JCT Coatingstech Magazine

November / December 2006

Volume 3, No. 11

Market Update

Page 28-32

Excerpts from… “Paint and Coatings: What Will Be Coloring the Market in 2007?”

By Cynthia Challener, JCT Coatingstech Contributing Writer

Raw Material and Energy Costs

JCT: Do you expect the recent trend of higher oil and petrochemical prices to continue in the New Year? Or will moderating prices hold firm? Will the paint and coatings supply chain be able to recover higher costs in 2007?

Dan Murad, The ChemQuest Group: “I expect raw material prices to moderate for 2007. Ethylene (impacting vinyl acetate), propylene, and natural gas (impacting acrylics) are loosening with the exception of occasional spot supply interruptions due to maintenance issues. Natural gas prices are down to the $4 range. TiO₂ inventories are building with the effects of Rita and Katrina behind us. As one consequence, the industry should be able to achieve good margins in 2007 as it is approaching the back end of the cycle where raw materials are going down. Overall, coatings producers should be able to recover some lost margins. They are currently still behind by 5-8% in their gross margins.

Not surprisingly, there will be continued heavy emphasis on improving efficiencies. After regulations, this trend is the second largest driver in the paint industry. The biggest impact felt would be in cutting the cost of pigment grinding, which is approximately 35% of the cost of manufacturing and tends to be the second highest cost component after raw materials.”

(To read the complete article…and more comments on GLOBALIZATION; CONSOLIDATION; LOW COST COMPETITION; INCREASING REGULATORY REQUIREMENTS; TECHNOLOGY DEVELOPMENTS; PRODUCT INNOVATION; AND POSITIVE FACTORS………see JCT Coatingstech Magazine – November / December 2006 issue...”Paint and Coatings: What Will Be Coloring the Market in 2007?”)