Industry IssuesAnalysis of the reasons 1behind the approximate 40% decline in the number of U.S. coatings companies in the past 20 years reveals an industry under intense competitive pressure and an overabundance of companies with available capacity. This resulted in a situation where supply exceeded demand, thus negatively affecting prices and margins. This consolidation trend will likely continue, as some experts have predicted that the number of paint companies will be cut in half, to 300-400 by the year 2030.
The coatings market has been described as both mature and dynamic — dominated by strong competition and the need to innovate due to stringent environmental regulations. The consolidation trend that began in the 1980s has significantly intensified as many companies strive for geographic expansion and the ability to service global customers. The consolidation trend has required companies to reassess their market focus and identify the factors controlling their growth, profitability and competitive advantage. Despite these trends, there remain relatively few markets that are dominated worldwide by a small group of paint suppliers. A few examples of these market segments are automotive topcoat, interior/exterior can and the marine coatings segments.
Consolidation in the paint and resin industries has resulted in the creation of a few industry giants that are expected to bring economies of scale, supply chain efficiency, as well as the ability to compete more effectively on a worldwide basis. This combination should ultimately result in improved margins and increased shareholder value. The effectiveness of achieving these goals in the global arena has been more difficult, as companies must now focus on more complex operational, logistics, supply chain, and business coordination issues. This can result in a company becoming “internally focused,” often taking their attention away from customer satisfaction.
Considering the current business environment and trends, is there still room for the smaller paint companies? Absolutely! This is especially true in regional or niche markets where specialized service is paramount, or applications in which specific technical expertise is required. If a small company has the ability to maneuver around the giants, they are often rewarded handsomely for providing the specialized service, local brand, or technical expertise required to service the customers.
Sustainable Competitive AdvantageThe most successful companies are those that have addressed their market focus, divested non-core businesses and adapted to maintain effectiveness in different situations, environments, and cultures. Some of the key factors associated with market success are development and implementation of a long-term strategic plan; effective supply-chain management; adopting a safety, health, and environmental culture; and investing in operational and technical excellence. How a company understands and addresses these factors will be key to developing a sustainable market advantage into the 21st century.
It is crucial that all companies actively choose what they perceive to be their sustainable competitive advantage vs. the competition. This holds true for large corporate giants and small, focused companies. Some coatings companies may choose to be full service suppliers, or “one-stop shops,” with an ability to supply all products to all customers. Others may choose to be the low cost producer and offer highly competitive prices. Some paint companies may successfully focus on becoming the technology and/or service leader in one market niche or geographic area. By actively choosing and focusing your employees’ energies on an appropriate competitive strategy, your company can remain healthy and thrive in a hostile, competitive environment.
Resin Technology to Gain AdvantageInnovations can create a sustainable advantage by providing technology that can control the cost/performance balance, to meet a variety of customer requirements. The advancement of resin technology continues to be one of the key factors driving innovation in the coatings industry. The impact of advances in waterborne resin technology in the metal coatings market will be examined later in this article.
Using the U.S. coatings market as an example (see figure), one can see the dollar value split between architectural paints (37%) and the other segments, generally referred to as industrial coatings (63%).
In the U.S. architectural paint market2 from 1979 to 1996, waterborne interior paints increased their market share from 76% to 84%, and exterior waterborne systems increased from 60% to 71%. The move from solvent to waterborne systems has been based mainly on latex polymers (acrylic and vinyl acetate/acrylic) made by way of emulsion polymerization. This steady evolution to waterborne systems has been driven largely by consumer preference for the low-odor, water clean up, and fast dry/re-coat of waterborne systems. Advancements in waterborne resin and thickener technology have supported many of these changes. The proven long-term exterior performance of acrylic systems has also led to growth in waterborne architectural paints.
Analysis of the industrial coatings segment3 shows six major coatings technologies (see table), with waterborne and powder coatings increasing at the expense of solventborne coatings. Government regulations have been directly responsible for much of the shift in technology, as opposed to consumer preference factors discussed in the architectural paint segment. Environmental regulations have directly stimulated research in the industrial coatings market. In fact, according to a recent survey,4 over 50% of all R&D dollars spent (of the industrial coatings producers surveyed) were devoted to waterborne systems. An additional 15+% of R&D budgets were being spent on powder, rad-cure and other low-VOC technologies. Although regulations are driving much of this research, improved coating performance/economics will ultimately result in greater market share penetration for these lower VOC systems.
As one probes deeper into the types of resin technology used in the architectural and industrial coatings segments, several interesting trends and factors emerge. One significant trend is that resin technologies are predominately based on epoxies, urethanes, alkyds and acrylics. These traditional resin chemistries are the same ones that the industry has used over the past 20 or more years. They are also projected to be the same resin technologies carrying us into the 21st century. In fact, the majority of monomers and other basic “building blocks” used to produce these resins have not changed significantly in the past 20 years. One logical question is how can a company develop a market advantage, increase their profit, and continue to address environmental concerns when so little has changed in the last 20 years. Fortunately, several innovative trends have emerged in recent years to assist the coatings formulator in gaining competitive advantage.
