Powder coatings market: mixed performance

Everyone in the powder coatings market seems to agree: 2022 can be looked upon as a transition year, among the slowdown due to the pandemic in the previous years, a possible economic recession in sight for the following ones, and a year 2023 in which the coatings industry’s performance is appearing to be very mixed.

In 2022, according to Precedence Research’s data, the global powder coatings market size was around EUR 13.54 billion. It is projected to reach over EUR 23.4 billion by 2032, with a compound annual growth rate (CAGR) of 5.62 % from 2023 to 2032 – although, as ChemQuest Powder Coating Research director Kevin Biller warned, “we need to keep in mind that powder coatings have been a commercial reality since the 1970s and are therefore undeniably a ‘mature’ technology. Hence high CAGR is not a practical reality.”

In terms of market segmentation, Pietro Bucci, president of Anver (the Italian Industrial Coating Association) emphasised that there was uniformity in both positive and negative trends, which have now become truly global and cross-sectoral. However, it can still be said that by application, the consumer goods segment generated revenue share of around 28.6 % in 2022; it was followed by the automotive and the architectural segments. By technology, the polyester resin segment accounted for more than 30 % of the revenue share in 2022. By region, Asia-Pacific dominated the market with a revenue share of over 40.5 % in 2022; the fastest growing market was North America, according to Precedence Research.

The response of companies

According to Kevin Biller, companies have been coping with this transition year with technical advancements, for instance to advance low temperature cure powder coatings and meet the new demands from the electric vehicles market, and with major investments in expansion. For instance, this was the path followed by PPG, now focussing heavily on powders. Gianfranco Corvi, Market Manager Italy & Iberica at PPG, confirmed: “We recently acquired several powder coating manufacturers to expand our powder production capabilities and global reach. Other significant investments are already planned for the near future to strengthen our presence on this market and express PPG’s commitment to powder coatings. Household appliances and heavy-duty equipment remain our main target sectors, but we are focussing more and more on the general industry and contracting fields as well.”

SMEs, on the other hand, are adopting different strategies, often focussing on special niches in terms of technology, end-user segment, or market approach. An example is Italian brand AZ Powder Coatings, which decided to carve out for itself the niche of tailor-made small batches manufactured with a very short lead-time: “Big players are not interested in this niche and would have a hard time to serve it with the required flexibility. That is where we come into play.”

2023: The forecasts

With the well-known supply chain issues, natural gas prices-related issues, potential natural disasters, and geopolitical instability, many experts predicted a recession in 2023. They mainly blamed a reduction in consumer confidence and a corresponding cut in spending, which are also related to the durable goods markets mainly served by the powder coating industry. According to the Industry Pulse report recently published by the American Coatings Association in conjunction with Decision Metrics, the durable goods output is going to decline by 4.1 % year-over-year versus 2022. This will translate into -2.1 % for OEM coatings compared to 2022. Corvi from PPG also added soft demand and stiff competition to the list of market challenges.

As Biller from ChemQuest Powder Coating Research suggested, another key indicator for powder coating consumption are housing starts – and the outlook for housing starts in 2023 is not very encouraging. Realtor.com predicted a decline of 5.4 % for single household starts in 2023 along with a whopping 22.8 % increase in existing home inventories.

In terms of forecasts by region, Biller pinpointed another key trend that may gain momentum: the de-coupling with China. “Supply chain woes exacerbated by a large expanse of water (the Pacific Ocean) and potential political unrest are compelling US and European manufacturers to re-shore and near-shore operations. We expect to see a surge in manufacturing investment in places like Mexico and Canada for the US and Turkey and Eastern Europe for EU countries.”

2023: the reality so far

However, such a projected economic recession seems to have not materialised. Kevin Biller emphasised: “Fast forward to Q3 2023, and the recent financial reports from the top coatings producers tend to paint (pun intended) a different picture. Looking at the second quarter/first half, financial performance of seven of the top ten global coating producers indicate business has been rather healthy.”

Several manufacturers are indeed reporting increased sales or income-related figures, despite some experts urging caution. Powder coating consultant Massimo Marchesini, for example, said: “The fact financial statements are positive means that the powder coating market’s performance remains good. However, companies’ turnovers are growing strong, but profits not so much.” Moreover, the specialty chemical producers that supply the coatings industry tell a different story. BASF, Evonik, Wacker, and many other manufacturers are reporting declining sales volumes due to a lack of an economic recovery and a persistently difficult market environment.

Biller noted that a common thread permeating their financial reports are higher pricing and lower variable costs. These variable expenses are typically dominated by the cost of raw materials. “Apparently, the chemical suppliers (resins, additives, pigments, etc.) are bearing the brunt with a rarely seen raw material price deflation. This usually happens the other way around: raw material suppliers hike their prices, and the coatings producers hesitate increasing prices to remain competitive. Now, it seems that the raw material suppliers, despite consolidation and plant closures, are reducing prices.” Biller, nevertheless, expects the specialty chemical producers to rebound in the next couple quarters. In general, he predicts the industry to stabilise and continue to prosper, although the impact on global commerce and supply chains of the Israel-Hamas war that broke out in October 2023 is yet to be experienced. Bucci from Anver shared the same optimistic approach: “In 2022 and in the first half of 2023, the number of orders received by companies skyrocketed. Now, we are witnessing a physiological decrease. The market, however, does not appear to be worried about this. Recovery is expected to start already in Q1 2024.”

Reading tip

Interested in powder coatings? The third, revised edition of Powder Coatings – Chemistry and Technology by Emmanouil Spyrou offers all about powder coatings in one book – from the current market situation and REACH to the various types of powder coatings, raw materials, parameters affecting the properties of powder coatings, production technologies and application technologies.