation itself."

"The growing demand for water-based coatings is pushing up their prices at a time when they are still being sold in relatively low volumes in some sectors," Jarvinen continued. "Also the binders in water-based coatings are becoming more expensive due to higher raw material costs and a lack of competition between waterborne resin producers."

As the SED rules begin to bite over the next two years, the exodus from solvent-based coatings is likely to result in even higher prices not only for waterborne products but also machinery like air-drying equipment.

"Many businesses are leaving things until the last minute," said Jarvinen. "Over the next year or so before the final deadline in October 2007 for total compliance with the legislation, there will be a big rush into waterborne systems. Even demand for engineering services for drying equipment will outstrip supply. After a while, the higher volumes in water-based coatings should bring down product prices but it will not happen until 2008 or 2009," he added.

Nonetheless, coatings operators have had plenty of time to get ready for the new legislation, which was first discussed in the early 1990s amidst increasing worries about the effects on human health and the environment of ground-level ozone.

The solvents emissions directive was approved in 2001 but its implementation among individual countries has been held up because of its complexity.

"Many of these SMEs who are now having difficulties adapting themselves to the new rules have only themselves to blame because they were warned years ago that the restrictions were coming," said one coating industry source.

A recent survey of Finnish furniture manufacturers found that most large companies had already carried out any necessary solvent-reduction measures. It was the smaller players, with annual solvent emissions of 1015 metric tons and accounting for around 20-30% of the total, who still needed to take action on lowering consumption of solvents.

These SMEs were mostly considering shifting to existing waterborne products rather than to new coatings technologies.

"There was little preparedness (among these companies) to make major investments in new surface treatment technology as yet," said Pasi Martikainen, technical representative of the Association of the Finnish Furniture and Joinery Industry.

"However, bigger companies were ready to invest in new technology, to improve the efficiency of the surface treatment process and to introduce new surface treatment products," Martikainen stated.

The biggest need for alternative technologies has been in areas such as manufacturing of large metal parts where primer coatings have VOC contents as high as 80%. Under the SED rules, these have to be cut to 20% by October 2007.

In response to the SED legislation, Wessling Oberflaechenveredelung (WOB) GmbH, a German-based coatings applicator, has just brought on stream Europe's largest industrial coatings plant with an annual capacity of 4.5 million sq. meters. It has a conveyor system for objects up to 16 meters in length, 2.6 meters wide and 3.6 meters high, which are dipped in 360 cubic metre tanks for application of a cathodic electrodeposition process. The plant, which is supplied with binders and pigment paste by BASF Coatings, serves customers in the engineering and transport equipment sectors.

"At the moment we don't know of any other applicator using this e-coating technology but we think it's the only way in which the coating of large metal parts can comply with the new legislation," explained Bernhard Joene, WOB general manager.

A sophisticated technology such as e-coating is far too expensive for the many small- and medium-sized players active in metal parts coatings. It is just one of many sectors where the number of operators in Europe could dwindle over the next few years.

SEAN MILMO

EUROPEAN CORRESPONDENT

MILMOCW@RODPUB.COM
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Title Annotation:EUROPE. Solvent emissions directives.
Author:Milmo, Sean
Publication:Coatings World
Date:Apr 1, 2005
Words:1121
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