The National Association of Chemical Distributors (NACD) is an international association based in Arlington, Virginia, with a membership comprising nearly 430 chemical distribution companies and their supply chain partners. NACD members represent more than 85 percent of the chemical distribution capacity in the nation and generate 93 percent of the industry’s gross revenue.

The organization’s members, operating in nearly every U.S. state through approximately 3,400 facilities, are responsible for more than 26,000 direct jobs in the U.S. Collectively, the distribution industry is responsible for almost 137,000 direct and indirect jobs. Chemical distributors in the U.S. are predominantly small regional businesses, many of which are family owned and multigenerational – on average having 30 employees and operating under extremely low margins.

PCI recently talked to Eric R. Byer, President and CEO of NACD, about the effect the global pandemic has had on chemical distributors, the outlook for the coatings market, and current legislation that the NACD is actively involved in to protect the chemicals industry.


PCI: How has the COVID-19 pandemic affected chemical distributors specifically, and what have they done to respond? 

Byer: Fortunately, the chemical distribution industry has, by and large, fared much better than other sectors of the U.S. economy due to our essential link in commercial and industrial supply chains, and our ability to distribute much-needed products to combat the Coronavirus, like sterilizers needed for medical equipment, cleansers consumers use in their homes, hand sanitizer, and even personal protective equipment for first responders.

Nevertheless, like most of the world, the U.S. economy and the chemical distribution industry have not been immune to the ill effects COVID-19 has flung upon the globe. In terms of the broader United States, Gross Domestic Product fell five percent in the first quarter of 2020, and some estimate it fell by as much as 35 percent in the second quarter. Unless there is a dramatic improvement in growth over the remaining two quarters of the year, it is very likely the U.S. economy will have contracted for the first time since 2009.

The U.S. chemical sector has been able to weather the health and economic crisis better, but it still has had its share of troubles. Since February, employment has been down 2.1 percent - a fraction of what other industries like entertainment and hospitality have faced, but still concerning given the number of high-skilled jobs the industry needs to perform well. Chemical production is down 12 percent from this time last year, but the good news is shipments are up 2.3 percent in the last five months. And again, since February, prices are down 5.6 percent. However, wages have been holding steady, meaning that profit margins have been absorbing most of the price drop.

Most of the major industries that are users of chemicals have seen a large drop-off in demand. One particularly bright spot for chemical distributors has been the sale of isopropyl alcohol (IPA). Beginning in March, demand surged for IPA both here in the United States and globally due to its use in hand sanitizers and cleaning agents. Many NACD members store IPA as a “rainy day fund” of sorts, and have been able to draw upon those reserves to boost their sales when demand for other products has fallen off. Prices for IPA spiked across the globe to historically high levels this spring, and while they remain historically high, they are starting to come down slowly from their peak levels. This increase in demand and prices has been a key lifeline for NACD members that have been able to tap into that product market during the COVID-19 crisis.

Chemical distributors were deemed essential businesses during the pandemic and able to continue doing business serving their customers in paints, coatings and many other industries. They continued to take the safety and security of their operations, their employees, and their communities seriously - thanks to NACD Responsible Distribution®, NACD’s mandatory third-party-verified environmental, health, safety and security program. Throughout this entire health crisis, NACD members have taken steps to limit the spread of COVID-19 within their ranks. Most have allowed front office employees to work remotely when possible. For staff that are needed onsite, companies have instituted social distancing practices and daily temperature checks, restricted visitors from entering their facilities, provided PPE to workers, and undergone daily facility cleanings, among other strategies.


PCI: Have the partnerships between distributors and their principals been a benefit to the industries they serve throughout the pandemic? If so, how?

Byer: We saw many examples of the benefit of the close relationship between chemical distributors, their suppliers and their customers. Many were able to help each other obtain access to critical PPE when it wasn’t available from their regular providers. Additionally, many chemical distributors were able to become essential suppliers of hand sanitizer in volume to those companies who needed it for their operations and employees, as well as keeping product moving through the supply chain to keep customers’ businesses up and operating during the pandemic.


PCI: How has “virtual” business and learning been a factor throughout the pandemic?

Byer: Until recently, chemical producers and distributors have been slower to adopt to new opportunities posed by digital tools and technologies than some other industries such as banking and manufacturing that have streamlined operations and improve productivity as a result of digitalization.

However, opinions are changing, and chemical distributors are becoming far more aware of the benefits of investing and innovating in the digital space, especially in light of the COVID-19 pandemic. There are several platforms in the marketplace that have helped distributors launch their own branded e-commerce portals and supplement existing sales channels.

Shifting demographics are also driving change. A significant proportion of those working in the chemical industry are expected to retire in the next five years, and the younger generation entering the workforce are bringing with them a better understanding of how these new technologies work. Many of these systems offer distributors and manufacturers/customers with a closed B-to-B network offering a simple-to-use, secure way to buy and sell chemicals.

