International Coatings Scene
EUROPE
BY SEAN MILMO
EUROPEAN CORRESPONDENT
MILMOCW@RODPUB.COM
Raw material supply shortage
European coatings manufacturers are bracing themselves for a pro- longed period of shortages in key
raw materials.
The industry is currently being hit by double–digit rises in prices for resins, pigments,
additives, solvents and packaging materials
as demand for paints begins to pick up in
Europe while there is continued strong
growth in coatings demand in China, India
and other emerging economies.
“Our members are being told by their suppli-
ers they cannot have the raw materials they
want,” said Tony Mash, chief executive of the
British Coatings Federation, Leatherhead,
England. “What has happened is that raw mate-
rials have been shipped to the Far East because
of the increase in coatings sales in countries like
China while at the same time there has been an
upturn in demand in Europe, particularly the
UK. The suppliers have been cutting back their
stock levels since the recession. For a number of
raw materials, there have been production out-
ages and plant shut downs, which have made
matters worse. Now many suppliers are saying
they are sold out for the present and are having
to delay some shipments.”
In addition to the combined effects of persist-
ent fast growth in Asia and a sudden surge in the
need for coatings chemicals in Europe—as well
as in North America—it has become clear that
there is now an underlying imbalance in produc-
tion capacity in Europe for certain raw materials.
The coatings supply chain is readjusting to
cope with plant closures and cutbacks in capacity of individual production units in Europe
during the recession and with a big increase in
capacity for petrochemicals and other base
chemicals in the Middle East and Asia.
As a result coatings producers are expecting
that the current shortages will not be short-lived so that coatings companies are being
forced to rethink their procurement strategies.
“The feedback we are getting from our members is that they anticipate that the shortages
will continue for several more quarters because
The situation
with coatings
raw materials
is causing
a lot of
problems
at the
moment.
of the rapid economic growth in the Far East and
the low stock levels in Europe,” said Mash.
Some analysts are warning that there will
be regular uncertainties about raw material
supplies for the next few years until the
European economies have fully recovered from
the recession.
“Europe will not be completely back on track
until 2012 or 2013,” said Paul Hodges, chair-
man of International e-Chem, a London-based
consultancy. “Undoubtedly in that time there
will be great volatility in the level of supplies of
raw materials to the coatings and other down-
stream industries which will result in a lot of
price fluctuations. Relatively small shifts in
supply/demand balances will make raw materi-
al purchasers very vulnerable.”
Some raw material scarcities can be traced to
the recent opening of new crackers in the
Middle East for making ethylene, a building
block for a wide range of petrochemical deriva-
tives. The expansion has resulted in the Middle
East having around 25 percent of global ethyl-
ene capacity, which has caused European ethyl-
ene producers to run their crackers at lower
utiliszation rates. This has cut domestic pro-
duction of ethylene and its by-products propy-
lene and butadiene, which are also important
organic base chemicals.
In addition the economic downturn has caused
overcapacity among Europe’s oil refineries. They
have been reducing output of products like benzene, a base feedstock for aromatic chemicals.
Forecasts made a year ago that the closure of
titanium dioxide plants in Europe would precipitate shortages when demand improved have
appeared to be accurate as TiO2 producers
pressed for price rises of four to five percent in
the wake of tighter supplies in the first quarter
of 2010. Some coatings have been warned that
they may have to wait up to two months for
deliveries.
In anticipation of a persistent problem with
shortages, BCF has introduced a brokerage service for helping its members to transfer excess
supplies of raw materials in their own ware-
