Europe
compared with average growth of less
than 1 percent over the last two years.
Of the other major EU economies, the
UK has one of the fastest growth rates
with GDP expected to expand by 2.6
percent this year. In Spain, which was
in recession until last year, GDP growth
is expected to reach 2.8 percent, mainly
pushed by domestic demand.
Output of chemicals, including coat-
ings and other specialty chemicals, rose
by only 0.2 percent in the first half of this
year, according to the European Chemical
Industry Council (Cefic), Brussels, in its
Chemical Trends Report issued in August.
But it is nonetheless sticking to its fore-
cast earlier in the year of an overall 1.5
percent rise in production this year, in the
expectation of a stronger rise in demand
in the second half,
The Cefic report shows production
of paints, varnishes, coatings and inks
shrinking by 1.5 percent in the first quar-
ter of 2015 but in the second quarter it
bounced back with marginal growth.
There was a 4.7-percent surge in June
in the output of specialty chemicals, according to Cefic. This big rise in output
of chemicals, a large proportion of which
go into the coatings sector, could be reflected in a higher production of coatings
in the next few months.
A large proportion of this increased
production could consist of decorative
paints. Demand for architectural coatings
has been bolstered by a revival across
much of Europe in the region’s construction sector, which has been in the doldrums for the last several years.
After plunging to a low of a six-percent
decrease three years ago, construction
output in Europe will rise by 1.9 percent
this year and then average around 2.5
percent annually over the next two years,
according to a mid-2015 forecast by
Euroconstruct, a Vienna-based business
research group.
Residential construction will rise by
two percent annually across Europe
through to 2017, while in Eastern
Europe, outside Russia and its neighbors, it will average over four percent,
said Euroconstruct.
Revenues from residential construc-
tion in Germany are expected to go up
by three percent this year, according to
the country’s two main construction in-
dustry associations.
“Much of the impetus has been com-
ing from new residential buildings,”
explained Michael Bross, spokesper-
son for the German coating industry
association (VdL). “Decorative paint
sales gain the most when there is also
an increase in home renovations. One
third of decorative sales come from new
construction, while the rest comes from
renovation expenditure.”
In the UK work on new housing has
returned to levels similar to those before
the 2008 crisis but expenditure on re-
pairs and maintenance has remained flat
or even declined. While work on private
new housing increased by 3. 9 percent in
the second quarter of this year, repair and
maintenance went down by 1.2 percent.
“Growth in new construction output
in the second quarter helped boost deco-
rative trade paint sales to a new high,”
said a spokesman for the British Coatings
Federation (BCF). “But the hard pressed
retail paint sector continued to struggle.
For the trade paints market, sales (vol-
ume) increased by four percent in the
quarter and is now up by 5. 5 percent so
far this year.”
A prolonged slump in the housing sec-
tor seems to be ending in Spain with a
sudden spurt in new housing builds in
early 2015 and the likelihood that by
the end of the year housing starts will
exceed housing completions for the first
time since 2007. However, although the
number of excess homes on the Spanish
market has fallen by around 40 percent
in the last five years, there are still
around 400,000 unsold properties on the
Spanish market.
In addition to the reinvigorated construction market, automobiles is another
sector which has been boosted by the rise
in consumer expenditure. In the first half
of the year automobile sales soared by 8.2
percent with 28 out of the biggest brands
on the European market increasing sales,
10 in double-digit figures, according to
data from the European Automobile
Manufacturers’ Association (ACEA).
In Germany, Europe’s largest car market and producer, revenue in the first half
reached a level almost 50 percent higher
than five years ago, bringing sales levels
back to the pre-2008 levels.
BASF Coatings, predominantly a producer of automotive coatings with a large
proportion of sales its domestic German
market and in the rest of Europe, reported a nine percent sales increase in the first
half of the year.
With the global economy possibly
about to go through a turbulent period,
the European coatings sector will be high-
ly dependant consumer-centred demand
in its home market in the short term.
For some larger players this reliance
is too risky so they are protecting them-
selves with low-cost strategies based on
streamlined production and logistics.
At Tikkurila of Finland, which is grap-
pling with sharp downturn in consumer
sales in recession-hit Russia, one of its
main market, Errki Jaervinen, president
and chief executive, says the company
has to find “new, more effective and more
flexible operating methods as well as im-
plementing strict cost management.”
AkzoNobel, where sales dropped one
percent in the first half of this year in its
main decorative paints market of Europe,
Middle East and Africa (EMEA), has
been applying what it calls a new operat-
ing model in the EMEA decorative area.
This results in fewer management layers,
reduced production costs with centralised
plants, restructuring of marketing and
sales and outsourcing of some adminis-
trative activities.
The European coatings market is ma-
ture but still fickle. Even a period of more
robust growth might not last long. CW
“One third of
decorative sales
come from new
construction, while
the rest comes from
renovation.”
