Both 2002 and 2001 were difficult years for manufacturing and finishing. But this year's Finishing Market Survey and other economic trends are upbeat about this year's prospects.

No doubt about it, 2002 was a bear of a year, and a bigger, more frightening bear than most people would have predicted. In fact, it may have been worse than it seemed much of the time, considering the U.S. Census Bureau's downward revision last August of paint and coatings shipments (see Census Bureau table), the underlying fear that led the Feds to lower interest rates to numbers not seen in more than four decades and other declines in economic indicators. Of course, mind-boggling crimes, misdemeanors and missteps by corporate executives only exacerbated matters.

But based on Industrial Paint & Powder's 16th annual Finishing Market Survey and other economic data and trends, a rebound appears at hand. Nearly 53% of finishers responded that their operating levels in 2003 would be higher than in 2002. In last year's survey, less than 43% of respondents said their operating levels would increase. Likewise, only 5% of respondents said their operating levels would decrease in 2003, compared to last year, when nearly 13% said their operating levels would decrease.

About 31% of respondents indicated that orders were on the rise, compared to 22% of respondents indicating orders were on the rise in the previous year's survey. Less than 6% of respondents indicated that orders were declining. The percentage of finishers indicating that they were optimistic about the coming year rose somewhat from a year ago, while the percentage indicating that they were pessimistic about the coming year fell by half, to 4.4%. The number of finishers saying they would increase spending for finishing equipment rose from 27% to nearly 32% (Figure 1(), while the percentage saying they would decrease spending-8.5%-fell slightly from last year's figure. Nearly 60% of respondents indicated that their spending would remain the same. Of the nine spending categories, each of which indicates a range of the amount finishers plant to spend, most of them changed little from last year's figures ((Figure 2().

On average, the surveyed companies estimated that they would spend nearly 32% of their 2003 finishing budgets on liquid application equipment. That's about the same as last year, but down about 6% from two years ago. Companies say they will spend about 20% of their budgets on powder spraying equipment, 5% more than a year ago. Companies will spend about 42% of their budgets on support equipment, about the same as last year, and up from 34% a year ago (Figure 3).

Reduced operating costs continues to be the principal motive for new investments in finishing equipment. Like last year, a little more than half of the respondents list this as their top priority, followed closely by the need to upgrade or replace aging equipment (48%).

Other reasons for purchasing new equipment include:

  • Increase capacity, 41.4% (up from 36.6% last year)
  • Improve coatings appearance/performance, 37% (consistent with the last few years)
  • Environmental compliance, 27.3% (this percentage has continued to decline in the last few years, from nearly 37% three years ago)
  • Expand/improve color-change capabilities, 13.2% (about the same as the last three years)
  • Conversion to new coating system, 11.9% (about the same as the last three years)
When asked which costs would be reduced to justify investment in new finishing equipment, "scrap and rework" was cited by 56.5% of respondents. "Direct labor" was cited by 47.7% of respondents as a justification for investing in new equipment, down from 56% last year. Other spending justifications include "indirect labor (setup, maintenance, material handling)," 46%; "material costs," 35%; "in-process inventory," 12.3%; and "warranty and field service," 11.6%. These spending justification percentages were similar to last year's numbers.

Of those responding to this year's Finishing Market Survey, 66.4% identified their operations as finishing departments of a manufacturing company; 29.6% identified themselves as custom coater or job shop. This chart shows the application methods they use.

The "Typical" Finisher

Finishing operations vary widely in size and scope of operations; thus, attempting to provide a snapshot of the "typical" finisher is no easy task. But the responses to Industrial Paint & Powder magazine's 16th annual Finishing Market Survey provide detailed information about staffing, spending, application methods and much more for small and large finishers alike.

While finishing facilities that use a relatively small amount of liquid paint comprise a huge portion of all facilities using liquid coatings, the same is less true for powder finishers. Of those respondents using liquid coatings, more than 46% use less than 100 gallons per month; 100 to 249 gallons, 18.4%; 250 to 499 gallons, 10.6%; 500 to 999 gallons, 8%; 1,000 to 2,499 gallons, 8%; and 2,500 gallons or more, 8.7%. Conversely, about 14% of shops applying powder coatings use less than 100 pounds per month; 100 to 249 pounds, 11.3%; 250 to 499 pounds, 10.6%; 500 to 999 pounds, 13.3%; 1,000 to 2,499 pounds, 14%; and 2,500 pounds or more, 36.5%.

A majority of the respondents (66%) say their finishing operations occupy less than 10,000 square feet; about 38% occupy less than 5,000 square feet. A little more than 5% occupy 50,000 square feet or more.

