China
But even foreign companies are facing
quick changes in the Chinese domestic
markets, brought about mainly by new
government regulations. For example,
around 95 percent of the global container market is held by Chinese companies.
China produced 209 thousand tons of
container coatings in 2016. The market
leaders are almost foreign companies such
as Kansai, Chugoku Marine Paints, KCC,
Henpel, Valspar and SKS. And the use of
container coatings released large volume
of VOC into the air before 2016. In other
words, China polluted its own air to provide high quality products to the world.
But this kind of development is not sustainable for China. It is reported that 67. 3
percent of VOC released by container production needs to be reduced until 2020.
So almost every major container manufacturer is renovating their painting lines
from using solvent-based coatings to using
waterborne varieties. And it is estimated
that a new standard for limiting the use
of solvent-based coatings on container
production will be released in 2018, so the
time left for container companies to renovate their painting lines is not much now.
Selecting different business
strategies, domestic
companies strive to break
out of the competition circle
Domestic coatings producers have a major
presence in architecture related markets,
such as waterproof coatings, exterior and
interior architecture coatings, wood coat-
ings and so on. These markets are filled
with thousands of local coatings compa-
nies. Their profit margins are relatively
thinner than those of industrial coatings.
But the market is still not lacking in
new players. Behr, an American brand
introduced into China in 2017 with
Home Depot (Home Depot closed their
stores in China and withdrawn from
the Chinese market), is a foreign brand
entering China relatively late. And with
their products imported from abroad,
their market penetration will be mainly
dependent on brand and quality. This is
quite difficult for a relatively new brand
to grow in a large scale in a market whose
domestic brands also have good quality.
Domestic companies, under fierce
competition mainly from other domestic counterparts, have to make changes,
or face the risk of being eliminated in the
market. But with many considerations
playing into the decision process, it is
hard to say whether their strategies will
work in the long term. Financing through
stock market is a popular move, but the
direct impact to the business is not immediate since the cycle of a new investment,
for example, adding a new production
line, will take several years to become
new profit source for the company.
New capacities are still added into the
competitive architecture coatings market
in China. On June 28th, Lantiantun put
into production their diatomite coatings
plant. The new plant, targeting the con-
struction market, has an investment of 350
million yuan($48 million) for phase one
and will produce 500 thousand tons archi-
tecture coatings and construction materi-
als per year. Founded in 2010, Lantiantun
is also making overseas markets includ-
ing southeast Asia, India and UAE, their
primary targets for marketing promotions.
The prosperous development of high
speed train industry provides more op-
portunities for those rail relatd coatings
companies. As the first coatings compa-
ny who serves railway communications,
Feilu successfully listed their stock in the
market in early 2017. In the first quarter
of 2017, Feilu’s sales was increased by
23. 3 percent. As a major coatings sup-
plier for high speed train production and
railway development, Feilu has met their
best growing opportunity in recent years.
And the fund raised from the market will
provide necessary financial support for
Feilu’s several new projects.
Kuangshun, a major PCB ink supplier
for electronic devices and another public
company in the market, acquired Jiangsu
Hongtai in early 2017 with 660 million
yuan ($90 million), strengthening its lead-
ing position in the UV curing coatings mar-
ket and expanding their customer base.
Like the American market, the Chinese
market is always changing, but unlike
American companies, who like to merge
with or acquire other companies, Chinese
companies are more prone to increasing footsteps and capacities, and these
strategies, favored by “professional”
business managers, all lead to short term
growth, but long term growth normally
comes from differentiated products and
technologies, resultinh from investments
in R&D and close studies of customer
needs. And the largest structural change
in the Chinese coatings industry in these
two years is from solvent-based coatings
to water-based coatings, which is driven
by government regulations. CW
“Like the American market, the Chinese market is always
changing, but unlike American companies, who like to merge with
or acquire other companies, Chinese companies are more prone
to increasing footsteps and capacities...these strategies lead to
short term growth, but long term growth occurs from differentiated
products and technologies. ”
