Global Processing

U.S. protective coatings market sales expected to soar

October 24, 2005

With international environmental bodies imposing new regulations restricting the use of certain coating materials, the specifications of protective coatings has become increasingly complex. Several federal and local regulations monitor the U.S. protective coatings market with specifications of the types of coating materials used for particular applications in order to ensure safer and healthier work conditions.

Although this poses a challenge to the coatings industry, companies are aligning their future strategy toward continuous development and promotion of environment compliant coatings. In order to meet the stringent environment regulations, companies are introducing new solvent-free high solids and waterborne acrylic coatings.

New analysis from Frost & Sullivan (www.chemicals.frost.com), U.S. Protective Coatings Market, reveals that revenue in this market totaled $916.0 million in 2004 and projects to reach $1,127.6 million by 2011.

The demand for protective coatings is heavily dependent on the investment opportunities and economic cycles of end-user application markets. Certain end-user markets such as the pulp and paper, power generation, and petrochemical and chemical processing are witnessing investment slowdowns and budget shortages. Consequently, companies are cutting down maintenance costs as well as placing several new projects on hold.

However, the water and wastewater and pharmaceutical markets are showing remarkable growth and with the economy continuing to strengthen, Frost & Sullivan expects the investment outlook in most application markets to improve. "Broadening the product portfolio to accommodate maximum application segments is important to counter investment variations in a particular application segment," notes Tulsian.

The end-user market, as well as the supplier market has an impact on the fortunes of the U.S. protective coatings market. For instance, escalating crude oil prices has caused a huge price increase for raw materials for coatings, while increasing steel prices has affected packaging costs.

In a price sensitive market, suppliers cannot afford to increase their coating prices, and hence, end up absorbing a major part of the cost hike. This finally results in a declining profit margin for the coating suppliers.

To overcome this challenge of reduced margins, coating suppliers focus on developing innovative coatings that enable a significant decrease in labor and material costs as well as application time. The new coatings expect to reduce the number of coats needed to achieve desired levels of protection. Thus, coating suppliers can charge a small premium on their products while offering overall cost savings to their customers.

Such inventive solutions could also help protective coating suppliers fight off commoditization a trend initiated by the advent of online bidding. Large coating suppliers are finding it difficult to match the prices offered by relatively small suppliers because the former generally tend to sell value-added services as a part of their product package.

Large national and international coating suppliers are adopting various methods to strengthen their market share position. Having local presence is of tremendous advantage while dealing with corporations that have multiple facilities in different locations.

"Strong distribution network is a key to gaining market share in the U.S. protective coatings market," says Tulsian.

Buoyant investment outlook for markets such as pharmaceuticals, water and wastewater, offshore oil and gas, and bridges and highways expects to boost the overall demand for protective coatings.

Future success in this industry lies in working together with facility owners, engineering firms, applicators, and painting contractors. A customer-focused approach along with strong distribution network could be critical for coating suppliers to gain market share.

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company''s industry expertise integrates growth consulting, growth partnership services and corporate management training to identify and develop opportunities.