Coating industry warning: one third of natural disasters and seven of man-made disasters

On March 7, as the authoritative organization of China's coatings industry, the China Coatings Industry Association said that after careful research, it issued the first profit warning of China's coatings industry in 2022
.
All enterprises in the industry are required to pay close attention to operating conditions such as profits, and adjust business strategies in a timely manner according to fluctuations in the upstream raw material market
.

This is the first time that the Coatings Association has issued such an industry warning report since its establishment, which shows that the coatings industry has encountered an unprecedented crisis of survival
.

What kind of crisis has the paint industry encountered?

Upstream raw material prices are rising every day

Lin Zhe, secretary-general of Shandong Paint Industry Association, said frankly that the current prices of raw materials required for paint production have risen sharply
.
The association's profit warning is intended to remind paint companies that in the face of sharp increases in raw material prices, paint companies should take specific measures and actively respond
.

It is understood that although the overall output and main business income of China's coatings industry will achieve positive growth in 2021, the growth rate of total profits has declined sharply since the beginning of the third quarter, and entered negative growth at the beginning of the fourth quarter.

.
As of early March 2022, according to the latest research, most companies in China's coatings industry have suffered losses due to the rapid rise in upstream raw material prices
.

So, how much is the upstream raw material price increase?

Dai Maozhen, chairman of Shandong Aohui Enterprise Group, said that at present, xylene is 8,500 yuan/ton, 128 epoxy resin is 27,000 yuan/ton, and 011-75 epoxy resin is 22,500 yuan/ton
.
Among them, xylene rose by nearly 3,000 yuan / ton, an increase of more than 50%, mixed xylene rose by more than 40%, and silicone and n-butanol rose by more than 20%
.

Titanium dioxide, which must be added to coatings, has completed nearly 10 rounds of increases in 2021, almost reaching the rhythm of one price increase every month, and the price has repeatedly climbed to high levels
.
According to the data of the business community, as of March 11, the domestic rutile titanium dioxide market quotation reached 21,000 yuan/ton, an increase of 1.
8% during the year, double the price of 10,000 yuan/ton in July 2020
.

Not only titanium dioxide, but also resins that must be added to coatings are also increasing in price
.
The amount of resin used in the coating is about 30%, and once it is reduced, it will directly affect the gloss, corrosion resistance and weather resistance of the coating
.
In March of this year, the main resin production enterprises' coating resin increased by 800 to 1,200 yuan per ton
.
The price of epoxy resin is approaching the high price of 30,000/ton
.

End products can only passively follow

In this regard, Dai Maozhen said that the sharp increase in the price of raw materials has seriously squeezed the profit margins of producers
.
There is no other good way for coating companies to make up for the repeatedly reduced profit margins by raising the price of coating products
.

Facts have repeatedly proved that paint companies have always been passively beaten
.
Usually, after the price increase of raw materials, the price of coating products is raised in response to maintain normal production and operation
.

It is understood that in 2021, facing the price increase of raw materials, coating companies will raise prices three times in March, July and October 2021, and the price increase will be around 20% each time
.

In March of this year, faced with another price hike of crude oil and other raw materials, paint companies across the country raised their prices in March
.

Jiangsu (Nanjing) Changjiang Paint Co.
, Ltd.
, Shaanxi Baotashan Paint Co.
, Ltd.
, and Shanxi Dongfanghong Paint Co.
, Ltd.
issued price increase notices on the 10th.
Shandong Lehua Paint Co.
, Ltd.
, Shandong Pentium Paint Co.
, Ltd.
, Shandong The three Qilu Paint Co.
, Ltd.
jointly announced a price increase on the 11th.
Jiangsu Champion Coating Technology Group announced that the special paint will increase by 1,000 yuan per ton from the 15th.
Hubei Wuhan Shuanghu Paint Co.
, Ltd.
announced that all coatings will increase by 6% from the 19th.
.
.
…

Raising prices has become the only means for coating companies to deal with rising raw material prices
.
Many paint companies said that if they do not increase prices, they will not be able to ensure the normal balance of payments for the company, and the only way for paint companies to face bankruptcy is bankruptcy
.

As the Paint Association issued an early warning, paint is a product in the end market, and fluctuations in raw material prices will bring profit fluctuations to the paint industry
.
Paint companies are powerless to change, let alone change
.

Vicious competition keeps destroying the Great Wall

There is a consensus in the paint industry: paint is a chemical field with low technological content and low-end manufacturing and processing
.

According to Dai Maozhen, the original paint was simply used to paint the doors and windows of houses
.
With the increase of rural population and the planning and construction of new houses, almost every home will use paint
.
From the beginning painted wood doors and windows, and later developed to paint iron doors and windows
.
The use is relatively simple, but the amount is still large
.
There are more than 100 paint companies in Shandong, all of which are producing alkyd paint for civil doors and windows
.
Later, with the birth of trailer bases, some paint factories began to make a fuss about trailers and produce trailer paints
.

Dai Maozhen said that the reason why the production and processing of coatings has no scientific and technological content is because the production of coatings is very simple
.
Taking paint as an example, resin, solvent oil, pigments, fillers, additives, etc.
are added to the reaction kettle in turn, and after stirring evenly, they can be filled and sold on the market
.
This is the case for a large factory with an output value of 1 billion yuan and 500 people, and a small workshop with 20 people with an output value of less than 10 million yuan
.
Coating manufacturing technology content is not high, resulting in low barriers to entry
.

It is understood that there are paint processing and manufacturing figures in all provinces of the country
.
In particular, Tianjin, Hebei, Henan, Anhui, Jiangsu, Guangdong and even Shandong, a major chemical province, were once famous production and processing provinces in the coatings industry
.
Boye County, Hebei Province used to be a production base for low-end paints.
The iron red anti-rust paint processed there sells for only 50 yuan for a 15kg barrel
.

In order to seize the market and fight against competitors, the "Three Kingdoms Kill" in the paint industry has been emerging one after another
.

To give a typical example, in a bid, in order to suppress competitors, the price of a kilogram of acrylic polyurethane white topcoat of a certain brand in Jiangsu was 15.
5 yuan, while the price of a kilogram of acrylic polyurethane white topcoat of other brands was 25.
5 yuan
.
The price of an epoxy zinc-rich paint directly sold by the company in the market is only 8.
9 yuan per kilogram, the kilogram price of light blue alkyd topcoat is as low as 4.
5 yuan, and the cheapest anti-rust primer of a certain brand in Shandong also costs every kilogram 9 yuan per kilo
.
The normal market price of epoxy red dan paint is 18 yuan per kilogram, but this brand of epoxy red dan paint turns out to be 12 yuan per kilogram
.

Perhaps, such self-destruction of the Great Wall is what the Chinese paint industry needs the most early warning
.