Even in Eastern Europe, where coatings
demand has been much stronger during the
economic downturn since 2008, sales have
been faltering. Tikkurila of Finland, whose
main markets are in Eastern Europe, particularly Russia, recorded flat sales in the
third quarter while in the first nine months
of 2012 they went up by 4. 8 percent.
“European demand for coatings is
poor so as a result prices of some chemical raw materials have been weakening, ”
explained Alan Eastwood, senior economist at the UK’s Chemical Industries
Association (CIA) and chair of the economic forecasting panel of the European
Chemical Industry Council (Cefic), representing chemical producers.
“Major buyers of coatings like au-
tomobile makers are having a bad time,
except in a few countries like the UK, he
added. “The construction industry is in
the doldrums across much of Europe.”
The economic outlook for the 17-nation
eurozone has worsened in recent months.
The Washington-based International
Monetary Fund is now predicting that the
zone’s average GDP will decline by 0.2 per-
cent in 2013 after the IMF forecast a slight
rise of 0.1 percent in October.
Chemical suppliers are expecting the
squeeze on chemical sales to continue to
well into this year with a possible pickup
in the second half of 2013. After a two
percent fall in output in 2012, mainly due
to slide in sales since the summer, chemicals production is expected by Cefic to go
up in 2013 by 0.5 percent mainly because
of a recovery later in the year.
However there are forces at work that
are still preventing sharp falls in many
chemical prices, indicating that they
could quickly rise again with a revival in
demand in sectors like coatings.
The latest figures from Cefic confirm
that by the beginning of fourth quarter, the
impetus behind the long period of chemical
price increases was distinctly fading after an
average year-on-year 3. 4 percent rise in the
first half of 2012. By October the average
increase had dropped to below three percent with those for inorganic and consumer
chemicals going up by only 1.3 percent.
Nonetheless prices for petrochemi-cal-based chemicals, which make up the
majority of those used in most coatings
“However there are
forces at work that
are still preventing
sharp falls in many
chemical prices,
indicating that they
could quickly rise
again with a revival
in demand in sectors
like coatings.”
formulations, have been demonstrating
resilience. They went up year on year by
5.1 percent in October.
“Chemical producers are putting a
lot of effort into maintaining their prices
because due to continuing high oil prices
the costs of their own feedstocks are still
high,” explained Henrik Meincke, head of
the economics department of the German
Chemical Industry Association (VCI).
Nonetheless the VCI is forecasting that
in Germany overall chemical prices in
Europe’s largest coatings market will go up
by only 0.5 percent this year, compared with
an average of just under 3 percent in 2012.
In the fourth quarter of 2012 and at
the beginning of this year, there have even
been signs of softening of prices for petrochemical derivatives. Spot prices for
some coatings solvents have been going
down because of surplus output.
Some chemical companies in Europe
have even been reducing their own output to prevent excess supplies pulling
down prices. The scarcity of production
capacity for some chemicals is enabling
producers to reduce utilization of their
plants while staying profitable.
However in a crucial raw materials sector like titanium dioxide a tight
balance between supply and demand is
After the 2008 financial crisis TiO2
prices in Europe almost doubled after a
spate of closures of high-cost, low efficiency plants in the region.
“The current supply cycle in TiO2
with demand outstripping production
capacity seems to be coming to an end,”
said Eastwood. “The post-2008 ratio-
nalization in the sector sent prices sky
high because there was no new capac-
ity to deal with a recovery in demand.
Now demand has fallen so sharply that
the sector is showing the usual ups and
downs of a commodity market.”
Major players in the European TiO2
market, such as Huntsman Corp, DuPont
and Rockwood Holdings, owners of
Sachtleben of Germany, announced falls
in sales or profitability in the third quar-
ter of last year.
Producers of the pigment have been
cutting prices by 5-10 percent in recent
months in Europe to reverse a trend of
persistently rising prices since 2009. For
some the demand has been so low that
they had to seek buyers of their output in
Asia and Latin America.
Nevertheless the likely excess in capacity in TiO2 and other important coatings raw materials this year will not be
big enough to withstand a predicted upsurge in coatings demand in 2014 without prices going up again.
“Even if you cannot produce more when
you want to, there will inevitably be a strong
rise in chemical prices,” said Meincke.
Some analysts believe, however, that in
the longer term the best hope for coatings
producers and other downstream users of
petrochemical and other organic chemicals is a decline in the oil price.
“We’ve had persistent high oil prices
for at least two years in succession at a
time of a weakening global economy,
which is historically unprecedented,” said
Paul Hodges, chairman of the London-
based consultancy International eChem.
“Oil prices need to come down substan-
tially if they are to reflect the reality of
current economic conditions.”
That big decrease in oil prices may
happen. But unfortunately for coatings
producers it could only occur a long time
in the future. CW
