Coatings World - March 2009

wide has slowed. Nearly all industrial coatings firms reported terrible performance for the fourth quarter of 2008, and the primary OEMs—from General Motors and Toyota to John Deere—are all retrenching.

The combination of low industry demand and the large number of small, medium and global powder providers bodes an unhealthy near-term future. Excess capacity is chasing orders. Return on capital for many firms is likely to further worsen in 2008. Some of our customers and competitors may not survive this downturn, as capital allocated to underper-forming return sectors becomes scarcer. Powder manufacturers simply do not have the capacity to extend working capital in a period of tight liquidity. In addition, the migration of parts manufacturers to low-cost countries for economic advantage appears to have slowed significantly. It’s increasingly clear that the capacity increases made earlier are now perhaps misaligned with future local demand.

ence. In today’s environment, few companies have the financial resources to justify new material development. That said, even those that do have not had much success in

objective. Brand owners need technology to differentiate their products. As an industry we need to dedicate resources to have that dialogue and translate the need into selling a

“The challenge (and opportunity) for the powder coatings industry, is to restart the conversion engine, using new material advances to both restore healthy returns on capital and growth.”

STALLED CONVERSIONS Given the weak profitability of powder, there is little financial incentive for multi-system coatings providers to favor a switch to powder versus an existing coatings class. Within the universe of the $5-6 billion powder industry, the majority of providers are broad-based industrial coatings firms. They have powder lines, but this is not their sole purpose. Adoption rates are low in Japan, but much higher in Italy. Why? Adoption rates are highest where OEMs played the leading role in demanding a different form of coatings performance that nurtured the growth of powder. Lastly, powder remains a leading choice in a market where capital costs are rising for coatings lines, but powder coatings technology has lost its compelling argument for converting markets.

the last decade. Achieving success here requires a deep working relationship between brand owners and technology providers. The powder coatings industry needs to better understand the brand needs of OEMs. That is, how they want to position a car, an appliance, a farm tractor or an aluminum window profile, and so on. To do this, powder providers need to reach out to leading edge OEMs and start a dialogue about how the metal part plays a role in their brand, and then working in partnership with them to design the surface treatment that fulfills that

value added powder.

To be a technology provider, one needs to invest in R&D, and to have a proven capability for delivering solutions. Future material solutions need to expand the performance range of the powder, be a more sustainable material, and/or provide system savings to the OEM or coater. It need not always be a lower powder price! In the absence of our industry investing in powder development, we are destined to remain the poor cousin of coatings.