Industry reshuffling continues in China with slower growth ahead.

China just announced recently that its GDP growth for 2019 is estimated to be 6.1 percent.

Although the domestic economy has slowed down growth, it is still positive compared with many other countries in the world and most coatings companies had a relatively comfortable year in 2019.

One reason is that raw material cost became lower and gross margin for end products was not lower in 2019.

The other reason is that the size of the local coatings market has not changed much and fewer coatings companies are left for competition in the market.

According to a report released by China National Coatings Industry Association, total coatings output in the first 10 months of 2019 was 20 million tons, an increase of 2.5 percent over the same period in 2018.

Meanwhile, profit increased by 5.6 percent for the first 10 months, compared to -7.1 percent during the same period of 2018.

Due to the implementation of stricter environmental regulations, it is estimated that the market had fewer than 13,000 coatings companies by the end of 2019 and the number will be shrinking further in the next three years.

Although the real estate property market is highly regulated by the central government recently, the domestic coatings market still received strong sales from this segment.

In 2019, Jiangsu Canlon’s total profit was estimated to grow 80-110 percent compared to 2018.

The reason reported by the companies includes sales increase for major businesses and business expansion.

Canlon was listed on the stock market in 2017 as the first domestic waterproofing materials and coatings company.

Nippon Paint (Henan) Co., Ltd held its opening ceremony on November 30.

This is the fifth plant opened by Nippon Paint in 2019 alone, meaning Nippon Paint’s strategy is to quickly increase its footprint throughout China, especially in the west and inland areas.

Other large architecture coatings companies are also investing heavily to increase their presence in remote areas and west regions deemed to have more potential in China.

When market competition changes to the economy of scales and product quality, large companies will further reduce market space for small companies, reducing the number of coatings companies in the market in the next three years. 

Renovation

The architecture market’s profit is in retail, but volume comes from wholesale.

Second-hand house sales were 26.7 percent of total new house sales.

Metropolitan cities including Shanghai, Beijing and Shenzhen have already been the market of stocked houses, and the sales of second-hand houses for close to 20 cities surpassed their sales of new houses.

The growth of coatings for home renovation is around 12 percent, which is much faster than that of other segments in the architecture coatings.

Large companies, including Nippon Paint and AkzoNobel have allocated resources to target this market segment which offers good potential.

Inorganic coatings are a new development area over the last two years due to better fire resistance.

To grab the opportunities in this market segment, many coatings companies launched their inorganic varieties. In addition, liquid granite coatings, waterborne multi-color coatings, reflective thermal insulating coatings, etc. are gaining more attention. 

Automotive Coatings Market

OEM coatings companies are under heavy pressure due to the soft passenger car market as a whole.

But the refinish market still offers good potential. BASF announced in December 2019 that it has begun an expansion project in Jiangmen, Guangdong province, doubling the automotive refinish coatings capacity of its Jiangmen plant, and the project will be completed in 2022.

BASF acquired a local company in 2016, and since then BASF has been investing capital into this site to increase R&D, quality and HSE.

Luxury car sales increased faster in 2019. Based on a report, the luxury car market share reached 10.8 percent in the first 11 months of 2019, compared to 8.85 percent during the same period of last year.

Sales of luxury cars reached 2 million units, increased by 11.5 percent over last year.

On the contrary, the whole passenger car market dropped eight percent in the same period.

Powder Coatings Market

Both foreign companies and domestic companies believe the powder coatings market will grow in the future, a theory proved by multiple investment projects in 2019.
Tiger Coatings is building its second phase in Taicang, Jiangsu province with a total investment of 150 million yuan.

When put into operation in June 2020, this project will have a capacity of over 35 thousand tons.

Tiger also has an ambitious business plan for China. In the next 10 years, the company wants to increase its sales to more than 3 billion yuan.

Domestic companies are investing actively in the powder coatings area.

Huang Guang Powder has six powder coatings manufacturing bases in China, and the company’s total sales for 2019 are estimated to increase by seven percent.

The company has started its market expansion plan and will build production bases in western China.

Besides powder coatings, UV coatings and waterborne coatings are also enjoying faster growth in China than the overall coatings market.

While sustainability and environment protection awareness increases, consumers are demanding more from coatings products they plan to purchase, including environmentally friendly, high quality and eye appealing. The companies who do not respond or are slower to respond will lag behind.