The Chinese Economy – Impact on the Chinese Coating Market
October 2016 www.coatingsworld.com Coatings World | 55
type entity. As such the coatings industry has no major local leader and is so
fragmented that no one is happy. China’s
coating industry is ripe for a major consolidation of participants.
Given the apparent slowdown of
the Chinese economy it may be possible to “reform” the coatings industry.
Commencing in 2015 we have witnessed
severe headwinds in virtually every area
of the coatings market. The Chinese government has decreed that they will deal
a heavy hand in combating over capacity
and non-sustainable businesses. The coating industry is well positioned for such
an undertaking. If there is a consolidation within the Chinese coating industry
this will be a win/win for producers and
customers. Such a consolidation should
give rise to a greater investment in R&D
by local producers. At the moment, local
R&D efforts by other than multinational
participants are essentially nonexistent.
Obviously, you can’t ignore the
Chinese coating market. Some estimate
has the total coatings market at 7.1 mil-
lion tons valued at USD$137 billion with
ink production at 500,000 tons. It’s im-
portant to note that although there has
been significant growth in waterborne
systems the majority of paint production
remains solvent-based. In total it repre-
sents the world’s second largest coating
market. As I mentioned, even today this
market is dominated by solvent-based
systems. In recent years there has been
a marked increase in the switch to water
based systems both in the architectural
and industrial coating segments. The
move by Chinese authorities to reduce air
pollution has been one of the major rea-
sons for such a switch.
As mentioned elsewhere in this report,
China is now the leading global pro-
ducer of automobiles. The 2016 value
of the coatings used in the OEM auto-
motive market is estimated to be about
USD$ 1.44 billion. Future growth rates
are variable but most experts believe it
will exceed 7%/annum. Of course, that
growth rate depends on the overall health
of the Chinese Economy.
China will most likely continue its
infrastructure spending spree. As such,
China’s market for anti-corrosive coatings
(ACC) for marine, container, bridge and
oil platform application will continue to
exhibit robust growth in the face of weak-
ened economic activity. Application areas
in this market include bridges, containers,
drums, maritime anti-corrosion, etc.
With a growing housing market, an expanding automotive production forecast
and continued infrastructure spending
you would think that China offers a genuine growth option. Unfortunately, this
isn’t that type of market. There are many
competitors and the market isn’t well developed. Additionally, for non-multina-tionals there is genuine concerns about
raw material availability, paint quality,
paint specifications and routes to market
are confronted with formidable obstacles.
The Chinese coatings market is presents
many challenges to those that wish to
participate. It will take enormous commitment, resolve and patience to build
success. There are no quick wins in the
Chinese coatings market. However, the
long-term gain from investing in China
more than justifies the sacrifice demanded
in order to achieve success. Given the recent slowdown of the Chinese economy
and the likely pressure from the central
government to cut back on overcapacity
and seriously look at the long term sustainability of various companies it may
be possible for a new entrant to acquire
success by mounting an aggressive acquisition strategy. However, if this is your
chosen route to market I encourage you
to focus on quality, not quantity in your
pursuit of possible candidates. CW
“Although there is a lot of uncertaintly about the Chinese
economy, there have been some recent bright spots. China’s
factory output & retails sales grew faster than expected in August
as a strong housing market & government infrastructure spending
spree underpinned growth in one the world’s largest economies.”
