By Lin Xuanyi, STO Shanghai

Transformation and development under multiple pressures

1. Production and sales revenue

   In 2017, the output growth rate of architectural coatings was about 9%, reaching 6.3 million tons. Among them, the output of exterior wall paints was estimated to be 2.6 million tons, including 2.2 million tons of natural stone coatings and texture coatings. The interior wall coatings production was 2.58 million tons, the waterproof coatings 650 kt, and the fireproof coatings & floor coatings 650 kt. The sales revenue of architectural coatings increased by about 7%, reaching RMB129 billion. In the case of rises in raw material prices, labor costs and three-wastes treatment and overcapacity, company profits fell by about 5%. The architectural coatings outputs, coatings outputs and architectural coatings’ proportions in coatings from 2012 to 2017 are shown in Table 1.

   Table 1  China’s architectural coatings production, 2012-2017

   According to the National Bureau of Statistics, in the first half of 2018, the coatings output of enterprises above designated size totaled 8.3949 million tons, an increase of 0.6% over the same period in 2017, and the growth rate was 9.9% lower than the same period of last year. The main sales revenue was RMB160.793 billion, an increase of 6.2% over the same period of 2017, and the growth rate was 3.1% lower than the same period of last year. The total profit was RMB9.946 billion, an increase of 2.0% over the same period of 2017, and the growth rate was 2.51% lower than the same period of last year. The industry's profit margin was 6.19%. The growth rate and profit of architectural coatings companies in 2018 are roughly the same.

   2. Pressure and motive force from environmental protection

   In recent years, some of the most stringent regulations have been issued by the state and all provinces to monitor and regulate the architectural coatings enterprises to guarantee the environmental friendly production. Some architectural coating companies have been closed due to the failure of meeting the standards, and architectural coating industry is undergoing the transformation and upgrading.

   The requirements of clean production have become the new norm. Architectural coating companies must turn environmental pressure into a driving force for transformation and development.

   3. Manufacturing cost increases

   As a result of rises in raw materials, labor costs and logistics costs, architectural coating manufacturing costs have increased.

   4. Renovation

   The renovation of houses and apartments, also known as re-painting market, is a new development impetus for the architectural coatings. The revenue of re-painting industry is mainly from service income, and paints sales revenue only accounts for a small part. The re-painting market has become a new growth point for China’s architectural coatings. In a few years or more, the Chinese architectural coatings market, like the developed countries’, will be driven by the re-painting sector.

Three major directions of development

   Architectural coatings development aims high performance, multifunction and greenness.

   1. Higher performance

   China's architectural coatings industry is in the midst of a transition from high-speed development to high-quality development. In terms of enhancing performance, users attach great importance to the decorativeness of architectural coatings. Therefore, improving the decorativeness of architectural coatings is an important part of high-quality development, which can be realized by improvement of colors, texture and gloss. The water-based colorful paints developed in recent years have broken through the bottleneck of monochromaticity, thus greatly improving the decorativeness. The texture coating makes the coating film form an endless texture, enriching the decorative effect. Take sand-containing colorful paint for instance: it not only has good texture, but also is colorful. Dry powder natural stone coating reduces shipping costs and does not require preservatives. As for gloss, it includes metallic luster and glitter, which also enhances decorativeness. Art paints also have bright future. The combination of color, texture and gloss, the three elements of paint decoration can make the film have an artistic decorative effect.

   In addition, improving the durability is also an important part of improving performance. The shortness of latex paints lies in color retention and stain resistance. The use of durable color pastes to improve the stain resistance of the paints is an important aspect of improving durability.

   At the same time, the hydrophobicity and the breathability, the stain resistance of the interior wall paints, and the stability are the main directions for manufactures to enhance the performance.

   2. More functions

   Functional architectural coatings are also innovation directions. First are the reflective heat-insulating coatings, which make the coating films have the functions of protection and decoration and increase the energy-saving effect. Reflective thermal insulation architectural coatings’ color matching pastes and color matching technologies have progressed. In addition to white and light-colored reflective insulation coatings, architectural coatings companies have also produced colored reflective insulation coatings. Reflective heat insulation natural stone paints and reflective heat insulation water-based colorful paints have also been used. The second are air-purifying coatings. As China's air pollution problem becomes serious, the coatings are required to be able to eliminate toxic and harmful components such as formaldehyde and VOCs, in addition to being low-toxic and even non-toxic themselves. The third are antibacterial, humidity control and anti-graffiti paints.

   3. Greenness

   With the improvement of people's living standards and the awareness of environmental friendliness, higher requirements have been placed on architectural coatings. Greenness will guide the production, marketing and development of architectural coatings, including low VOCs and even zero VOCs, non-alkylphenol ethoxylates (APEO), low formaldehyde, and restricting some active ingredients and limiting the use of anti-corrosion, anti-mold and anti-algae architectural coatings given the corrosion protection is ensured.