GLOBAL DEMAND INCREASES
Agriculture, construction and earthmoving (ACE) Coatings is one of the most demanding coatings sectors as high quality
coatings are required for high-value OEM equipment. By Olga Menukhin, Irfab Global Industrial Coatings Markets
study, PRA World Ltd.
According to the new Irfab Global Industrial Coatings Markets study from PRA, a chemicals and coatings consultancy, after a decline in 2015, the global demand for ACE coatings increased in 2016 to reach 621 thousand tonnes (462 million litres). The market performance over the period 2011 to 2016 was mainly driven by growth in the Asia Pacific region, where both China and India showed strong growth in demand. The market performance in the Americas was down, while declines in Western Europe were slightly offset by increases in other sub-regions in Europe.
PRA estimates that the global market is expected to grow at 4% CAGR over the period from 2016 to 2021. Asia Pacific is expected to exhibit steady growth in the construction, earthmoving and mining machinery segment. Key country markets will be India and China, which should continue to account for the largest share of global demand for new products. China is expected to generate considerable
opportunities for coatings due to expanding manufacturing of construction and mining machinery. It is one of the largest global construction markets that resumed growth following a downturn in 2015. Annual growth forecast of above 7% and 5% for China’s non-residential construction output in 2017 and 2018 should generate significant demand for equipment and associated coatings. Domestic demand in India is contributing to significant production increases of construction equipment.
Production of any type of agricultural machinery is influenced by the global agricultural markets that have been in decline since 2014. Since the level of activity in the sector is strongly correlated with global pricing for the principal farming commodities, low prices of agricultural products are affecting profitability of the farming sector. Global OEM manufacturers, such as CNH Global and AGCO Corporation, reported declined revenues in 2015 and 2016. Declining turnover and profitability in the agricultural sector has resulted in a reduced demand for agricultural machinery affecting the demand for coatings in this segment. The domestic market for agricultural machinery in the Americas,
Europe and China are not expected to improve in 2017, however slow recovery is expected from 2018. Regions that expect positive developments in 2017 and beyond are China, India, Russia, Brazil and Turkey. The Irfab study projects the
global demand for coatings used in manufacturing of agricultural machinery to grow at 3% CAGR over the period to 2021. More than 30% of agricultural machinery manufacturing is in China, the world’s largest producer, and in India, the fourth global country producer after the United States and Germany. In general, the wealthier the country is, the higher the level of mechanisation. Europe and North America remain important centres for agricultural machinery production, with high levels of farm mechanisation. Major trends in the agricultural sector in North America and Western Europe are a reduction in number but growth in size of farms. These developments are supporting increased demand for higher capacity agricultural equipment. Similar coating technologies are used in both of these regions by multinational OEMs, offering high performance in terms of corrosion protection, resistance to mechanical damage and excellent colour and gloss retention. The two trends that support the demand for equipment in developing markets of South America and Asia Pacific are the growing number of farms and the need for mechanisation to replace physical labour. In Asia Pacific, the influence of the demographic trends, growing urbanisation, and low level of farm mechanisation represent the key drivers of demand for agricultural equipment and the associated coatings.
Multinational OEMs are investing in these regions, either with their own production facilities or with local partners. New facilities are designed for OEM-specified coatings used in Europe and North America, while domestic manufacturers that have established partnerships with global companies upgrade their paint processes. Independent local manufacturers in these regions are still using older coating. It is expected that they will convert to higher performance processes as customers start to demand equivalent quality levels to those of western OEMs, and as new lines are installed.
