China

capacity in China was over 3 million tons per year in August 2015. Wanhua Chemical, the largest MDI producer in China, generated a net profit of 1.4 billion RMB (about $220 million) in the first half of 2015, 27. 5 percent lower than the same period of 2014. The prices of most raw materials for polyurethane production have been experiencing a downward spiral since the second half of 2015.

Niche markets offer
precious growth
opportunities

The soft downstream markets, along with stricter government regulations, pushes polyurethane coatings companies to advance their production technologies, develop and introduce waterborne polyurethane coatings and explore new potential markets to release their existing capacities.

For example, foreseeing the growing demand for high quality and safe materials for sportsground in China, especially when poisonous sports tracks raised public concerns to the health of school students, BASF quickly introduced into China their polyurethane solution. It is a polyurethane system which combines coatings, adhesives and rubber particles together. By targeting the market of outdoor sports tracks and indoor sports floors, BASF cooperates with local companies to standardize their installation services by controlling qualification certifications in order to make sure BASF’s products are delivered with a high quality to the end users.

Facing the same market pressure, do-
mestic coatings producers also speed up
their product upgrading process. And
some of them use the capital market to
help them achieve this objective. A major
coatings and ink supplier for major toy
producers including Mattel, Lego, etc.,
Yonghui Chemical listed their stock in
the national share transfer system since
March 12, 2015. Yonghui Chemical said
the company will use the new raised capi-
tal to enter the children’s wood furniture
and home decoration markets. Although
the toy market in Guangdong province
has been shrinking for several continuous
years, Yonghui’s business has kept grow-
ing. In the first half of 2015 Yonghua’s
sales was increased by 4. 29 percent over
the same the period of 2014. But they are
also clear that the plastic and wood coat-
ings produced by Yonghua are mainly
solvent-based, so the new capital will help
them add new production lines to get into
new market segments and develop more
environmental friendly products.

Waterborne varieties will
take over more market
share

Although developing waterborne coatings is the market trend in China and waterborne PU coatings is taking over their solvent counterparts in more and more applications, waterborne PU coatings are only popular on leather products and solvent-based nitro, PE and PU coatings still control wood furniture market at the moment. Similar to the trend in other downstream markets for polyurethane coatings, China’s wood furniture output was decreased by 1.86 percent from January to October in 2015. As the wood furniture market is getting saturated, the competitiveness of the wood coatings producers depends on the extent of a company’s ability to adapt to fast changing market environment.

In 2015 several international coatings
companies including Nippon Paint and
Dulux of AkzoNobel introduced new wa-
terborne wood coatings into the Chinese
market. Nippon Paint also announced
the establishment of a new business unit
to provide a one stop shop solution,
Besides wood coatings, Axalta, PPG,
AkzoNobel and BASF, also established
new waterborne automotive coatings
production facilities recently to meet new
market demand in China.

Fast growing railway
industry creates a new
battlefield

Following continuous investments in the construction of high speed trains and subways, many companies trying to grab this business opportunity developed and launched their own products to target this new market segment. It is estimated that China will have a total railway length of 18 thousand kilometers which can support the operations of trains with a speed of equal to or over 200 kilometers per hour by 2020, about half of the total high speed railway length worldwide. PU coatings are widely used in the painting of high speed trains, so the total market for PU coatings from high speed train sector is huge. But the competition can only be won by qualified companies. Spray polyurea coatings used to be widely applied in the railway construction as a major waterproofing material. At a time, so many companies got into this category, driving the bidding price very low. Since quality issues were found in several finished railway and subway lines, polyurea waterproofing coatings has been prohibited from China Railway‘s official bidding process in high speed railway construction. This proves that high quality instead of low cost is the key to win market competition. Coatings companies, especially those who are new entrants, need to aim for long term growth instead of short term business interests.CW