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How the Supply Chain Is Affecting the Coatings Industry in 2021

While the coatings industry is experiencing some turbulence right now, demand is booming, and innovation is accelerating. Short-term pain aside, the future is looking very bright.
By Thomas O’Shaughnessy
August 31, 2021
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After one of the most challenging years ever, the early 2021 numbers for the coatings industry actually show significant year-over-year growth. In fact, the top three industry players all reported double-digit increases in net sales, thanks to a demand boom in end-user markets.

However, the industry is still working through some very serious adversity.

Major Shortages and Long Delays

The biggest single challenge for the coatings industry at present is a massive disruption in the raw materials supply chain, which has already affected industries like manufacturing, construction and food production.

Many of the raw materials necessary for coatings are made in China, and few of those materials are making it out of China right now. Because China has had a v-shaped recovery, their industries are already back up to capacity, and are using many of the raw materials they’d normally export. And the materials that do get exported are taking months instead of weeks to get to the United States.

For the West, that’s led to price hikes across the board, especially for materials used in epoxies—like heat-resistant paints—and resins. In Europe, some epoxy components have become as much as 60% more expensive; these include vital materials like neopentyl glycol and triglycidyl isocyanurate. Nearly every type of coating has been affected, from aerospace coatings to industrial coatings.

The result? Those price increases get passed right down the line; some epoxy products have doubled in price since November 2020, and prices still haven’t leveled off. But it could be worse. Due to a shortage of titanium dioxide, some white architectural coatings have simply disappeared from the market.

There are some other factors complicating the supply chain. There’s a shortage of container vessels, and shipping costs have doubled or tripled. Due to fluctuations in the labor market, seaports have slowed to a crawl. In some cases, ships have to wait weeks to be unloaded. When they are finally unloaded, gate appointments, which transport companies use to load goods onto their trucks, are in short supply. And even if these companies do manage to get a gate appointment, there’s a shortage of trucks and drivers to actually get those goods to where they need to go.

At the same time, U.S. exports have been on a steady decline for years, creating more and more “one-way trade,” as one port manager put it, which puts even more stress on the supply chain and port management.

Is the Worst Behind Us?

As tough as things are right now, there’s ample reason to believe that things are going to improve in the near future.

First, all the supply chain problems will iron themselves out as the pandemic wanes and the economy stabilizes. Even the issues caused by the increasing trade deficit are just a matter of logistics. Once this surge of demand tapers off, the flow of precursors and raw materials from China will resume, and the industry will normalize.

Even setting aside the pandemic, a lot of the industry’s supply chain problems are the result of extraordinary bad luck. Some of it’s due to the freak Texas freeze back in February, which paralyzed the oil and gas industry, as well as the petrochemical facilities that supply so many chemical products to the industry. A Texas deep freeze is not likely to happen with any regularity.

The Silver Lining

But no one can claim that the coatings industry is simply waiting for the storm to pass. The present adversity has accelerated innovations that have been brewing for years.

In the big picture, various mergers and acquisitions by major industry players have increased collaboration and diversified the supply chain. Problems caused by the Asian monopoly on raw materials have even sparked discussions about reshoring. When the next crisis hits, the industry should be able to work through obstacles a little more efficiently.

On top of that, environmental regulations have been pushing the coatings industry towards green innovation for many years now, and those efforts have started to bear fruit. This includes everything from low- or no-VOC coatings, to fully automated coatings systems that are safer and faster than manually applied coatings.

While the coatings industry is experiencing some turbulence right now, demand is booming, and innovation is accelerating. Short-term pain aside, the future is looking very bright.

by Thomas O’Shaughnessy
Thomas O’Shaughnessy is the owner of Industrial Paint and Protection Magazine, a publication dedicated to educating and connecting with owners, engineers, and contractors.

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