Frost & Sullivan Asia Pacific Paint & Coating Market Outlook

26
Asia Pacific Paint and Coating Market Outlook Chemicals, Materials & Food Practice Frost & Sullivan Sep 2012 “ We Accelerate Growth” © 2012 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the prior written approval and consent of Frost & Sullivan.

Transcript of Frost & Sullivan Asia Pacific Paint & Coating Market Outlook

Page 1: Frost & Sullivan Asia Pacific Paint & Coating Market Outlook

Asia Pacific Paint and Coating Market Outlook

Chemicals, Materials & Food Practice

Frost & Sullivan

Sep 2012

“ We Accelerate Growth”

© 2012 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated,

quoted, copied or otherwise reproduced without the prior written approval and consent of Frost & Sullivan.

Page 2: Frost & Sullivan Asia Pacific Paint & Coating Market Outlook

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Table of Contents

2 Paints and Coatings Industry Outlook

1 Macro Economic Outlook and Drivers

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Source: IMF(World Economic Outlook, 2011)/ 2012

GD

P G

row

th %

Regional GDP Growth

2011: Global World growth slowed down to 3.8% from 5.2% in 2010. Developing Asia also slowed to 7.9% from 9.5% in

2010. China and India key growth regions

2012 : Global World Growth estimated at 3.3%, ( 2.5% by world bank) Developing Asia : 7.3%. ASEAN 5 gaining

importance along with China and India

Macroeconomic Scenario- Asia still strong led by China, India

and ASEAN 5 and a rebound from Thailand and Japan

-5

0

5

10

15

2007 2008 2009 2010 2011 2012

United States

Europe

Asean-5

Africa

China

India

World

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-5 0 5 10 15 20

Japan

ANZ

Singapore

SKorea

HK

Taiwan

Thailand

Philippines

Malaysia

Vietnam

Indonesia

India

China

2012

2011

2010

High Growth

GDP Growth %

GDP Growth of APAC Countries

Asia : One region, many countries , different growth

rates……means different strategies for different markets

Per capita paints

>13kg

Focus- Greater

push to high-end

technologies

Per capita paints

<5kg

Focus- Greater

penetration

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Key Drivers of Growth in ASIA/ ASEAN

Demographics

Growing Middle Class/ Purchasing

power

Growth in Construction, Infrastructure

and Manufacturing

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Population favors Indonesia, Vietnam and Philippines

Population of Top 20 Population Countries

Source: United Nation Populations Fund

2025 2010

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-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

0 50 100 150 200 250 300

GD

P (

US

$ B

illio

n)

POPULATION (million)

GDP - POPULATION CHART 2010 - 2015

2010 2015

GDP Per Capita expected to grow in line with economic

growth

• Indonesia and Vietnam are predicted to be the fastest growing countries in next 5 years with increase in GDP per

capita are likely to be 9% and above

Size of bubble indicates per capita GDP

Malaysia

Thailand

Vietnam

Philippines

Indonesia

Source: IMF, Analysis: Frost & Sullivan

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Asia expected to receive high investments in

infrastructure

North America

Asia/Oceania

Europe

Source: Morgan Stanley

Middle East

Latin/South America Africa

Water

Power

Road & Rail

Air/Seaports

$22,610bn

$9,000bn

$7,800bn

$1,590bn

Total

0

1,000

2,000

3,000

4,000

0

1,000

2,000

3,000

4,000

5,000

0

100

200

300

400

0

2,000

4,000

6,000

0

200

400

600

800

0

2,000

4,000

6,000

8,000

10,000

Projected Infrastructure Investment (Global), 2005-2030

M65B-18

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Indonesia

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Individually none of the ASEAN countries figure in top 10 globally,

but as a region ASEAN is likely to become 8th largest automotive

market by 2018 after China, Japan, India.

In 2010, ASEAN was 9th largest market 2015 it would become 8th largest market.