Beyond these sales platforms, chemical distributors have been engaging in many on-line webinars, workshops and conferences through NACD to continue to invest in their employees and meet their training and compliance needs. The Association’s online training platform, NACD U, offers the industry over 200 courses on safety, security, operations and Responsible Distribution at low cost.


PCI: What is your outlook for the coatings industry in the short and long term?

Byer: The paint and coatings industry is one of the key customers for NACD members. Based on data from the Bureau of Economic Analysis (BEA), more than $27.00 of every $100 of paints and coatings produced in the United States consists of chemicals like industrial gases, basic organic/inorganic chemicals, and resins used by paint manufacturers in their production process. This figure compares with the 20.6 percent of the overall cost of paints and coatings going to wages and benefits for company workers.

Considering that about $40.3 billion worth of paints and coatings were produced in the United States last year, this is a very important segment for the chemical distribution industry, with over $11.2 billion worth of chemical products purchases.

Paint and coatings sales have been relatively flat over the past few years. According to the Bureau of Economic Analysis, paint and coatings manufacturers’ sales are up by just 5.8 percent, for a compound annual growth rate of 0.3 percent per year, which is well below the 2.2 percent growth in the overall economy during the same period.

Interestingly, the growth in paint and coatings sales has not kept pace with new home sales, a major market for such products. Back in 1997, overall paint sales were equivalent to 6.8 percent of the value of every new home sold in America. This does not mean that each home used this much paint, but overall sales for all markets equaled 6.8 percent of the value of every new house. A similar ratio continued up until the recession when it fell to about 4.6 percent, a level that is up to just about 5 percent today (Figure 1). Comparing overall paint sales to overall construction spending, the trend is even more dramatic, and paint as a percent of construction spending has fallen by 26.9 percent.

What this means is that the housing and construction market is less important for paint and coatings sales than it was prior to the 2006/07 recession. According to the American Coatings Association, the largest drivers impacting the coatings industry overall are the rising needs in the construction and automotive sectors, with the architectural segment alone accounting for about half of the market. The trends therefore, are problematic, and may be a big reason why paint and coating sales have not kept up with overall economic activity.

In order to keep up sales, paint and coatings manufacturers will need to develop new markets outside of automotive (which is likely to be impacted by tariffs in the near term) and construction. Again, according to the American Coatings Association, the industrial and specialty purpose segments have contributed to the growth of the paint and coatings market, with demand for products like marine, antimicrobial and corrosion resistant coatings all increasing in recent years.


PCI: What is some of the current legislation that the NACD is actively involved in to protect the chemicals industry?

Byer: As NACD set out our priorities at the beginning of this year, we were hopeful but acknowledged what would likely be a challenging environment in a presidential election year. Then the Coronavirus pandemic hit and turned everything upside down for the chemical distribution industry, our country and the world, and we immediately pivoted to supporting our members through this extraordinary time. NACD established an online Coronavirus Resource Center to keep the industry up to date on the latest developments. We worked closely with the Administration to ensure that chemical distributors were allowed to continue their important work as essential businesses, and we developed guidance for accessing the Paycheck Protection Program (PPP) for those who needed it to weather the pandemic. NACD continues to work to encourage common-sense approaches to taxation and forgiveness of PPP loan dollars.

Fortunately, Congress has also continued its work on important issues beyond COVID-19. Most notably for our industry is reauthorization of the U.S. Department of Homeland Security’s Chemical Facility Anti-Terrorism Standards (CFATS) program, which after several small extensions was reauthorized in July for a three-year period. This program is critical to securing our nation’s chemical facilities against potential acts of terrorism.

Another important issue for the chemical distribution and paint and coatings industry is recent action to designate per- and polyfluoroalkyl substances (PFAS) as hazardous substances. The U.S. Environmental Protection Agency (EPA) already requires comprehensive toxicity testing be conducted on all PFAS under the Toxic Substances Control Act (TSCA) - a move the effectively bars the manufacturing of PFAS of concern. Our industries must be constantly vigilant against efforts to group very different chemicals under a single regulatory umbrella, and we at NACD will continue to closely follow and thoughtfully weigh in on this issue.

Trade is also front and center. Last year, NACD successfully petitioned the Trump administration to exempt hundreds of chemical products from the Section 301 tariffs on imported goods, but the tariffs continue to have an adverse impact on our industry and others. NACD supports the Generalized System of Preferences (GSP) and the Miscellaneous Tariff Bill (MTB) – two programs that effectively reduce the tariff rates on thousands of goods that either cannot be sourced domestically or otherwise would put U.S. businesses at a global disadvantage because of higher import duties – and both require action in 2020. The GSP, which helps the world’s developing countries increase and diversify their trade with the U.S while significantly reducing tariffs on imported raw materials used by chemical distributors and others, must be reauthorized before the end of this year. We’ll be working tirelessly to ensure it remains a priority.