Coatings: 10% Profit Growth in 2015

By China National Coatings Industry Association

The number of domestic coatings enterprises with annual sales of RMB20 million or above, reached 2 026 in 2015, and they posted main-business revenue of RMB418.48 billion, up 7.3% YoY. In spite of a collapse in raw material prices, coating profits rose 10% YoY to RMB30.85 billion.
Output was up from 5.08 million tons in 2006 to 17.18 million tons in 2015, but annual growth slowed down from 32.7% to 4.2% during the same period.
Domestic coating prices were up in 2015, averaging RMB24 400/t, mainly because: 1) Raw material prices had remained low for a long time, especially prices of acrylic monomer and titanium dioxide, while coating prices were less impacted by declining prices of crude oil and natural gas; 2) Small firms could hardly survive, due to higher costs of environmental protection, energy consumption and labor, and therefore large enterprises took over the market, dominating pricing and profits in the whole coatings industry.
China has been adopting ever-stricter measures to protect the environment, and requiring enterprises that adversely affect the environment to relocate, pressuring many consumers of coatings, like makers of vehicles, furniture and steel structures, and lowering coating output by 5.2% in Beijing, by 18.2% in Tianjin, by 14.3% in Hebei, and by 4% in Guangdong. Enterprises in Liaoning, Anhui and Hubei also cut coating production, considering weak demand, high costs of raw materials and fierce competition with foreign corporations. In contrast, producers from Shanghai, Jiangsu and Zhejiang enjoyed advantages in raw materials, talents, technologies, logistics and capital, raising coatings output in 2015 by 2.2%, 4.8% and 3.5%, respectively.
Foreign trade for the domestic coatings industry was up 5.7% YoY to US$1.87 billion in 2015. Coatings imports reached 176 000 tons, up 4.7% YoY, valued at US$1 billion, up 5.3% YoY. Coatings exports were up 6.2% YoY to 209 000 tons, worth US$770 million, up 7.4% YoY.
In spite of stronger competitiveness and more overseas business, only a small part of the nation’s coating output was exported, around 1.2%. Currently, further developing China’s global market share and attracting more technical talent are fundamental to expanding coatings export.
One of the most-imported and most-exported classes of coating products in 2015 was “other kinds of paints and varnish solutions, soluble in non-aqueous media” (HS code: 32089090), with import volume reaching 37 000 tons and export volume reaching 70 000 tons. Import volume of “polyester paints and varnishes soluble in non-aqueous media” (HS code: 32081000) was 28 000 tons, up 4.3% YoY after falling in both 2013 and 2014, and the export volume was 46 000 tons. “Polyurethane compounds paints and varnishes soluble in non-aqueous media” (HS code: 32089010) saw an 18.7% YoY decrease in import volume in 2015, versus a jump of 39.9% in 2014. The export volume of “polyacrylic acid paints and varnishes soluble in aqueous media” (HS code: 32091000) was down 21.9% YoY in 2015, but it saw peak growth of 23.7% in 2014. “Polyethylene paints and varnishes soluble in non-aqueous media” (HS code: 32082020) was the fastest growing export category of 2015, increasing 69.37% in volume.
The import volume of iron oxide and hydroxide (HS code: 28211000) was 202 000 tons in 2015, down 13% YoY, valued at US$110 million, down 6.1% YoY; export volume was down 6.4% YoY to 300 000 tons, with export value down 4.4% YoY to US$330 million. “Pigments and preparations based on chromium compounds” (HS code: 32062000) suffered a 7% YoY decrease in import volume to 1 286 tons, and a 9.1% YoY decrease in export volume to 6 962 tons (export value, down 4.7% YoY to US$23.46 million). Export trade of zinc oxide (HS code: 28170010) grew in both volume and value, up 8.3% YoY and 14.4% YoY, respectively. Import volume of titanium dioxide (HS code: 32061110) was 204 000 tons, down 5.6% YoY, valued at US$510 million, down 12.9% YoY; export volume was down 2.5% YoY to 5.54 million tons, with the value down 14.9% YoY to US$960 million.
China’s coatings output is forecast to be up 5% YoY in 2016, reaching about 18 million tons, according to the China National Coatings Industry Association.