International Coatings Scene
EUROPE
BY SEAN MILMO
EUROPEAN CORRESPONDENT
MILMOCW@RODPUB.COM
Weathering the economic storm
As the
coatings
industry
prepares
for a sharp
economic
downturn,
how will the
market cope?
Coatings companies and their raw
material suppliers in Europe are
hunkering down in preparation
for a sharp economic downturn with
some already announcing cost cutting
measures, including job reductions.
At the same time companies are looking
at ways of taking advantage of what could
be at least a one-year recession in the leading economies of Europe by continuing to
invest in expansions into new markets and
in new technologies.
“The world economy has now clearly
entered a phase of lower growth, particularly in the mature markets,” said Hans Wijers,
Akzo Nobel’s CEO. “In these challenging
markets, only lean companies succeed. We
have therefore started a rigorous drive to
further reduce our cost base.”
The company is now aiming for a reduction in jobs of at least 3,600 following last
year’s takeover of ICI, as well as additional
cost savings of €100 million ($127 million).
For more than a year the economies of the
UK, Spain and Ireland have been declining
because of the bursting of the boom in their
housing markets.
In the wake of the financial crisis, the economic difficulties have spread to much of
Western Europe and Central and Eastern
Europe as well. The International Monetary
Fund (IMF) has predicted that all of
Western Europe’s major economies will slip
into recession over the next few months. In
the euro zone of 15 countries growth next
year will be only 0.2% versus 1.3% in 2008,
according to IMF.
The construction and automobile sectors—both major outlets for coatings—have
already been hit hard by the economic
slump. In the UK granting of new mortgages
is a third of the level it was a year ago.
A severe blow to companies in the coating
sector in Western Europe is that the slowdown is also affecting large parts of Eastern
Europe. Over the last few years Eastern
Europe has been the big growth area in the
whole of Europe. Strong demand there has
helped Western European players offset
sluggish growth in their domestic markets.
“People have been expecting the emerging
economies to escape the worse of the downturn,” said Louis McCulloch, a coatings consultant at James Consulting, Dorking,
England. “But it looks likely now that this
might not happen in areas like Eastern
Europe. The problem for Eastern European
countries is that a lot of them rely on
exports to Western Europe.”
One hope is that the larger Eastern
European economies, particularly Russia
and Poland, will withstand the worse of the
recession. Oil and gas production should
continue to be a driving force behind the
Russian economy.
“Russia seems to have been holding up
until now, and so has Poland,” said Cheryl
Martin, Rohm and Haas’ general manager
for paint and coatings materials in Europe.
“But there is a credit squeeze in Russia
which has affected the automobile market
and could spread to construction as well. A
lot will depend on how the banks and government there react.”
With growth in Eastern Europe shrinking, coatings companies in Western Europe
are looking to the fast growing economies of
China, India and elsewhere in Asia for
opportunities for increasing sales and for
long-term expansion.
“Asia looks likely to remain a major
attraction for Western coatings companies,”
said McCulloch. “Even if there is a decline in
the growth rates of countries like India and
China, they will still be consuming coatings
at a rate well above their GDP growth rate.
