The total shipments of coatings for 2001 were 1,187 mil. gal. This was the lowest quantity shipped since 1993. Figure 1 shows that the year 2000 was the best year ever for the industry; 2001 followed with a drop of 100 mil. gal., or 8.7%. The value of shipments amounted to $15,717 mil., a drop of $500 mil. or 3.1% from 2000. The value of shipments has been more stable than the volume. Figure 2 shows the value of shipments for the years 1995 to 2001. (Note that the 'miscellaneous allied paint products' are not included in the figures.)

The declines shown by the annual survey indicated a steeper decline than was previously reported in the fourth quarterly 2001 report (see "Market Place," PCI May 2002). The annual survey consists of a larger sample with more detail and is considered more accurate. The quarterly results have therefore been revised for each quarter of 2001. These changes will be shown in the report on the second quarter 2002 due to be published in the November issue of PCI.

The major segments of the coatings industry are architectural, product OEM, and special-purpose coatings. Figures 3-4 show the relative breakout of the three segments. It should be mentioned that the architectural values represent shipments from the manufacturing plant and not retail sales through paint stores.

All three of the segments showed declines in 2001 from the previous year. Architectural coatings declined in volume 4.9% to 618.4 mil. gal., but increased in value by 4.4% to $6,744.3 mil. Price increases in the architectural segment were obviously made at the manufacturing level, which resulted in an increase in the value of shipments.

The product OEM coatings representing the manufacturing segment of the industry declined 10.3% in volume to 407.0 mil. gal. and declined 9.6% in value to $5,560.9 mil. A bad year for manufactured OEM products, but consistent with the manufacturing economy. The special-purpose coatings segment decreased 11.3% in volume to 161.7 mil. gal. and decreased 5.4% in value to $3,412.3 mil. The reported Census figures are shown in Table 1.

Architectural Coatings

Changes in architectural coating shipments continue even during a period of downturn. The solvent based paints declined more significantly than waterborne coatings. Exterior coatings declined more than the interior coatings. These are trends that have been continuing over the last several decades. Figure 5 shows the breakout of water based and solvent based, and the interior and exterior coatings for 2001.

The waterborne architectural coatings now represent 82.2% of the total coatings shipped for the segment. For the interior coatings, the water based represent 88.8%. For the exterior coatings, water based represent 70.8% of the coatings. Consumers continue to use and demand more water based coatings both on the interior and exterior of the house. Part of this is due to better waterborne products being available and to the desire to eliminate undesirable aromas from the house during a painting job.

The interior coatings sold amounted to 63.3% of the total architectural coatings. Exterior coatings are gradually declining and now stand at 36.7% of the total. The exterior market for paints and coatings has been shrinking over the past decades as more non-wood exterior sidings are used in construction of new residences. The quality of the exterior coatings has also improved to permit a longer life span for the coatings.

The comparison of the architectural coatings for 2000 and 2001 by coating makeup and usage is shown in Table 2.

The Census provides further description of the architectural coatings. The categories are broad and sometimes overlapping. Table 3 shows the breakout of the coatings by the various categories.

From Table 3, the major category is the finish/top coat, with flat leading, followed by semigloss and gloss. Primers are important in both interior and exterior applications. Stains are primarily used for exterior applications. Since some coatings are sold for interior/exterior uses the listing in the table may not give an accurate picture of where the coatings are being used. The size of the 'other' category also points out the problem of accurate descriptive end-uses for the coatings. For additional information on the categories refer to the Census report MA325F(01)-1.

Product OEM Coatings

As mentioned, the product OEM segment declined in 2001 by over 10% in volume. The decline was not consistent throughout all the categories. Some of the categories, non-wood furniture, fixtures and business machines, major appliances, and machinery and equipment, actually increased in volume. Some categories remained about the same; automotive parts, aircraft, railroad and other transportation, and electrical insulation. The major losers included wood furniture and fixtures, wood and composition flat stock; containers and closures; coil, sheet and strip; cars, light trucks and SUVs; heavy duty trucks & buses; paper, film & foil; powder coatings; and other.

The 10 largest categories included in the product OEM segment for 2001 are shown in Figure 6, showing the largest in terms of volume shipped, and Figure 7, showing the largest by the value of products shipped.

Special-Purpose Coatings

Special-purpose coatings declined 11.3% in volume and 5.4% in value as mentioned previously. This segment of the coating industry is smaller in the number of categories of coatings included. However, the individual categories are quite large, especially in the value of shipments. The average price per gallon for the segment is $21.10. This compares to the product OEM segment where the average price is $13.67 and the Architectural segment where the average price is $10.90 (the latter price is at the manufacturing level not the retail level). Thus it can be seen that the coatings in this segment command a significant premium over the coatings of the other segments. It should be mentioned that the Auto refinishing category, with a $39.34 per gal. value, skews the results of the special-purpose segment.

The relative importance of each of the categories can be seen in Figures 8-9.

An analysis of the individual categories of both the product OEM and special-purpose coatings offers some interesting comparisons. The categories have been placed in groups that have been organized by similar markets.

Transportation Related Group

The transportation group of categories represents the largest group with all the coatings having a direct relationship to the transportation industry. Some of the special-purpose coating categories are included because of their direct relationship to transportation. Table 4 shows all these categories for 2000 and 2001.

As seen from Table 4, transportation coatings represent a major portion of the coatings industry. The group was down by 12.3% from 2000 in volume and 8.7% in value. These results were off more than the economy of the transportation industry should have indicated. The effects of post-9/11 slowdowns, obviously had a major impact on coating sales.

