New Product Development-Key to Success of Pigment Producers

JCT Coatingstech Magazine

October 2007

Volume 4, No. 10

Market Update

Page 40-45

Excerpts from… “New Product Development Key to Success of Pigment Producers”

By Cynthia Challener, JCT Coatingstech Contributing Writer

In 2006, the global sales volume of pigments used in pains and coatings was estimated to be 2.59 million metric tones, valued at just over $9.2 billion, according to Dan Murad, president and CEO of the ChemQuest Group, a consulting firm located in Cincinnati, OH. White pigments, which experienced a decline in dollar value in 2006 compared to 2005, accounted for the largest volume of sales by far at 83%, but only half of the total dollars. Colored inorganic pigments were the second largest pigment type of volume (13.3%) and represented 10% of sales in dollars. Colored organic pigments, which made up only 3.1% of the sales volume, accounted for over 39% of the dollar value. Geographically, the Americas and Europe together represented three quarters of the 2006 sales volume.

…Some of the economic trends occurring in the marketplace are creating a challenging situation for pigment manufacturers. “Products from emerging markets are establishing very low price ceilings for pigments in mature markets. These products today do not meet quality standards, but they will eventually,” Murad states. “At the same time, raw material prices, along with healthcare, personnel, and administrative costs, are rising. This combination is squeezing margins.”

…Energy prices will keep climbing as well. Some are predicting the cost of oil will reach $100 per barrel as soon as the second half of 2008. “Pigment manufacturers, particularly those located in and serving the U.S. market, are going through a troubling period when all of these factors are considered together,” remarks Murad.

…Activities by the Chinese government will likely have an impact on the pigment market, but to what degree is yet to be determined. “The Chinese government’s reduction of VAT rebates, which took place in July, is already affecting both raw materials and pigment products being exported from the country,” says George Pilcher, a vice president with ChemQuest. Price increases ranging from 7% to more than 10% are being reported. “At this early stage it is difficult to predict what the long-term effects will be on the global pigment market, and n regional markets, too, but there will be some level of impact.”

…Counteracting these economic trends are positive social drivers and opportunities for advanced technologies that help solve customer problems. “Color today has a much higher influence in styling decisions that it ever did in the past,” asserts Murad. “It provides a significant form of differentiation in this challenging market environment, and this differentiation can be leveraged by the pigment producer, paint formulator, and down stream customer as well.”

…On the technology front, development of stir-in pigments and pigments that are more easily dispersible is a major growth area. For paint companies, the cost of grinding pigments before they can be incorporated into the formulation is significant. The process also results in variations in color concentration from batch to batch. “There is a real opportunity for pigment manufacturers to increase their margins by offering technology that can have a direct impact on the bottom line of their customers,” says Rick Jones, a vice president with The ChemQuest Group. “Paint manufacturers can save significant money with improved dispersant technology and will likely be willing to share some of those savings with their pigment supplier by paying a higher price for the greater value and service they receive.”

The trend toward increasing the multi-functionality of paint and coatings products also provides potential areas for growth in the pigment market. “Pigments are no exception to this trend,” comments Jones. He lists as examples heat (infrared) and solar reflectivity, EMI shielding, photocatalytic compounds for self-cleaning, and corrosion protection as examples of the additional properties pigments can bring to coating formulations. “This aspect of pigment technology is a wide open field and offers plenty of opportunity for pigment manufacturers to differentiate themselves and provide real solutions to their customers,” Jones adds.

(To read the complete article…and more comments on NEW PRODUCT DEVELOPMENT Key to Success of Pigment Producers………see JCT Coatingstech Magazine – October 2007 issue...Market Update)