Results of Paint Contractor/U.S. Architectural Coatings Industry Research Report
Which Compared Business Trends in 2Q16 vs. 2Q15
Each quarter, Northcoast Research surveys a large sample of
paint contractors to get a sense for current business trends while
Specialty Chemical Sales provides insight into coatings raw material trends. Please note that of the three primary architectural
paint channels (paint stores, home centers, and independent
distributors), the contractor survey results are largely a proxy for
the paint store channel. For inquiries regarding the results of the
survey please contact Kevin Hocevar at 216-468-6924 or kevin.
hocevar@northcoastresearch.com. For inquiries regarding raw
materials please contact Dave Kotowski at 216-577-1982 or
dkotowski@specialtychemicalsales.com.
Contractor Sales — Positive Trends Continue in 2Q16
The cumulative responses to the question of “How do your
sales in April, May and thus far through June of 2016 compare
to your sales during the same time period last year”, show that
the market appears to have grown solidly from the prior year, as
was the case in 1Q16. 68% of contractors experienced a higher
level of sales thus far in 2Q16 compared to 2Q15. A mere 16%
of contractors described their sales as “Flat”, while 16% experienced a year-over-year sales decline in the period. These metrics
produce a net increase (percent of contacts who experienced
higher sales in the period minus the percent of contact who experienced lower) of 52%, which we believe is highly encouraging
for the industry and indicative of the paint season being off to a
good start. Sales for contractors thus far in 2Q16 have grown at
an average of 6%.
Price of Paint from Suppliers — 2Q16 Paint Prices Remain
Flat
In order to get a gauge for the pricing environment surround-
ing the paint contractors, we asked a few questions related to
said topic. At 86%, most contractors have not received any news
of a price increase from their suppliers. This is in-line with our
expectations, as we also have not heard of price increases from
any manufacturer contacts. As you can see, contractor expecta-
tions for any sort of price increase are very low. Only 11% have
received notice of a price increase and expect it to stick for the
full amount, while 3% expect the increase they received to stick
for “Less than the Full Amount”. While pricing may be imple-
mented in some small regional areas, we do not believe pricing
is much different industry wide than it was in 2015.
Raw Materials Pricing and Supply Update
Tio2 has had a significant upward bounce off an inflation adjusted historic low price in early 2016. Chinese producers have
pushed the envelope and garnered up to a $300mt cumulative
increase during the first half of 2016. A couple of the major
chloride producers have struggled to meet delivery dates during 2Q16. Most domestic consumers have received increases
exceeding $.10lbs. Ore suppliers have jumped on the price increase bandwagon, raising this key Tio2 raw material from $75-
85mt to $120-130mt during 2Q16. I am betting there are more
increases coming on our cherished white pigment. As I write
this article, crude oil is up off its low of $29 per barrel to $49 per
barrel. This 69% increase will be reflected in much higher prices
on hydrocarbon solvents, paraffinic oils, naphthenic oils and
other direct and indirect downstream raw materials based on
crude oil. Diatomaceous earth supply issues have hit our radar.
This key low cost matting pigment is primarily used in architectural coatings. The two key domestic suppliers have extended
lead times and are struggling to keep up with demand. Other
mined minerals are tight as well due to strong seasonal demand
exceeding short term capacity.
3-Month Outlook — Outlooks Remain Solid So Far in 2016
At 78%, the vast majority of contractors believe that business
trends are improving/will improve over the coming months.
Again, it goes without saying that this is encouraging as we
head into the back half of the paint season. At 17%, the next
most common response was neutral, or that business trends will
stay about the same. We do not view a “Neutral” response as
necessarily a bad thing, as the survey average sales growth in
the quarter as mentioned above is 6% which represents solid
growth. Only 5% of contractors have a negative outlook and
expect business trends to decline. In asking this question, we
attempt to gauge actual expectations for the coming months
based on how business has been trending as of late and based
on leading indicators such as contractor backlogs, bidding activity, and any other relevant factors.
Y/Y Net Sales Increase Average Sales Increase Who Received Price
Net Positive
Outlook
West 45% 6% 14% 82%
South 67% 8% 8% 83%
Midwest 57% 5% 19% 76%
