State of the Industry
the worst of the economic decline is
behind us. Recovery, however, remains
fragile and will vary significantly by
region. Overall, the International
Monetary Fund forecasts that the global GDP will grow by 5.7% in 2010 followed by an additional 4.8% in 2011.
This will basically put the global economy in 2011 on par with economic
activity of 2008. Latin America and
ROW markets are predicted to post the
strongest percentage growth, albeit
from a small base. Again, Asia-Pacific is
forecast to show the greatest amount of
growth in dollar terms. North America
and Europe will lag Asia-Pacific in both
GDP percentage and dollar growth
with North America slightly outpacing
Europe.
Following the market declines in
2008 and 2009, the global construction market is forecast to be essentially flat in 2010. The declines in the
U.S. and European markets will slow
and will be accompanied by a robust
rebound in Asia. Growth is expected
to be particularly strong in China
and India, as well as in Russia and
Brazil. The net result is that for at
least the next year, the decorative,
industrial maintenance, coil and
Chart 2
wood finishes markets in North
America and Europe will continue to
be negatively impacted by a declining construction market, but should
start to see recovery in 2011.
Growth in industrial sectors will
similarly vary widely. In the transportations sector, the global automotive market is projected to grow by
nearly ten percent in 2010 with
North America showing significant
recovery. It is important to note, however, that part of the reason for the
strong forecast percentage growth in
North America is that the market
has fallen so significantly over the
past three years. Production in this
region is not forecast to reach 2007
levels until approximately 2015.
Europe is projected to be flat in 2010
and show modest gains over the following few years. These forecasts are
obviously highly dependent on the
recovery of the regional economies.
In terms of general manufacturing
activity, and overall demand for
industrial coatings, the expectation
is that 2010 will see a gradual
improvement. According to the
JPMorgan Purchasing Managers
Index (PMI), global manufacturing
production increased for the eighth
successive month in January of 2010.
Strong growth was seen in the U.S.
manufacturing sector, as well as in
China, India, Taiwan and South
Korea. Western Europe and Japan
have shown signs of growth, but lag
the overall global market. Western
Europe in particular is being held
down by continuing deep recessions
in Spain, Italy and Greece.
PREPARING FOR RECOVERY
Coatings companies across the globe
have felt the serious impact of this
most recent economic crisis. Emphasis
for most of the past 18 to 24 months
has been on survival. Either as a
proactive means of preserving profitability or as necessary action to stay
afloat, companies have tended to focus
internally on means of reducing costs.
Through layoffs, salary cuts, inventory
reductions, facility closures, or all of
the above, coatings companies have
been forced to lower operating costs
and working capital requirements.
Now that the worst is apparently over,
many are starting to look ahead to
growth. The challenge, however, is how
to grow in this changed marketplace.
One consequence of the recession
has been consolidation, from both a
supply and demand standpoint.
There are fewer coatings manufacturers and fewer potential customers