Country Sales 2010

1 China 17,212,891

2 USA 11,562,701

3 Japan 4,891,452

4 Brazil 3,363,445

5 Germany 3,109,641

6 India 2,712,587

7 France 2,669,402

8 UK 2,260,881

9 ASEAN 2,226,965

10 Italy 2,128,492

Sales 2015

1 China 29,010,852

2 USA 16,466,283

3 India 5,788,462

4 Brazil 5,364,935

5 Japan 4,591,476

6 Germany 3,850,511

7 Russia 3,429,031

8 ASEAN 3,140,684

9 France 2,704,451

10 Italy 2,563,360

Sales 2018

1 China 33,391,276

2 USA 16,970,585

3 India 9,039,806

4 Brazil 6,287,188

5 Japan 4,517,218

6 Russia 4,025,975

7 Germany 3,968,411

8 ASEAN 3,634,697

9 UK 2,897,909

10 Italy 2,793,822

• AFTA (ASEAN Free Trade Agreement)- will encourage regional hubs for manufacture

• Healthy rivalry among various countries to attract investments

• Growth hungry Indian and Chinese companies vying for this market

• ASEAN is a competitive production base, net exporter with strong competencies in certain product ranges. Rebound seen in Thailand after floods

• Japan expected to see the highest growth in 2012 after 2011’s earthquake and tsunami

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Table of Contents

2 Paints and Coatings Industry Outlook

1 Macro Economic Outlook and Drivers

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Asia’s share of paints and coatings has increased in line

with economic growth

Asia Pacific:

10% CAGR

Growth

America: 2.5% CAGR Growth

Europe: 2.6% CAGR Growth

Africa: 6.9% CAGR Growth

2001

2010

Middle East: 7.9% CAGR Growth

34.6

%

32.9

%

27%

1.6

%

3.9

%

2

%

27.6

%

25.9

%

4.5

%

40%

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APAC market worth over $62 billion in 2011. Growth rate is

12-15 %

APAC Paint & Coatings Market Size ( 2011 )

5%

6%

65%

0%

2%

11%

1%

0%

1%

1%

1%

1%

2%

3%

Paint and Coatings Market: Percent of

Revenue by Segment

Paint and Coatings Market: Percent of

Revenue by Country

3%

13%

14%

10%

1%

12%

13%

24%

6%

4%

China Vietnam

Thailand

Taiwan

South Korea

Singapore

Philippines

India New Zealand

Malaysia

Indonesia

Japan

Hong Kong

Australia

Wood

Automotive -OEM

Automotive - Refinish

Can

Marine

Coil

Decorative Protective

Powder

Other Industrial

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*Note: Bubble size indicates size of the coatings market

• Relatively more price-conscious

consumers

• Low cost coatings

• Scope for improving quality

Low-end Coatings High-end Coatings

Underdeveloped Market

Developed Market

• South Korea and Australia are maturing

markets, and moderate growth is

expected in the next two years

• The growth of eco-friendly coatings,

though, is expected to outpace the

market

• Japanese market is mature and has

become stagnant- some rebound

expected in 2012

• Manufacturers have resorted to eco-

friendly coatings to boost profitability

and to gain competitive advantage

• Focus on high end value paints

Australia

Thailand

Japan

South

Korea

China

India

Indonesia

• Rapidly developing markets for paints.

• A mix of high end and low cost coatings

Vietnam

Japan most advanced market while China is the largest

Malaysia

Myanmar

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High raw material costs puts pressure M

ark

et

Dri

vers

M

ark

et

Restr

ain

ts

Greater Economic Growth in APAC region

Growth in end-use sectors- construction, automotive etc,

increasing investment in Infrastructure

Escalating Prices of Raw Materials as a result of rising crude oil prices as

well as developing markets increased consumption of these raw materials

Increase in Purchasing power- Rise in Middle Class

Reduced Export Demand from Western economies

Mergers & acquisitions and New technologies

Slower adoption of technology than expected

Key Market Drivers and Restraints, Asia Pacific, 2011-2012

Local companies cannot compete on R&D, marketing, branding

Source: Frost & Sullivan analysis. High Medium Low

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• Global construction spending to slow to < 5% p.a. Asia constn spending to increase by 9%p.a

• Japan – rebuilding from earthquake. Thailand- rebuilding after floods

• China- growth in west,/ interior regions as per 12th 5 yr plan . India rising middle class and urbanization drives housing

• Singapore drop in construction sector, sustainability and productivity key

• Indonesia spending on construction to increase in line

• Korea- grew by 6% last year to become the largest in new orders- 52 billions$ but slow down expected in 2012 due to global crisis

• Challenges also seen in China due to high costs of labor and raw materials and lack of competitive tech

• Emerging opportunities in Vietnam and India

• Industrial sector expected to grow at 6-8% in coming decade

• Car sales and demand to slow in H-1 2012 and is expected to pick up later in ASEAN while China and India continue to drive demand

• Thailand is expected to drive the demand through pent up demand after floods and disruptions in supply chain

• Export market to slow

• Japanese players to bounce back

• China has the largest demand for car production.