Cars, light trucks and SUVs were down by 6.6% in volume. Heavy-duty trucks and buses were down even more by 18.2% in volume. Automotive powder coatings followed the decline of the other automobile coatings by declining 22.8% in volume. Marine coatings declined by 6.8% in volume.

Automotive refinishing was off by over 25% in volume. This is quite surprising and appears as a larger decline than expected. However, the 2000 volume for the automotive refinishing category was higher than considered normal. Therefore the average decline over a two-year period should be in the 10% range that would relate to the transportation industry more closely.

Highway and traffic marking coatings declined 3.9% in volume. This decline is less than anticipated since alternate forms of highway marking have been cutting into paints and coatings for a number of years.

Building and Construction Related

The building and construction group includes a number of coating categories that relate directly to the building and construction industries. Most of this group was down in 2001. The categories showing significant declines were; wood furniture & fixtures, down 32%; wood and composition flat stock, down 42%; and architectural powder, down 15%. Non-wood furniture, fixtures, and business machines increased 15%. High performance maintenance , remained about even with 2000. Table 5 presents the details for this group of coating categories.

The two wood categories, wood furniture and fixtures, and wood and composition flat stock, appear to have inaccurate reporting for 2001. The declines of 32% and 42% for the two appear to be more than the downturn in the economy could account for. In fact, the continued high level of new construction and resales of housing would indicate that the decline if any would be less than 10% in either category. The Census department stated it would be next year before any corrections could be made to these categories even though further analysis shows some may be needed.

Non-wood furniture, fixtures and business equipment increased more than expected, but could be the result of continued strength in computer sales. This increase could be the result of increased purchasing of office equipment following 9/11.

Architectural powder is a small category that had declines in both volume and value in 2000. The heavy-duty industrial maintenance coatings remained constant in volume but was up 6.6% in value. Better pricing or a more expensive product mix is the likely cause. Both of these categories are part of the special-purpose coatings segment.

Machinery and Equipment Group

The machinery and equipment group consists of a number of coating categories where the products coated are machinery or equipment. Table 6 shows the comparison of the various categories.

The appliance liquid coatings apparently gained volume back from the appliance powder coatings. The two categories together gained about 1% in volume but the value of shipments increased 14.0%. Both liquid and powder coatings gained in price per gal.

The machinery and equipment category had an unusually large increase of 39.0% in volume shipped and an increase of 33.1% in value. The large increase appears to be due to 2001 reporting errors. The increase is larger than the economic condition should warrant.

Lawn and garden powder had reduced shipments in 2001 as did most of the powder coatings.

Metal Product Coating Group

The metal products coating group represents coatings for products that are metal but may be used by multiple industries. The makeup of this group is shown in Table 7.

Containers and closures coatings were down by 5.7% from 2000. The decline is higher than expected and may continue to reflect the bad reporting this category has had over the past several years. Consumption of beverages has remained high and can production has shown only minor declines in 2001.

Coil, sheet and strip was down 20%. This could be accurate since the category has enjoyed a number of years of good growth and some softness can be expected.

The general metal category declined 14.3% in volume in 2001, and over 20% in value. The large decline in value could indicate a decline in high value products such as radiation cured coatings which are known to have had reduced sales in 2001. It is also suspected that other miscellaneous products were down in sales in 2001.

The thermoset functional and thermoplastic powder coatings category showed an increase of 24% in volume and an increase of over 30% in value for 2001. The category is not reported separately and is derived by difference from the total powder coatings shipped and the powder shipments reported in the other powder categories. Because of so few reporting companies for the two parts of this category, thermoset and thermoplastic, separate quantities are not reported for either individually. The increase may be the result of additional companies reporting, combined with growth in the pipe and rebar coating market.

Miscellaneous Group

The miscellaneous group consists of a number of categories that did not fit in with the above groupings. Table 8 includes the remaining categories of both the product OEM and the special-purpose coatings segments.

Electrical insulation coatings have remained relatively constant over the past two years. Paper film and foil coatings showed a decline of 9.8% in volume and a decline of 9.0% in value. Much of the film and foil coating is related to the automobile industry and thus is in line with the decline of the automotive industry.

Aerosol coatings and marine refinish coats used to be reported separately. However because of the small number of reporting companies, the Census department leaves these two categories blank to withhold disclosing data from individual companies. The marine refinish coatings category has been around 1 mil. gal. in previous years when it was reported separately. This year the numbers had to be obtained by difference from the total special-purpose coatings and the reported data of the segment. The decline of 11% is higher than it should be due to the combination of the two categories. Aerosol coatings were likely off by about 5%.

The other special-purpose coatings are those that could not be classified into the various categories of the segment. The decline in other special-purpose products follows the rest of the segment, and is not significant due to its small size.

Powder Coatings

Powder coatings have been mentioned in the various groups above. Powder coatings are reported in pounds to Census and converted to gallons using a 5 lbs/gal.conversion factor. For 2001, 306.6 mil. lbs. were reported, and in 2000, 342.5 mil. lbs. Thus overall, powder coating shipments declined by 10.5% in volume. The value decline was 10.8%. This is the first year of a significant decline of powder coatings in over two decades. The powder coating category has reached its growth peak and is now following the trends of the coating industry. New anticipated inroads in the automotive industry have not been realized. Other areas of growth also seem to have reached their limit. Powder coatings although still a major technology in the coating industry is now becoming more of a commodity with low profits and little growth.