CONSTRUCTION AND EARTHMOVING EQUIPMENT
The world’s coatings market for construction and earthmoving equipment is estimated to be 283 thousand tonnes (210 million litres) in 2016, Irfab estimates. Global consumption of coatings used in the construction and mining sectors is expected to grow at over 4% CAGR over the period to 2021. The key producing regions of machinery and equipment for this market are Japan, China, Europe,
United States and Canada. Most Chinese output has been for the domestic market, but OEMs are now looking to expand its presence in the APAC region. The levels of inter-EU export/import of construction and earthmoving machinery are high, so is interdependence on new orders, deliveries and funding available within the EU. Europe is the second largest regional market with a share of global demand for coatings reaching 23%. The Americas represents a fifth of the world’s demand for coatings where the United States and Canada export machines to Mexico, South America, Australia and South Africa. Coatings demand reflects the global production. A very deep decline in production and pricing in the global mining sector has severely harmed the market for machinery, but the global demand for mining equipment is forecast to pick up. It is reported that expansionary spending policies from the public sector in several of the larger economies, such as the United States, Japan and China are expected to improve future prospects. China continues to be the main global market for mining equipment due to an expanding mining industry and is expected to drive future growth. However, macro risks related to scaling back overly ambitious growth targets by the Chinese government exist for the machinery exporters to China, such as Japan and Germany. In the United States, the capital investment spending by oil and gas companies has grown since the beginning of 2017 and the conditions are expected to improve further. In addition, in the first half of 2017, some global equipment manufacturers saw positive trends in construction and mining equipment purchases from India, South America and Australasia, as well as a pick-up in the intra-EU trade. In Europe and North America, the coating processes are similar to those for agricultural equipment, i.e. an epoxy electrocoat primer followed by a powder coating or two component polyurethane topcoat. There has also been a trend by construction equipment manufacturers in these two regions to extend the use of powder coatings to other components, even those weighing up to two tonnes, although the installation rate of new powder coating lines has slowed considerably in recent times. There is significant trade of used equipment in all regional markets. Used machinery from North America can be sold for infrastructure and construction projects in South America, while used equipment from Western Europe could be deployed in other parts of Europe, North Africa and Middle East. With the high capital investment costs associated with much of the equipment produced by these industry sectors, refurbishment plays an important role and some large multinational companies may have specialist facilities to refurbish used equipment.
MATERIALS HANDLING EQUIPMENT
The coatings used to decorate and protect Materials Handling equipment will vary depending on the performance requirements dictated by their operating environment and the size of the components. Similar technologies are used to those for agricultural and construction equipment.
The Irfab study estimates that solvent-borne coatings still have a large share of the market, 69% at almost 430 thousand tonnes (307 million litres), of which high solids constitute a major share. Although most paint lines in Europe and North America have switched to either high solids solvent-borne coatings or powder coatings, and many are using water-borne electrocoat primers for
some components, there is still a demand for further reductions in VOC content of the coatings. For wet coatings, it is further increase in solid coatings to 75% or higher (very high solids) or water-borne coatings. The use of water-borne coatings still causes various problems and therefore is less preferred by ACE equipment manufacturers. For example, water-borne coatings require investment; they are more difficult to apply; the flow, appearance and performance can vary, adhesion and corrosion protection are among other challenges. Most OEMs have considered and/or evaluated the use of waterborne
coatings. The majority of ACE paint lines that are operating in Europe are using high solids solvent-borne, powder coating and water-borne electrocoat coating systems to meet the requirements of the EU Solvent Emission Directive. The technology trends in coatings used for agricultural and construction equipment in the USA and Canada are very similar to those in Europe. Medium solid solvent-borne coatings still make up the main technologies, but high solids and powder coating usage is slowly increasing in South America. A key factor that will drive change in the ACE coatings market in the Asia Pacific region over the next five years is the recent introduction of national regulations in China and South Korea restricting the VOC levels of coatings used in these countries. There is a trend to develop monolayer direct-to-metal coating systems, coatings that will combine the properties of both a primer and topcoat in one layer. These coatings are already being used commercially for a limited number of applications, but further development of the technologies is still needed to overcome some problems that are restricting their more widespread adoption. A number of other areas where coatings innovation and development trends are ongoing include corrosion protection, improved durability performance, reducing costs during the paint process, isocyanate regulations.
Irfab Market Studies, PRA World Ltd
Originally published in European Coatings Journal 10 – 2017