given rise to a large import demand
by China for a variety of raw materials including crude oil. However, as
the economy of the U.S. and Europe
continues to shrink it is expected
that China will not see a repeat of
2008 for quite some time.
According to the latest market data,
China remains the second largest
paint and coatings market in the
world, with the U.S. market taking
first place. The total paint and coatings
shipment in 2007 totaled approximately 6.2 million tons with an expected
annual growth rate of 22.3%.
According to the National Bureau of
Statistics of China, the total production of paint and coatings was 3.2 million tons in the first half of 2008, which
was up approximately 11.8% over the
same period of 2007. Estimated year-end production figures indicate that
the last six months were not as good
due in part to the declining economy
and a huge drop off in exports from
China. In general, although the growth
of the Chinese market is slowing down
due to the global financial crisis, the
market is expected to expand at a moderate speed in the coming years. The
large stimulus package with its focus
on infrastructure expansion and
replacement of consumer goods should
prove beneficial for the paint and coatings industry.
The huge construction/renovation
and build up to the Olympics was a
tremendous success for most paint and
coating producers. However, as most of
us will recall, the Chinese requested
that all industry within a certain
radius of the Olympics cease operation
in order to improve the air quality. This
meant that most raw material and finished goods producers stockpiled
inventory to carry them through the
down time. Unfortunately, most of this
inventory was not sold until the following quarter thus delaying many
planned start-ups.
The main impact of the economic
downturn on the coatings industry was
significantly realized after September
2008. Overseas orders decreased by
more than 20% compared with last
year. The architectural and wood coatings sectors witnessed almost the
same level of decline. Furthermore,
Figure 2
large industrial coating related industries, such as plastic toys, shipping and
machine tools, all have significantly
declined in export volume. The average
growth rate of domestic demand for
coatings dropped from approximately
20% in 2007 to less than ten percent in
2008. Although a firm growth rate for
2009 has not been established it is
expected that unless the Chinese stimulus strategy commences to work soon,
2009 will be at a much reduced level
compared to 2008. Unlike most markets, the Chinese coatings market is
dominated by foreign producers, mostly through onshore production of
paint/coatings. In 2007, the top ten
companies’ had a market share of
approximately 12.5%. This kind of situation leads to low profit margins and
counterfeit products. Leading multina-
Figure 3
