Technology Interchange—Report on the Global Powder Coatings Market

By Douglas Bohn

The global powder coatings markets grew at an impressive rate in 2021 as the global economy recovered from the pandemic, the sustainability trend has further increased the conversion of liquid to powder, and more users discovered the benefits of powder coatings. But there were challenges that the market encountered as it relates to raw material availability and pricing.

The challenges we’ve grappled with over the past two years are expected to persist at least through the first half of 2022. In addition, the Russian invasion of Ukraine has further upended the global raw material markets and will likely lead to further supply chain disruptions.

Market Size
The 2021 global powder coatings market is estimated to be $12.2 billion and 2.8 billion kilograms (Figures 1 & 2). The market grew by an estimated 11.8% in volume and 19.6% in value in 2021, fully recovering from the 2020 contraction. All major regions of the world now exceed their 2019 pre-pandemic levels. The global market is now 18% higher in value and 10% higher in volume versus the pre-pandemic 2019 levels.

The 2021 North American powder coatings market is estimated to be $1.39 billion and 164 million kilograms. This is a 14% increase in value and 2.6% increase in volume versus pre-pandemic 2019 values.

Global Raw Material Supply Situation
The biggest issue facing the global coatings market is the supply and pricing of raw materials. On a year-over-year basis, raw material prices were up 35% in Q4 2021 versus Q4 2020. This is for all coatings raw materials, not just those used in powder coatings. For powder coatings, the increases have been higher than the overall coatings market, resulting in significant price increases. By the end of the year, prices for powder coatings were up by an estimated 24% versus year end 2020.

Not only were prices high, but actual availability was a problem as many powder coatings companies were not able to produce product due to lack of raw material availability.

Towards the end of 2021 and the beginning of 2022, the availability situation was starting to improve. Specifically, pricing and supply of some of the base chemical feedstocks were improving. In addition, elevated prices for ethylene and propylene, as well as other basic organic chemical prices, were starting to decline. At the beginning of the year, it was anticipated that these initial price declines would start to work their way through the supply chain and that by the second half of 2022, would have a positive impact on the raw material cost and availability situation. Just as things were starting to look up, Russia invaded Ukraine, resulting in a corresponding price increase of oil and other commodities. The United States Energy Information Agency (EIA) is forecasting that Brent Crude prices will average $116 per barrel in Q2 and $102 per barrel in the second half of 2022. Assuming that these forecasts hold true along with the historical relationship between oil prices and raw material prices, there will be further inflation in the market.

Figure 3 shows the historical correlation between oil prices and coatings raw material prices. Generally, as oil prices rise, raw material prices rise. Prices do not always rise in a 1:1 relationship but they do increase as oil prices increase. Sometimes raw material prices rise faster than the price of oil (like in 2021) or sometimes they do not rise as much (like in 2019 and 2020). But over the medium and long term, coatings raw materials prices track the price of oil. This usually leads to inflation or price increases of the actual coatings.

In addition to the raw material price impact, the conflict will result in lower economic activity both in Europe and globally, resulting in lower powder coatings growth forecasts for the year. In Europe, the European Central Bank is forecasting that the conflict will reduce European GDP growth by 0.5% and the expectation is that GDP growth will be reduced by 0.25% in other regions. GDP is still expected to grow this year, but it will not grow at the previously forecasted rate. Globally, we expect the powder coatings market to grow at a 4.5% volume and 14.4% value rate this year. As Figure 4 indicates, Asia will be the fastest growing region.

Growth Markets and Regions
Despite the raw material challenges and the uncertainty brought on by the Russia-Ukraine conflict, there continues to be a lot to be positive about relating to the growth of the powder coatings market. The sustainability trend continues to increase with populations in all regions of the world being more concerned about environmental issues. This will bode well for the global growth of powder coatings. Overall, it is expected that the global powder coatings market will grow at a volume rate of 4.6% and value rate of 7.9% on a Compounded Annual Growth Rate (CAGR) basis (Figure 5).

Some of the most exciting growth opportunities are in countries and regions where powder has not yet penetrated to the degree that it has in North America and Europe. The countries of South Asia and Southeast Asia are where some of the best opportunities lie. India, Vietnam, Indonesia, and Malaysia are all expected to see significant increases in the use of powder coatings. Figure 6 shows anticipated growth rates for each region in Asia. South Asia includes the countries of India, Bangladesh, Pakistan, Sri Lanka, Nepal, and Bhutan. Southeast Asia includes the countries of Indonesia, Malaysia, Thailand, Vietnam, Singapore, the Philippines, Cambodia, and Laos. The powder markets in these regions are relatively small but they are growing fast and could therefore afford some good opportunities. The powder coatings market in South Asia is estimated to be $425 million and in Southeast Asia, it is estimated to be $200 million. Combined they are 5% of the global market. While relatively small, growth should be significant in these markets for the foreseeable future.

Another growth segment of the powder coatings market is the North American market for architectural applications. As architects have continued to learn the benefits of powder coatings, they are specifying it more and more. Another growth area is the use of metallic powder coatings products in architectural, appliance and other applications.

Conclusions
For the most part, the powder coatings market rebounded nicely in 2021 from the pandemic low in 2020. The biggest challenge was, and continues to be, raw material pricing and shortages. It was expected these issues would improve towards the second half of 2022 but the conflict in Ukraine, which has driven up oil and other commodity prices, has upended that forecast and inflationary pressures are now expected to grow. Despite these challenges, the global outlook for powder coatings remains positive as a result of the ongoing sustainability trend and the growth of powder in regions of the world where penetration levels have traditionally been low.

Douglas Bohn is director of Orr & Boss Consulting Incorporated.