Coatings World - JUNE 2013

Latin American Paint and
Coatings Market Rebounds

by Charles W. Thurston Latin America Correspondent thurstoncw@rodmanmedia.com

The estimated $9.2 billion Latin American market for paint and coatings is in rebound mode, expanding again this year a few percentage points faster than overall economic growth. While growth rates differ among the four largest country markets -- Brazil, Mexico, Argentina and Colombia -- the outlook is strong for each of them. Indeed, the growth of Latin America’s paint and coatings industry has been projected at six percent per year through 2016 by Englewood, Colorado-based IHS, an industry research analyst.

These four countries account for more than two-thirds of regional sales of all segments, according to a late May financial community presentation by Tim Knight, the president of Sherwin-William’s Latin America coatings group, in Cleveland. By country, Brazil accounts for 30 percent of all regional sales, Mexico accounts for 20 percent, Colombia accounts for 11 percent, and Argentina accounts for six percent, he indicated.

From a global perspective, Latin America ex-Mexico accounted for eight percent of worldwide paint and coatings demand in 2012, according to the World Paint & Coatings Industry Association, or WPCIA, in Washington, D.C. Add Mexico to the mix and Latin America is well on the way to consuming 10 percent of global demand.

Not too long ago, Latin America was seen by U.S. paint and coatings companies as an ancillary source of income following domestic sales. Today, the region is of crucial importance as a source of the major players’ global income. AkzoNobel, for example, reports that 11 percent of all revenues in 2012 came from Latin America, which now is of “nearly equal importance to North America for the company’s operations.” Similarly, Latin America is estimated to represent nine percent of Sherwin-Williams $9.5 billion global sales, 13 percent of RPM’s global coatings sales of $4 billion, and 14 percent of DuPont’s global paint and coatings sales of $5.3 billion.

Investments Follow Strong Demand

Global paint and coatings companies continue to make direct investments in Latin America, including acquisitions and new projects. Apart from seeking to serve the expanding market, global companies also are seeking to increase their local content production to meet requirements for domestic added value.

Architectural, automotive and industrial segments of the industry are all poised for growth. But the automotive segment, global in its planning, may be attracting the largest investments among end users of paints and coatings in the industry. Mexico is now the world’s fourth largest exporter of automobiles, shipping

AkzoNobel’s Maua, Sao Paulo State production facility sports popular tones. Source AkzoNobel

2.1 million units last year. And Anfavea, Brazil’s auto industry trade association projects that production will increase from 3. 3 million units in 2012 to 5. 7 million by 2016.

One of the largest recent investments in the region is BASF’s $660 million Acrylic Complex at Camacari, in Bahia State, which is slated for operation by late 2014. The Camacari production will supplant some $200 million in Brazilian chemical imports, and add $100 million in exports, the company calculates. It could also lower the production cost of BASF’s leading Suvinil architectural paint line. “This is the first acrylic complex in Latin America with leading edge technology, and it reconfirms our confidence in Brazil,” said BASF board member Stefan Marcinowiski, in a May interview with Tribuna da Bahia. BASF reported $8.4 billion in group sales in Latin America during 2012.

Among other recent investments in the region, Evonik Industries, based in Essen, Germany, is planning a new precipitated silica plant in Brazil that will come on line next year to supply the paint and coatings industry among others, with an “investment level in the middle double-digit million-euro range.”

Emphasis on Building a Local Presence

Many paint and coatings manufacturers follow their clients into Latin America as an initial beach-head into the market, then form joint ventures with local partners, only to later buy them out. Valspar, for example, began serving John Deere in Latin America since 2007, and over the past decade has acquired 100 percent of joint ventures it had formed Brazil and Mexico.

Then two years ago, Valspar moved into acquisitions, purchasing Brazil’s Isocoat Tintas e Vernizes Ltda., based in Araçariguama, in São Paulo State, to further strengthen its Latin American sales of powder, liquid and electro-deposition coatings. “We are not yet in the architectural market in Brazil,” qualified Carlos Campos, the marketing director for the