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November 24, 2009

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Coating industry sees bright future in eco-transition

LIU Meigui slipped out of the China Coat 2009 exhibition in Shanghai to get a breath of fresh air away from the overheated, overcrowded hall.

"I did not expect such a crowd here," Liu said. "The coating industry must have recovered, judging from the number of people here looking for business opportunities."

Indeed, China's coating industry began gaining steam in the second half, helped by demand for new, environmentally friendly chemical technologies.

Coatings are applied to the surface of objects across an array of industries such as furniture, consumer electronics, ships and containers to protect them from corrosion, fire, water and sun damage and reduce friction and wear.

New on the market: a new coating material that optimizes wall paint formulas to enhance waterproofing and promote easy cleaning of even tough stains such as ink, soy sauce, wine and black tea. In fact, the paint cleans so easily and is so resistant to water that walls can be used as whiteboards.

China coatings industry surpassed 150 billion yuan (US$22 billion) in value in 2007 after growing at a double-digit rate for more than five years, according to the National Bureau of Statistics. Production rose to 6.3 million tons last year from 5.09 million tons in 2006.

The importance of the industry was underscored by the success of China Coat, the largest exhibition of its kind in China. About 660 domestic and overseas companies and more than 24,000 visitors participated in the event.

Opportunity knocks

Liu Meigui works for a Shanghai-based coating plant and went to the exhibition, which ended last week, to survey new technologies and talk with representatives from industry leaders such as Dow Chemical Co, Bayer AG, BASF AG and Eastman Chemical Co.

China is seen as the land of opportunity for many suppliers. Sweden-based Perstorp Holding AB, for example, said it is expecting sales to rise this year from last year as China's economy emerges from a slowdown.

Dow, the largest coating raw material provider after its acquisition of Rohm & Haas Co earlier this year, said the market for its products in the Asia-Pacific region started picking up in the second quarter and showed clear signs of growth in the third quarter.

"We have seen a good recovery in China's architectural coating market, driven by the real estate market in coastal cities such as Beijing and Shanghai, particularly in the past six or seven months," said Bruce Hoechner, vice president and general manager of Dow Coating Materials Asia-Pacific. "I think this directly related to China's stimulus package."

Another factor driving the coating market is the expansion and focus on residential and infrastructure development in third- and fourth-tier cities, Hoechner said.

In the next 15 months, Dow said it plans further investment to expand production of emulsions to match the rising demand. That will include new plants and expanding existing facilities.

Dow said the recovery in industrial coatings is expected to lag the gains seen in the architectural segment of its business.

"We still see the industrial coating market, which relies on exports, depressed," Hoechner said. "But we have started to see small increases in the automotive market, which is rebounding quite substantially here in China."

Slower sales in industrial coatings offer new opportunities for innovation among Chinese customers, he said.

"We are seeing a transition from solvent-based to water-based coatings, which are more environmentally friendly," said Hoechner.

Water-based coatings have low volatile organic carbon emissions and can reduce toxic emissions by as much as 70 percent.

"This trend is a result of stricter regulations on emissions and solutions for sustainable development," said Martin Lundin, president and CEO of Perstorp.

The Swedish company said water-based materials account for up to 10 percent of its China portfolio currently and have grown as much as a fifth annually.

Growth engine

"In the next 10 to 15 years, it will be the engine of growth for both the company and the industry," said Luis Fernandez, Dow Chemical's business group vice president of the advanced materials division.

In the past five years, Bayer has been promoting environmentally friendly coatings.

"Climate change and environmental protection have become the largest challenges, and water-based products will play a key role in addressing those concerns," said Li Xilin, general manager of coatings, adhesives and specialties for China at Bayer Material Science Trading (Shanghai) Co.

Bayer, which supplied the "Water Cube" at the 2008 Beijing Olympics, is planning to apply its water-based coatings to China's bullet train system and China's first domestically manufactured regional jet, the ARJ21.

"China's expanding network of high-speed railways and subway projects in 15 cities is providing huge opportunities for coatings on trains," Li said.

And Bayer has extended the use of similar materials on buses in Beijing, with plans to expand their application to Shanghai and other cities.

Water-based coatings can be used in many sectors, including metals and consumer products, said Daniel Meyer, senior VP of the coatings, adhesives and specialties business unit for Bayer MaterialScience Asia Pacific. Bayer started to produce polyurethane dispersion products in Shanghai in September last year to meet increasing demand for eco-friendly coatings in China and the rest of Asia-Pacific. The plant can turn out 20,000 tons annually.

"The next step is to improve the profile of water-based materials, which usually contain some solvent material. The goal is zero solvents," said Dow's Fernandez. "But it takes some time for the transition. We are constantly working on that."


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