China
Production capacities
boosted to meet customer
demand
On June 30, 2015, COSCO Kansai
opened a new plant in Shanghai Jinshan
Industrial Zone II. The new plant, which
has an area of more than 90 acres and
a total investment of approximately
RMB 500 million, mainly offers container coatings and industry heavy-duty
anticorrosion coatings. As disclosed
by COSCO, the demand for their container coatings rebounded because of
the growth of new build containers during the first half of 2015. Meanwhile,
COSCO Kansai successfully explored
new customers while further strengthening its relationship with existing
customers. COSCO and Japan Kansai
have established three joint venture
companies in China, located in Tianjin,
Shanghai and Zhuhai of Guangdong
province respectively.
Jotun COSCO, a joint venture formed
by COSCO and Norway Jotun, is mainly engaged in the business of marine
coatings. In the first half of 2015 Jotun
COSCO put greater efforts into marketing, and therefore maintained its leading position in China’s marine coating
market. In addition, to achieve a larger
economy of scale, Jotun COSCO Marine
Coatings (Qingdao) Co., Ltd. also put a
new plant into production in 2015. The
total investment of the new plant is RMB
316 million, and its annual production
capacity is 67,500 tons per year, which,
as COSCO said, is the largest and most
advanced marine coating production factory in China.
Hempel, another major anticorrosion
coatings producer in China, also has three
plants in China, located respectively in
Guangzhou, Kunshan and Yantai. Besides
positioning its production base into
three major regions in China mainland,
Hempel opened its China’s second R&D
center in Kunshan, Jiangsu Province in
2015, deepening the company’s exploration and development of the China market. Yantai R&D center will serve as its
regional R&D center, which is different
from Hempel’s four major R&D centers,
located respectively in UK, Denmark,
Spain and Guangzhou, China.
Sales increase in new ship
building category
As disclosed in the interim report of
COSCO, the total coatings revenue of the
two COSCO joint ventures has increased
by 1% and operation profit 6% in the
first half of 2015. Although the growth is
not two digits any more, we can find by
digging a little deeper into each category’s
performance that a total of 7,425 tons of
the industry heavy-duty anticorrosion
was sold in H1 of 2015, representing an
increase of 14% over H1 of 2014. Besides,
COSCO Jotun sold a total of 53. 7 thousand tons marine coatings, increased by
49% over H1 of 2014. And 77% of the
marine coatings sold went into the new
built ship category. These numbers, coupled with the changes in marine coatings’
downstream market, verify the happening of the trend of capacity concentration
in China’s anticorrosion coatings market.
New environmental
protection policies provide
more momentum
In 2015 Chinese coatings producers, es-
pecially those focusing on solvent-based
coatings production, have been dealt with
a head-on blow by a new coatings con-
sumption tax policy released by Ministry
of Finance and the State Administration
of Taxation. Finance Tax (2015):
Notification on Imposing Consumption
Tax on Battery and Coating Products
released in January, 2015 imposes a 4%
tax to coatings manufacturers on the in-
voice price of the coating whose volatile
organic compounds (VOC) level exceeds
420 g/l. According to the notification, the
new tax will be collected by local tax bu-
reaus, and VOC levels will be examined
by provincial quality inspection agencies.
The consumption tax is not the only
regulation which has a big impact to the
coatings producers. Some regulation affects the coatings industry indirectly, if
not directly. But one thing for sure is that
the pressure from the public for the government to address air pollution in major
cities, such as Beijing, has never been seen
before. As a result of this, Beijing has become the first city in China to impose fees
to the manufacturers of furniture, petrochemicals, automobiles and electronics
in Beijing for emitting VOCs, a source
of air pollution. The new regulation has
been put into effective since October 1st,
2015 in Beijing. It says the polluters will
be charged 10 yuan per kg of discharged
gas if their VOC emissions do not exceed
50 percent of the city’s limit, and will be
charged 20 yuan per kg if the companies
whose emissions are higher than half of
the limit but do not exceed the standards.
Polluters whose VOCs emissions pass the
limits will pay 40 yuan per kg. Packaging
and printing as well as production of
coatings and ink are clearly listed among
the 17 industrial categories that are covered by the new regulation.
As more and more provinces and municipal cities release their own policies
about VOC emission, the environmental
protection pressure on the shoulders of
coatings producers can only be seen on
the rise in the near future. Unlike architecture coatings market, in which a big
part of their products are waterborne,
the anticorrosion coatings segment, still
depends on solvent-based varieties for
meeting the demands of many of their
applications. It is predicable that the
anticorrosion coatings producers need
to develop more environment friendly
technologies, put more waterborne varieties into their product portfolio, or
just quit the market if their transition is
not quick enough. CW
“But one thing
for sure is that
the pressure from
the public for
government to
address air pollution
in major cities, such
as Beijing, has never
been seen before.”
