In a presentation titled, "New Dynamics of Supply and Demand," Cook outlined dramatic economic forces affecting the entire supply chain of the paint and coatings industry - from the oil and gas used as raw materials, to the retailers selling paint to consumers.
Cook noted that for the past several years, chemical and coatings companies have been "caught in a severe margin squeeze between two powerful forces - ‘big oil' and ‘big boxes.' When you compare profitability and market cap from 1993 with today, you can see that the oil producers and large retailers have grown dramatically," Cook said. At the same time, those chemical companies that supply the ingredients, and many coatings producers, have not seen much improvement in margins or market cap.
In addition to margin squeeze, the coatings industry also is facing tightening supply and growing demand. "With capacity rationalization and under-investment in the chemical industry over the past 10 years, the supply of coatings raw materials has not kept pace with demand growth. All industry indicators and consultants point to tighter supply and demand for 2005 and beyond in the coatings industry," said Cook.
To read the complete speech, visit www.dow.com/dow_news/corporate/2005/20050315a.htm.