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The impact of COVID-19 on the European coating market

  • Categories:Industry News
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  • Time of issue:2020-04-14
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The impact of COVID-19 on the European coating market

(Summary description)In late March, the European coatings industry faced the prospect of a severe recession due to the blockade imposed by most of Europe to slow the spread of the new coronavirus (COVID-19). Most people are ordered to stay at home instead of going to work. Even in addition to necessities stores such as food and medicine, other stores are closed. Paint Online

  • Categories:Industry News
  • Author:
  • Origin:
  • Time of issue:2020-04-14
  • Views:0
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In late March, the European coatings industry faced the prospect of a severe recession due to the blockade imposed by most of Europe to slow the spread of the new coronavirus (COVID-19).

 

Most people are ordered to stay at home instead of going to work. Even in addition to necessities stores such as food and medicine, other stores have closed the paint online.

 

As a result, demand for coatings in many regions has almost collapsed for a period of time, and it seems unlikely to recover unless governments cancel the restrictive "stay at home" policy to restore their economies to some normal state.

 

In a sluggish market environment, European paint and other manufacturing sectors are optimistic about the upcoming economic trends.

 

The government’s economic aid package, including grants to companies and state-guaranteed loans, and state subsidies to prevent layoffs, should help slow the decline in manufacturing output, especially among large buyers of industrial coatings .

 

Among consumers, government financing for companies should help ensure that they can afford DIY work in the coming months.

 

In addition, after the COVID-19 pandemic, the sharp drop in oil prices also led to a decline in the cost of petrochemical raw materials.

 

Elisa Markula, CEO of Finnish coatings company Di Gurila, said at the annual performance press conference in Helsinki in February: "‘Our 30% of raw material costs are indirectly related to oil prices."

 

In March, there were signs that the number of COVID-19 cases in China had peaked, and the outbreak began in late December 2019, which renewed hope for the export of some key raw materials such as pigments and certain additives.

 

Oxford Economics, a UK-based consultancy, said in March: "Once disruptions and uncertainties disappear, the rebound in economic activity may be strong." "It is important that companies must prepare for recovery. "

 

The consultancy said the 19-member Eurozone is heading towards "the worst recession in its 21-year history." However, after contracting by 4% in the second quarter, the "rapid rebound" in the second half of the year will reduce GDP's decline to 2.2%.

 

The strong growth in economic activity across Europe is a trend predicted by many other economic forecasters in the region.

 

Taking the United Kingdom as an example, Oxford Economics expects GDP to shrink by 3% in the first half of this year. On January 31, 2020, the UK officially left the 27 member states of the EU.

 

But the subsequent economic recovery will bring 2.3% growth in the second half of the year and reduce the overall decline for the whole year to 1.5%.

 

There is evidence that consumer demand for decorative coatings is suppressed, and for them, the restriction of working from home is an opportunity for DIY.

 

In many European countries, this demand has been dampened by the central and local governments' orders to close paint retail stores.

 

In Germany, Europe’s largest paint market, only a few of the country’s 16 federal states allow DIY stores to continue operations in March.

 

"Before closing the store, our member companies have actually noticed an increase in the sales of paints," said a spokesperson for the German Paint Industry Association (VdL).

 

In the United Kingdom, which allows DIY stores to continue to operate, retailers’ sales in the first quarter of 2020 grew rapidly.

 

Kingfisher is a UK-based DIY retailer with a network of stores including two large chain stores in Europe. The company said in a provisional transaction statement in March that UK sales increased by 38% in the third week of the month. This is when the British government's "home policy" began to be fully implemented.

 

On the other hand, professional painters are in a difficult period, because during the pandemic, residents are unwilling to decorate at home. In addition, many countries have closed construction sites except for important projects such as hospitals.

 

"In addition to professional painters, industrial paint producers have also been severely hit by coronaviruses," said Tom Bowtell, CEO of the British Paint Federation (BCF). "Some of their big customers, such as automakers, are temporarily closing factories in the UK and other parts of Europe. Orders for industrial coatings have dropped significantly."

 

Even before the outbreak of the new coronavirus, the coatings industry in most of Europe showed a trend of continuous decline or slow growth, especially in Western Europe.

 

VdL estimated in its February report on the prospects of Europe’s largest German coatings industry that sales of German coatings, inks and printing inks in 2019 fell 1.4% compared to last year. It predicts an improvement by 2020, but sales have only "slightly increased" by 0.4%.

 

The European coatings company that stood out from the COVID-19 pandemic is likely to be a multinational company with strong sales both inside and outside Europe, as well as some larger regional companies, such as Tikkurila.

 

These large companies are often those pursuing current strategies, with the focus on improving profitability.

 

AkzoNobel Chairman Thierry Vanlancker said at the company’s annual performance meeting held in February this year: "From the point of view that our value is higher than sales (strategy), we have been gradually changing. We have turned to margin management and margin improvement management ."

 

When implementing profit management policies, large companies rely heavily on the strong position of their brands, and the promotional image of these brands is of high quality.

 

Markula said: "In countries like Russia, consumers are increasingly aware of the importance of quality. In Russia, now higher prices mean quality for consumers."

 

In addition, many European international companies, such as AkzoNobel and BASF, have strong businesses in China and other parts of Asia. As the COVID-19 pandemic subsides, demand in Asia is expected to grow faster and stronger than elsewhere .

 

Vanlancker said: "In view of our large amount of business in Asia, coronavirus may cause demand to shift from the first quarter to later this year. Currently, we do not expect to be significantly affected throughout the year."

 

Analysts also currently expect that multinational companies like Akzo Nobel and other multinational companies with large-scale coatings or coating materials business will be relatively safe in this outbreak.

 

The most affected will be small and medium-sized enterprises, especially during the austerity period following the disease.

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