An Overview of Chinese Coatings Market 2016

By Patrick Chen, Golden Asia Consult Ltd

The Chinese coatings market has entered into a phase of “new normal” state in recent years affected by the slow growth of economy, mild recovery of global market, fluctuation of raw material price, rising costs of production, environment and distribution. According to the China Coatings Industry Association, the total production of coatings reached to 17.2 metric tons in 2015 up by 4.2% over 2014, comparing with 16.4% per year in average during 2007-2012. In January-October 2016, the production of coatings reached to 14 million metric tons, an increase of 7.2% comparing with the same period in 2015.
Architectural coatings remained the largest coatings product types in terms of production volume, followed by protective coatings, automotive coatings, furniture coatings, powder coatings, coil coatings and other coatings. The share of architectural coatings decreased affected by government’s limitation on property purchasing and slumping real estate since 2011. The housing construction completion started to recover in H1 2016 due to the resume of postponed projects in 2015 and increases of housing refurbishment and infrastructure upgrading projects, making the market of architectural coatings to grow in 2016.  
Protective coatings, as the second largest coatings product type followed architectural coatings in China, has been experienced a rapid growth with the development of construction, transportation, petrochemical, power generation, marine engineering and other industries for the last decades. New energy and railways are possibly two rapid growing areas for protective coatings. In 2015, the new construction of nuclear, wind and solar power plants have grown at 27.2%, 15.8% and 64.4% respectively, and there will be 6-8 nuclear power plants built each year from 2016 till 2021. China has experienced a dramatic growth of construction of railways during 2013-2015, especially the construction of high speed rails. The total length of high speed rails has reached to 19 000 km in 2015 and the construction will continue to grow at 13.5% during 2016-2017. In addition, the construction of underground rails increased strongly in 2016 with more construction projects happened in Sanya, Chengdu, Shenzhen, Xuzhou, Huhhot, Foshan, Dongguan, Chongqing, Ningbo, Guangzhou and Beijing. These would continue to boost the demands for protective coatings in China in 2016 and years forwarded.
The production of furniture remained stagnated after 2010 due to the rising labour costs, shifting of production to South East Asia, slumping domestic demands and slow recovery of overseas demands. The wood furniture production remained stable in January–October 2016, making the demands for wood coatings continued to be weak. The parquet markets have been saturated for years, and joinery and outdoor structure markets are still small despite outdoor structure segment showed a rapid growth in the last two years.
Automotive coatings market achieved a healthy growth in 2016 due to the strong recovery of passenger cars production driven by the increasing demands for large cars such as SUV and MPV and smaller cars under the government’s favorable policies on purchasing tax for small cars. The main automotive OEM coatings manufacturers continued to expand their production to serve the Chinese automotive market, ie. PPG set up a new e-coating production facility in Zhangjiagang, Nippon Coatings set up a 20 000 t/a auto coatings factory in Chongqing, and Kansai is to set up a 180 000 t/a water based auto coating factory in Changsha. The vehicle ownership also increased rapidly in 2016. According to the statistics of Chinese Transportation Administration, the automotive ownership reached to 194 million vehicles by the end of 2016, of which the ownership of passenger cars was 146 million vehicles, at 17.7% over 2015, representing a rapid demand for automotive refinishes.  
The slumping ship building and repairing industry global affected the demands and production of marine coatings in China. In 2016, the global shipping industry continued to decline, making many Chinese ship building companies bankrupted or closing down, such as Wuzhou Shipyard. These led to the marine coatings market continue down in 2016.
The main technology is still solvent based coatings in China, however, the water borne, radiation curing, and powder coatings continued to grow quickly with the increasing environmental concerns and legislative pressures. The launch of VOC tax on solvent coatingss and Law on Prevention against Air Pollution largely restraint the production and demands for solvent based coatings for the last two years. Beijing government launched Emission Standard of Air Pollutants for Wood Furniture Manufacturing Industry, forcing many wood furniture manufacturers to stop using solvent coatings or relocate their production out of Beijing. The main coatings manufacturers, such as Huarun, Carpoly, Chenyang, etc., launched more water based coatings, making the share of water borne coatings improved from the previous 5% to about 8-10% of the total wood coatings production in 2016.
In 2016, the competitive landscape of Chinese coatings market is dynamic. There are over 15 000 coatings manufacturers in China, most of these are small firms, which have to be closed down when they cannot afford the high environmental costs pressure. However, large companies continue to grow quickly through merging and acquisition. In September 2016, BASF announced to complete the acquisition of Guangdong Yinfan Chemical Co., Ltd. and took over its automotive refinishes business. RPM announced that their subsidiary Carboline has acquired the rest 51% of its joint venture Dalian Carboline Coatings Co., Ltd., an anti-corrosive coatings manufacturer, making it 100% owned subsidiary of RPM. Nippon Coatings has grown quickly in recent years by aggressive acquisition of Chinese coatings manufactures such as Guangzhou Super Coatings (2013), Opel Coatings/Dulux Camel (2014). In 2016, Nippon Coatings announced to acquire Chang Run Fa Coatings to reinforce its position in industrial wood coating market in China. AkzoNobel opened its new office in Chengdu in 2014 and a new powder coating and decoration coating plant in Chengdu, Sichuan province in January 2017, facilitating its business in western China.