Output of Coatings Increases Rapidly

By Yue Wangkun   

The national economy in China continued its rapid development
in 2006. In spite of the restriction from unfavorable factors
in energy, raw material and transportation, the coatings sector
still managed rapid growth in spite of aggravated market
competition.

Sound economic functioning

According to data from the National Bureau of Statistics of China,
the output of coatings from producers that have an annual output
value of over RMB5.0 million reached 5.0784 million tons in 2006,
an increase of 25.67% over 2005. The product sales revenue was
RMB96.316 billion, an increase of 30.04%. The total profit was
RMB6.567 billion, an increase of 48.06%. The profit rate
increased from 6.03% in 2005 to 6.82% in 2006.
   The three major producing regions (the Ring Bohai region, the
Yangtze River Delta and the Pearl River Delta) were major
contributors to the development. Their product sales revenue
accounted for 86.61% of the national total and their total profit
accounted for 89.1% of the national total. The growth of the
economic indexes in the Ring Bohai region was much higher than
other regions. Its product sales revenue growth was 37.19% and
its total profit growth was 74.72%.
   Of the 1 830 enterprises included in the statistics, 228
enterprises reported losses, with a total loss of RMB313 million.
It can be seen that in the rapid development of the coatings
sector, problems in medium and small producers have become more
prominent, and a number of such producers will be shaken out by
the market.

More concentrated production

Producers in the coatings sector became more concentrated
(large-scaled) in 2006. The proportion of the output and the
sales revenue from the top 20 producers increased from 23.52%
and 20.00% in 2005 to 24.38% and 20.39% in 2006.
   With the impact of various factors, especially the sustained
high price of raw materials, the coatings sector has accelerated
restructuring in recent years. Valspar Corp. of the United
States purchased most of the equity from Huarun Paints in 2006.
(CCR2006, No. 20) Merging can help the coatings sector to
optimize resources, enhance overall competitive edge and
upgrade risk-withstanding ability.
   Besides, China has strengthened supervision on the coatings
market and carried out nationwide certification of dangerous
chemicals and safety licenses. The elimination of outdated
products and the formulation of policies for disseminating
production processes and products with bright development
prospect have effectively promoted the development of the
coatings sector.

Upgrading innovation ability

With the establishment of Shunde Coatings University and
Research Center in 2006, Shunde of Guangdong province won the
title of "Coatings Land" and formed a coatings industry base
mainly engaged in scientific and technological innovation.
Changzhou of Jiangsu province made outstanding achievements in
scientific and technological innovation on the basis of the
state-class commercialization of new coatings. Innovation
systems in quite a few large enterprises in Shanghai and Kunshan
also developed rapidly in 2006. The research achievement of
nanometer transparent insulation composite coatings, a state
invention patent project undertaken by Nanjing University of
Technology, achieved commercialization in Jiangsu Chenguang
Paint Co., Ltd., a key enterprise in Changzhou New Coatings
Commercialization Base. (CCR2006, No. 6) The 10 thousand t/a
water-based wood product paint production base in Guangdong
Carpoly Chemical Co., Ltd. conducted wet commissioning at the
end of 2006. All these show that the ability of scientific and
technological development in the coatings sector has been
further upgraded.
   China has further strengthened macro control, especially on
the real estate sector. It will surely affect the market demand
for coatings. Further enhancement of overall competitive edge
and profit-earning ability will be the challenge before the
coatings sector in the near future.

Major Coatings Producers in China
              in 2006          (thousand tons)
Producer                            Output
Nippon Paint (China) Co.                119.1
Guangdong Carpoly Chemical Co.          117.0
Guangdong Huarun Paints Chemical Co.    102.6
Nippon Paint (Langfang) Co.             100.6
Chugoku Marine Paints (Shanghai), Ltd.    82.9
Shandong Lehua Group                      70.5
ICI Swire Paints (Shanghai) Co.           68.3
Shanghai International Paint Co.          58.5
Dongguan Taiho Paint Products Co.        57.3
Akzo Nobel Coatings (Dongguan) Co.       56.2
ICI Swire Paints (China) Co.             48.9
Hempel-Hai Hong (Kunshan) Co.           47.8
Source: CNCIC