PCI Magazine interviewed Roger Powell, marketing director, Architectural Coatings, Asia Pacific Region, Rohm and Haas Company, on the state of the coatings industry in China, future expectations for that market, and what Rohm and Haas sees as its global strategy in the region as well as in other global markets.

The new Rohm and Haas R&D facility in Shanghai.


PCI Magazine interviewed Roger Powell, marketing director, Architectural Coatings, Asia Pacific Region, Rohm and Haas Company, on the state of the coatings industry in China, future expectations for that market, and what Rohm and Haas sees as its global strategy in the region as well as in other global markets.


PCI: Other than China, where else is Rohm and Haas focusing its efforts in the global community, such as the former Eastern bloc countries like Poland and Russia, as well as India?

Rohm and Haas is always looking for areas where it can grow profitably. The focus over the past five years has been in China and India, and both areas are now established; but there is much more to be done. With access opening up to the old Eastern bloc, we have established a team to review the entry strategies that will provide a foothold in these countries. This will take time and careful planning as we need to make sure that the offering Rohm and Haas provides meets consumer requirements. The opening of facilities in Turkey is evidence of the move into Eastern Europe.


PCI: Are both the liquid and powder markets showing the same growth rates in China? If one market is dominant, why is that? Are liquid coatings primarily waterborne or solvent-based?

All segments of the coatings market, with the exception of the water-soluble segment, are growing in China. In liquid, we see both water and solvent still growing, but for different reasons and at different rates. Water is based around the housing market, and it has had a slower growth in the past as the market has seen reduced growth rates due to government intervention on money available for housing. The industrial area, which is mainly solvent-based, continues to expand based on strong exports and an increasing wealth in the Chinese community, leading to strong growth in the appliance and automotive sectors. Growth here is as strong as 11%.

Powder is growing but is patchy depending on the segment and type of resin required.


PCI: In what sectors of the industry do you see the greatest growth in China now? What do you predict the situation to be five years from now? What are the biggest growth areas in the Industrial sector?

We see the Architectural sector continuing to grow with the potential to return to double-digit numbers by the end of 2006. We expect the repaint market to appear then since much of the current market has been in new buildings. This will provide a surge in the various channels to market that domestic paint suppliers use. These channels are different to the new-building market. Five years from now will be much the same: strong new-home building, but much of this will be outside the current major cities, and there will be extensive repainting based on redecoration, color and style.

Industrial will continue to be mainly solvent-based and is expected to grow at 11%+ for the foreseeable future. There is a movement to water-based in certain key sectors, but this will be slow as not all performance demands are currently met. Much will depend on the governmental position on environmental emissions as to the speed of conversion.


PCI: Is R&D being handled in the United States? Where else?

Rohm and Haas’ central research for coatings is still in the United States. The new research facility in Shanghai will take over several areas of excellence that will supplement the Spring House, Pa., facility in the United States. We expect to focus the research here in China on products and applications that are more prominent in Asia.


PCI: Is the quality-control effort in China’s coatings manufacturing improving? What about at the raw material plants?

Local Chinese paint producers have been very fast learners, and the quality is now capable of matching the international companies. The Chinese have looked to local supply of most raw materials to reduce cost of importation, and to this end we see that these products have also increased in quality and consistency. Several specialty products have yet to be manufactured, and it is recognized that if the consumer requires higher performance, then imports will be used.


PCI: Are acrylic or acrylic hybrids the predominant resin technology used in China today? What other technologies seem to dominate?

Certainly the acrylic monomer is the prime building block for the decorative-coatings market. This is in the form of both pure acrylics as well as acrylics polymerized with styrene and vinyl. The type of product depends on the performance of the paint. There are small amounts of VEOVA* and additives of silicone added to some products for special requirements, but the styrene acrylic polymer is the most universally used.

In solvent-based coatings, we see significant use of alkyds, epoxy and polyurethane.


PCI: What are the environmental regulations for coatings in China compared to Europe and the United States?

This is an area where we see China moving very rapidly. The government and the relevant authorities look at what is going on in both Europe and United States. This is then put to the relevant committees, and decisions to move come quickly. While the regulation is quick, the ability to police and implement it is not as rapid, and it does take time for complete implementation. We now assume that what is taking place in Europe or North America today will be in China within less than 24 months.

Powell

PCI: Do the Chinese have the skilled labor pool required for plant-manufacturing operations?

China is producing more engineers, chemists and undergraduates than any other country. While there is still some considerable inexperience, this is rapidly being overcome, and the quality of the workforce available to coatings companies is extensive.

The area where we see skills still lacking is in application. To address this, the authorities are currently establishing training programs to increase skills. This is being done at a provincial level. Rohm and Haas through its Paint Quality Institute program is assisting by providing information on how to obtain a quality paint job.


PCI: Are most of the coatings being produced for internal use or for export of either coatings or coated products (like coil)?

All the decorative coatings are being used locally. There is still a small amount of importation for specialty decorative areas, but we expect China to eventually be an exporter of coatings in the not-too-distant future. As for Industrial, obviously the finished goods that are exported to the United States, Europe and other countries are coated. However, there is no trade in export coatings.


PCI: Has the cost of raw materials increased in this part of the world as it has in the United States? If so, what is the impact?

Raw materials have increased across the world, and China and Asia in general have not been excluded from this ramp up. We do, however, see that the price increases have not been as extensive as in North America and Europe, and the prices have bumped around considerably. Reasons for this vary, but the high degree of volatility has been due to the very high levels of competition and trying to hold back price increases, which is difficult for suppliers. As one country raises prices, another one will drop them. The market is difficult to read, and profit margins are challenged.


PCI: Who are your resin competitors in China? Is the profile similar to that in the United States?

Competition in China is fierce. Virtually every major supplier is established or about to set up an operation. In addition to this, the local Chinese manufacturers have developed products that meet the basic market needs. These tend to be very regional -usually based around one or two provinces. Rohm and Haas still is one of the few suppliers with multiple facilities and providing a complete product line for coatings customers.


PCI: How many plants do you currently have in China, and what are your long-term goals for further growth?

Rohm and Haas has 10 emulsion plants in Asia Pacific. Two of these are in Mainland China, and an additional one is in Taiwan. In December, a new multipurpose facility was announced at a major groundbreaking ceremony in Guangdong, which will house the next facility to service the coatings industry. In addition to this, a new powder coating plant had to be constructed outside Shanghai in 2005 to service this market.

Rohm and Haas is continuing to evaluate further options for plant placement in the region since servicing the coatings industry is a core activity of the organization.


PCI: Are there any problems with energy shortages, fuel, etc. or with the infrastructure?

The issues of infrastructure are still present in China. The authorities are having difficulty in keeping up with the surge in development. Over the past years the electricity supply had shown shortages at various peak times. Water is an ongoing problem, particularly drinking water, and with the large increase in automobiles, the road system struggles to keep up with the demand for access.


For more information on Rohm and Haas Co. products, including polymers, resins and additives for architectural and industrial coatings, visit www.rohmhaas.com/coatings.