Key Growth Segments- Construction and Infrastructure key growth

industries

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• 2011 Market Size: USD 15 Bn

• Key countries: China and India, Indonesia

• Market drivers: Growth in construction industry and ecofriendly coatings

• Market restraints: Rising raw material prices, presence of numerous unqualified coating suppliers.

• 2011 Market Size: USD 9-11 bill

• Key countries for marine: Vietnam, Japan and South Korea, China

• Market drivers: Environmental drive to antifouling paints, growth in the ship maintenance market, investment in industrial infrastructure

• Market restraints: Rising crude oil prices, rise in metal prices, rising global crisis

• 2011 Market Size: USD 6.3 Bn

• Key countries: China, India, Thailand and Indonesia

• Market drivers: Growth in production and domestic sales, pent up demand in Thailand

• Market restraints: Rising raw material prices and competitive pricing in the automotive industry.

Key Growth Segments- Decorative and Protective coatings expected

to see higher growth rates than other segments

deco

Protec

tive

and

marine

deco

auto

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Key countries driving growth- China, India, Indonesia and Vietnam

besides rebound seen in Japan and Thailand

Growing segment: Decorative segment,

automotive and protective

Market Drivers: Growing middle class

population, increased sale of premium paints in

urban areas.

Market Restraint: No mandatory standard for

regulating lead in paints or VOC emissions, so

slow shift to green expected

Growth: 13-15%p.a

Growing segments: Industrial and

Decorative coatings

Market Drivers: High growth end-industry,

China as hub for 3 C manufacture,

increasing commitment to green, growth in

West China/ second tier cities

Growth : 10-15%p.a

Growth Regions: Vietnam and Indonesia

Market drivers: High potential growth region driven by

increasing spending power and continuous economic

development, Increasing environmental awareness . Green

labeling, worker safety on the rise in Singapore/ Malaysia.

Thailand on a rebound

Market restraints: Rising raw material prices/ inflation is a

concern

India

ASEAN

China

Vietnam Highlight

- Growth in marine and wood coatings

- 70% of raw materials imported

- Growth 10%p.a

Indonesia Highlight

- Large population and potential to grow -

mainly decorative and protective

- Constn sector to increase to 9% of GDP

- Growth of paints >8% p.a

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Trends in Decorative Coating- Construction spending drives

decorative. Low VOC, functional coatings the trend

Overview and trends Decorative coating

• Decorative coating market grows parallel with the activity in

construction and renovation of commercial and residential .Countries

such as China , India, Indonesia has a high demand for Decorative

paints.

• Companies like Nippon and Akzo Nobel are very active in the

decorative coatings market with environment friendly paints (reduction

of voc) in paint

• Major driver includes rising paint consumption per capita due to trends

in interior decoration and standard of living in Asia Pacific

• Development of green and sustainable building in Asia-Pacific region

(for e.g. countries like Australia, Singapore, New Zealand) will be a

driver for decorative coatings

• 3 tech trends: sustainable coatings (energy / fuel saving), functional/

smart coatings ( e.g dirt resistance), ecofriendly ( low VOC,

formaldehyde free, water borne)

China 43%

India 16%

Japan 15%

Australia 6%

Indonesia 5%

Others 15%

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Marine coating- Korea and China drive this market

Overview and trends Marine Coatings

• Marine coating is estimated at about 6% of coating business.

• Ship Building moved to Asia- South Korea, China and Japan leading

Ship building countries globally. They take up 80% share of ship

building globally

• New shipping hubs in Vietnam, Philippines and India.

• In future high quality paint per litre value is expected to increase due

to rising cost of raw materials

• Innovations in Copper and Tin free anti fouling system to increase.

Glass flake epoxies for higher abrasion resistance to increase.

Coatings focused on reducing drag and increasing fuel efficiency on

the rise

China 46%

South Korea 19%

Japan 18%

Thailand 6%

Singapore 3%

Others 8%

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Protective coating – China drives this market. Japan and Thailand

rebound. Increasing investment seen in Indonesia and India

Overview and trends Protective coating

• Protective coatings take up about 12-14 % of total paint and coating

market share in Asia pacific

• China leads the market for protective coatings.