Using innovative polymer technology is one way to achieve advantage. Resin differentiation resulting in greater control of the cost/performance balance is being addressed largely by the method of putting the familiar building blocks together. This creativity results in new, innovative acrylics, urethanes, alkyds, and such. Advances are also continually being made in the development of hybrid resin systems. These hybrids and co-polymers provide further performance differentiation. The ability to make totally different chemistries compatible can generate a balance of desired performance features. Polymer hybrid chemistry, such as that practiced by NeoResins, is providing an exciting new set of options for market differentiation, and an improved cost/performance balance.
The following examples illustrate some of the resin capabilities being generated to ensure a healthy and profitable coatings industry. Urethane and acrylic building blocks are used to generate novel, self-crosslinking waterborne urethane/acrylic co-polymers with an improved balance of performance properties at lower overall system cost. Urethane and alkyd building blocks are used to generate waterborne alkyd-urethanes that provide hardness and chemical resistance from the air oxidation crosslinking that occurs after evaporation of the water and film formation. The performance and appearance of these novel waterborne hybrid resins can rival oil-modified urethanes, at a significantly lower VOC level. Alkyds have also advanced beyond the traditional alkyds and water reducible varieties. As an example, one article5 featured new alkyds derived from soybean oil with VOCs of 1-2 lbs/gal vs. traditional alkyds at 3-4 lbs/gal.
Waterborne Metal Coating AdvancesThe science of waterborne resin technology continues to play an important role in replacing solventborne technology. No longer can we simply change ratios of monomers and meet the ever-increasing requirements for the markets we now serve. In fact, every aspect of polymer design plays a crucial role in meeting specific requirements of any given market. Let’s take a look at the metal market.
When waterborne resins were first formulated for this market, it was hard to comprehend that any paint that contains water could protect steel. In addition, the use of traditional leads and chromates were eliminated as corrosion inhibiting sources. However, new corrosion inhibiting pigments and flash rust inhibitors aided greatly in meeting corrosion requirements for this market. The best performance was still with multi-coat systems, with primers being the key contributor to corrosion performance.
Trends in this market during the past few years have caused NeoResins to re-examine the role of the resin as the key contributor to coating performance. Such trends include direct to metal adhesion, lower film thickness and reduction in the number of coats, higher gloss, improved corrosion resistance, and better compatibility with other resin types.
Resin technology and polymer design, such as controlling the latex morphology, particle size and particle size distribution, molecular weight, and surfactant levels have begun to play a crucial role in achieving the balance of properties for these evolving requirements.
From Then to NowTraditional waterborne resins in the early 1970s had basic acrylic or styrene-acrylic compositions at various ratios. The particle size averaged 100-200 nm, surfactant levels were high, molecular weight was greater than 400,000 and glass-transition temperatures (Tg) averaged about 50°C. These resins, depending on the ratio of monomers and types of monomers used, gave fair performance on metal with the help of many formulating additives. Medium to high gloss was achievable, but not combined with good corrosion resistance.
In the 1980s, unique waterborne resins were developed that contained combinations of different monomers, such as vinyl chloride, vinylidene chloride, and acrylics. These resins had a large particle size (200nm), but molecular weights of less than 200,000 and low surfactant levels. These unique waterborne resins have outstanding corrosion resistance and the ability to coat metal with a high profile. They can be formulated at very low VOC (under 1 lb/gal), but do not exhibit high gloss. The challenge became how to get the best from both decades of learning.
After studying all aspects of polymer design and manufacturing processes, novel waterborne resins have been developed that now meet these trend requirements. These resins can be either acrylic or styrene-acrylic, depending on exterior durability requirements, have low particle size (<80nm) for better film coalescence, low molecular weight (<100,000), and low surfactant levels to prevent water osmosis in dried films. The resin itself imparts excellent corrosion protection to steel and can be formulated without the use of corrosion inhibiting pigments, thereby meeting high gloss requirements.
For example, with one novel resin, an 18% PVC white formula (without the use of corrosion-inhibiting pigments), exhibited the following balance of properties: 60( gloss of 85, combined with 250 hours of corrosion protection on cold rolled steel at 1.1 mil dry film thickness. With another resin, at the same PVC, film thickness, and with no corrosion inhibiting pigments, the 60( gloss measured 82(. After only a four-hour ambient cure, this paint exhibited no water damage upon water soak. The corrosion resistance of this system remained excellent.
Complete waterborne paint systems exhibiting the required performance, application and appearance properties, continue to prove themselves in the market. The drive for lower total application costs, including a reduction in total coating film thickness continues. The achievement of low VOCs and HAPs free systems, by itself, will not drive the market toward wide-scale incorporation of waterborne coatings. The objective of the resin manufacturer and coating formulator is to make these waterborne systems economical, practical and “user friendly,” while maintaining (or increasing) the performance level that the end-user is accustomed to. This will result in competitive advantage. Waterborne resin design is certainly not standing still and will continue to be a crucial aspect in providing coatings formulators the main ingredients required to meet their customers’ continually evolving requirements.
For more information on resins, contact NeoResins, a business unit of Avecia, 730 Main St., Wilmington, MA 01887; phone 800/225.0947; fax 978/657.7978; visit www.avecia.com.