Total Industry

The latest data from the Census Department for the year 2000 shows that the coatings industry has followed the rest of the manufacturing industry in the United States in taking a pause in its growth. Figure 1 indicates the trend of the industry in volume of shipments over the past six years. The trend over these years has been an average growth rate of 1.4% per year in volume. For 2000, there was a slight increase of 0.4%. The increase in value received from the shipments is shown in Figure 2. Average annual growth in the value of shipments has been 2.4%. However, 2000 showed a decline of 0.5% in value.

The growth during 2000 was not even across the segments of the industry. The architectural coatings segment declined 2.0% in volume and 3.0% in value. The OEM products segment advanced 3.1% in volume and a small increase in value. The special-purpose coatings segment grew 4.2% in volume and 2.9% in value. The data for the three segments and the total industry are shown in Table 1.

Architectural Coatings

The architectural segment had some interesting changes in 2000. Table 2 shows the interior and exterior plus water- and solventborne paints.

Waterborne architectural coatings continue to gain in share over solventborne products. In 2000, total waterborne architectural paint had 80.8% of the volume. The interior waterborne share of the volume was 88.0%, while the exterior solventborne share was 69.0%. Solventborne products continue to lose favor with the consumer and contractor.

In 2000, interior coating consumption was higher than in 1999 by 1.2%, while exterior coating declined by 6.9% from 1999. Interior waterborne coatings increased 2.4%, while interior solventborne coatings declined 6.2%. The exterior market was harder hit by the slowing economy. The exterior market was the major cause of the decline of the architectural segment in 2000. Exterior waterborne stains and sealers declined almost 50%, while all the solventborne exterior categories declined slightly over 10%. Exterior waterborne flat paint and the 'other' category showed modest increases in 2000, but not enough to offset the declines in the other product lines.

While total architectural coatings value of shipments declined by 3.0% in 2000, the waterborne coatings increased 1.4% for the interior products and 2.0% for the exterior products. The solventborne architectural coating value declined 10% for the interior products and 20% for the exterior products. The solventborne products had a significant decline in value in 2000, much more than the decline in volume warranted.

Product OEM Coatings

For 2000, the product OEM segment performed quite well with an increase in volume of 3.1% and a slight increase in value. The top 10 categories by volume are shown in Figure 3, and by value in Figure 4.

Volume wise, powder coatings have the highest volume. Powder has come a long way over the last 20 years. The growth rate of powder coatings is slowing down but still showed an increase of 8.7% in 2000 over 1999. Wood furniture and fixtures is second, followed by non-wood furniture and fixtures in third. The furniture and fixtures categories are enjoying good market demand with growth in volume of 3.2% and 1.6% respectively for the wood and non-wood categories.

By value of shipments, the ranking of the top 10 changes significantly (see Figure 4). The automobile, light trucks and SUV category is top value of shipments, followed by powder coatings. The coil, sheet, strip and extrusion coatings category is third, non-wood furniture and fixtures is fourth and wood furniture and fixtures is fifth. Obviously, some coating products command higher value due to factors such as technical input and content, technical service requirements, and warranties.

Wood Coatings

Wood coatings are sold to two distinct categories, wood furniture and fixtures, and wood composition and flat stock. The changes in these two categories is shown in Table 3.

The wood industry has been growing at a rapid rate for the last five years. Since 1995, the wood furniture and fixtures coatings category has grown in volume at an average rate of 10.9% per year. Flat wood and composition coatings has grown at an average rate of 13.4% per year. The value of shipments to these two categories has grown about the same, with the average value per gallon at around $10.

Transportation Coatings

Transportation-related coatings are a major part of the coatings industry. Within the product OEM segment, the categories include: automobile, light truck and SUV; automotive parts; heavy-duty truck, RV and bus; automotive powder coating; and other transportation including aircraft and railroad. In the special-purpose coatings segment, transportation coatings include automotive refinish coatings and highway and traffic paints. These categories are shown in Table 4. The transportation coating subsegment represents 185.4 million gallons and $4,059.4 million in 2000.

The automobile, light truck and SUV category plus the automotive parts categories both increased in 2000 from their already high levels. The auto industry has achieved significant growth in the United States in the last decade. Although slowing is apparent in the current year, the year 2000 still ranked high on the production scale. Some slowing was evident in the heavy-duty truck, RV and bus, and the other transportation categories. These two categories have also been operating at high levels for the last several years. The automotive refinish category showed a 15.4% increase, which was larger than anticipated. The highway and traffic marking paints increased as expected with the large amount of highway funds filtering down to the states and communities.