• High growth of industrial sector like Energy and power sector, Oil and

gas units, Infrastructure Sector and manufacturing industries promotes

the usage of protective coating

• Companies like AkzoNobel and PPG are very active in this segment

and they investing in R&D to develop new eco friendly products with

better functionality and emphasis on environment friendly product such

as low voc and water based

China 78%

Japan 6%

India 5%

South Korea

3%

Australia 2% Others

6%

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Automotive Coating- Besides China and India, pent up

demand from Thailand and Japan drive growth

Overview and trends Automotive coating

• Automotive coating market grows parallel with the production and car

sales in Asia pacific ,Countries such as China ,Japan and India has a

high demand for Automotive paints. Pent up demand from Thailand is

expected to increase in 2012

• Rebound expected from Japanese players like Honda, Toyota in 2012

• Japanese companies like Nippon and Kansai are very active in this

market followed by BASF and PPG.

• Auto companies are generally more environmentally conscious and

demanding ecofriendly materials which will drive coatings like

Waterborne & UV curable coating

China 56%

Japan 25%

South Korea

7%

India 6%

Thailand 2% Others

4%

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Key Takeaway: Nippon Paint and Akzo Nobel have a wide presence in the Asia Pacific

coatings market, further reinforcing their market revenue.

Key Participants, Asia Pacific, 2011

China

Nippon Paint

AkzoNobel

Valspar

Japan

Nippon Paint

Kansai

SKK

Philippines

Boysen

Charter Chemical

Dutch Boy

Hong Kong

AkzoNobel

Nippon Paint

Camel Paint

Vietnam

AkzoNobel

4 Oranges

Nippon Paint

Singapore

Nippon Paint

AkzoNobel

Jotun

Indonesia

AkzoNobel

Nippon Paint

Mowilex

Malaysia

Nippon Paint

AkzoNobel

Jotun

Thailand

TOA

AkzoNobel

Nippon Paint

India

Asian Paint

Berger

Kansai

Taiwan

Yungchi

AkzoNobel

Kansai

South Korea

KCC

Samhwa

DPI / Nooro

Australia & New Zealand

Dulux

Valspar

Major companies are multinational or regional in operations……small

country centric companies may lose out with global trade

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Presence of MNC’s growing in the region with greater

investments and commitment – e.g Akzo, Nippon, KCC

Local companies under pressure to grow through tie-ups with

MNC’s or expanding to new markets- e.g Asian Paints, TOA,

Yung Chi

Continued investment in Branding, distribution network, new

product introductions

Key Players include Jotun, Nippon, KCC, PPG

Players need to drive eco friendly practices and coatings

Technology, service and reliability of company is important

As Asian end users expand globally, Asia paint companies like

KCC, Nooru, will expand outside Asia

Industry very price sensitive and pro environment

Key paint companies continue to focus on developing eco

friendly process and key account relationships

Strong presence of Japanese paint companies like Kansai and

Nippon

Industrial

Automotive

Architecture

Industry dynamics differ by segment: Decorative paints is high

volume business relying on channel push and advertising pull.

Industrial coatings rely on technology and service

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Last Word

Major I are multinational or regional in operations……small country

centric companies may lose out with global trade

In Rapidly developing markets such as China and India, we note that market leaders are

dominating by focusing on volume sales at affordable prices. This helps build brand awareness

and gain popularity and recognition amongst the masses. Nevertheless, premium products are

also sold to boost profitability. Focus on second tier cities/ cities in the West or interior regions in

China

Much of the focus is now also shifting towards emerging markets mainly Vietnam and Indonesia.

Volume is the name of the game in these markets. Domestic suppliers resort to competitive

pricing as the sole competitive strategy. Established paint manufacturers are leading through

product offering and quality but also ensure they have a reasonably wide product range to cater

to low to high price needs. Increase in competition and expansion expected as many companies

are eyeing these markets

In mature markets such as Australia and Singapore, we note that manufacturers focus more on

product differentiation to standout against the competition. Focus is on eco friendly, sustainable

coatings or higher functionality products. Quality and innovation are also key drivers in these

markets

Sustainability and green initiatives will continue. Growth in point of sales tinting seen in countries

such as Malaysia. Mid tier expected to grow as companies push to offer more choices in this

space

Page 26: Frost & Sullivan Asia Pacific Paint & Coating Market Outlook

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For Additional Information

Krithika Tyagarajan

Research Director

Chemicals, Materials and Food, Asia Pacific

(65) 6890 0230

[email protected]

Please log on to our Paint Frost

website at www.paintfrost.com

for more info.