The transportation coatings segment -- being so large and so dependent on the production and sales of automobiles -- makes the coating industry vulnerable to slowdowns in the auto industry. Coil coating and general metal coatings (liquid or powder) also have a sizable amount of products going to the automotive industry.

Metal Coatings

Within the sub segment of metal coatings are the following categories: non-wood furniture and fixtures; containers and closures; coil, sheet, strip and extrusion coatings; appliances; machinery and equipment; and other product finishes. These six categories represent an important part of the coatings industry. Table 5 shows the results of these categories for the last couple of years.

This group of metal coating categories shows mixed results for the year 2000. Non-wood furniture, fixture and business equipment coatings increased 1.7% in volume and 8.7% in value. Higher priced products in the mix of products being sold has likely caused the larger increase in value. This category has been quite high the last two years, and may be the result of an error in industry reporting. The container and closure category shows significant growth in 2000.

However, the 1999 data was obviously low and the 2000 data may still be low. A major merger in this market took place in 1999 and may have caused reporting difficulties and low numbers. Hopefully, both of these categories will be reported to the Census Department more accurately for future reports.

The coil, sheet, strip and extrusion coatings category shows a decline of 2.8%. The coil coating industry has been operating at a high level for the last several years. The decline appears reasonable in light of the slowdown of markets that consume coil coated products. Appliance liquid coatings shown in the category are down, but are offset by an increase in appliance powder coatings. The switch to powder has been ongoing for the last 20 years.

Machinery and equipment was down 9.0% in volume in 2000 and 3.2% in value. The slowing economy hits the machinery and equipment prior to the end product producing categories. The other product category is considered the general metal products category. For 2000, the category grew 3.9%, which is considered possible. There may be non-metal coatings included in this category since it is a catchall category especially for small quantities of a product.

Powder Coatings

The powder coating category grew from 311.6 mil. lbs in 1999 to 338.7 mil. lbs in 2000, an increase of 8.7%. The Census Department converts pounds to gallons using a conversion of 5 lbs/gal. This conversion permits a better comparison with the liquid coatings that are reported in gallons. The dollar amounts are not changed and show that the value of shipments in 2000 of $803.5 mil. are an increase of 6.5% over 1999. For the last decade, the growth rate of powder coatings had been in the double digits. Although the rate of growth is slowing down, it is still high compared to most other categories of liquid coating products.

Most of the powder coating markets were close to the amount reported last year, with the exception of appliance powder, which as mentioned earlier continued its growth. The other major change was in the thermoset functional/thermoplastic powder coating area, which showed growth of 34%. Part of the growth in this area could be the result of additional companies reporting the shipments of thermoset functional or thermoplastic powder. There is also a conflict between whether some thermoplastics are coatings or not. Hopefully, consistent reporting will be achieved in future reports.

Miscellaneous Coating Products

The two categories of product OEM coatings not previously mentioned are electrical insulation and paper, film and foil coatings. These are shown in Table 6.

The electrical insulation category appears to be missing part of the volume reported previously. No major changes in this market are known that would reduce the volume and value so much. Paper, film and foil finishes are down slightly in 2000, and appear accurate.

Special-Purpose Coatings

The special-purpose coatings segment is the smallest of the three coatings segments. Within this segment are a number of dissimilar products that do not fit in either the architectural or product OEM segments. Table 7 shows the categories within the special-purpose products segment.

Automotive refinishing and highway and traffic marking paints were discussed under transportation coating above. High-performance maintenance coatings have been declining over the past several years. The slowing construction market and the reduced maintenance budgets, coupled with improved, longer lasting coatings may be part of the reason for the decline. High-performance maintenance coatings include many of the high value products sold by the coating industry.

Marine coatings remained relatively level with a small increase in volume and a decline in value of shipments. Aerosol paints had a growth of 2.9% in volume and a 1.0% gain in value in 2000. The miscellaneous category had an increase in volume but a decline of value.

A disclaimer has to be added to this report. The above data is based on the Census annual report of the coating industry, and is only as good as the reports submitted to the Census Department by private companies. Usually the marketing departments are most interested in the statistics while the accounting department is charged with reporting the details. The accounting department does not always value the need for accurate and timely reporting of company data to the Census Department. I would suggest that all those interested in the government statistics check with their own reporting departments to ensure the accuracy of the data submitted.

Edward W. Bourguignon is president of Posintel Inc. You can reach him at 216/249.6756, or by e-mail: EdBourguignon@cs.com.