When asked about the age of their equipment, nearly 22% of respondents said their liquid application equipment was less than three years old; 38.8%, three to five years old; 23.7%, six to 10 years old; 16%, more than 10 years old. These numbers were very close to last year's numbers. Regarding powder application equipment, 26% of respondents said their equipment is less than three years old (compared to 33% last year); three to five years old, 38%; six to 10 years old, 26%; and more than 10 years old, 10%.

On average, respondents say that about 14 people are directly involved in the company's finishing activities, though more than 68% of respondents say they employ 10 people or fewer. The number of people involved in finishing, according to respondents, has fallen significantly the last few years.

How are those employees applying paint and powder? More than 41% of respondents use air or airless spraying, which is down from 48% last year and 52% four years ago. That category is now slightly behind powder spraying (43.9%), which is up from last year and 34% a few years ago. About one-third employ HVLP spraying and 22.2% use electrostatic liquid spray equipment (Figure 4).

And what are they coating? Ferrous metals account for nearly 61% of total coating volume, while nonferrous metals account for 23%. Those numbers have remained about the same the last several years, and respondents say they are unlikely to change over the next two years. Plastic accounts for about 6% and wood accounts for nearly 8% of total coatings volume.

Nearly 23% of respondents say they are reformulating their coatings. Of those that do, the vast majority (84.7%) add solvents. They also add pigments (54%), resins (30%) and other additives (61.3%).

In the plant

Capacity-utilization rates in 2002 changed little from 2001 rates. The only utilization-rate category to show a statistically significant change is the 80 to 89% category, which decreased from 22% of respondents in 2001 to less than 15% in 2002. The other capacity-utilization-rate categories were:
  • Less than 50% capacity, checked by 22.7% of respondents
  • 50 to 59% capacity, 15%
  • 60 to 69% capacity, 12.7%
  • 70 to 79% capacity, 19.3%
  • 90% capacity or more, 15.8%
The percent of companies saying that they send at least some of their parts out to custom coaters to be painted or powder coated has dropped to 31% from around 45% the last couple of years. The vast majority of finishers say that less than 10% of their coatings requirements are handled by custom coaters (Figure 5).

For the most part, the percentage of each type of coating used by finishers hasn't changed much the last few years [check 2 and 3 years ago], and they don't expect to change that much over the next couple of years (Figure 6). The exception has been powder coatings. Respondents say that powder coatings account for about 41% of total usage, up from 35% of total usage last year and 30% three years ago. Finishers say they expect powder coatings to account for about 48% of total usage two years from now. The high cost of conversion was cited by more than 50% of respondents as the primary obstacle preventing them from switching to powder coatings, E-coat and radiation cure. Less than 60% of respondents cite poor performance as the main obstacle holding back the use of waterborne coatings.


In 1987,Industrial Paint & Powder, which was then calledIndustrial Finishing, conducted its first Finishing Market Survey. Some things, such as the increased use of powder coatings and the decreased use of low-solids solventborne, have changed dramatically; other changes have been relatively minor. Here are some of the results from the second study, conducted in 1988.

Other trends and forecasts

According to the latest census bureau data (Figure 7), OEM and special-purpose coatings shipments for the first half of 2002 are down 4.6% and 2.6% respectively. However, second-quarter 2002 shipments of OEM coatings spiked sharply upward over the first quarter and are not far off second-quarter 2001 shipments. Second-quarter 2002 shipments of special-purpose coatings also are not far behind second-quarter 2001 figures.

From 1996 through 2000, shipments of OEM coatings showed healthy gains each year, increasing from nearly 399 million gallons of paint in 1996 to 453 million gallons in 2000, before declining to 407 million gallons in 2001. Shipments of special-purpose coatings fared more poorly, declining from nearly 209 million gallons in 1996 to 182 million gallons in 2000, to nearly 162 million gallons in 2001, a decrease of almost 22% since 1996.

A Freedonia study released recently says that total U.S. shipments of paints and coatings will reach 1.5 billion gallons in 2006 as the United States expands its trade surplus in paints and coatings, with net exports forecast to reach 95 million gallons. In particular, the North American Free Trade Agreement has created substantial interregional opportunities for U.S.-produced coatings. U.S. exports within NAFTA expanded at double-digit annual rates between 1996 and 2000, before falling back in 2001.

The strongest gains are forecast for durable equipment coatings, particularly coatings used on metal building components, industrial equipment and machinery, and aerospace equipment. Demand for coatings used on industrial equipment and machinery, such as construction, mining and agricultural machinery, is recovering from cyclical lows brought on by the U.S. recession. Motor-vehicle coatings will post gains that are below average compared to the larger coatings industry but quite favorable for the sector, which tends to be highly cyclical, particularly at the OEM level. Motor-vehicle coatings demand will benefit from a solid outlook for United States motor vehicle production levels, with gains rising off a weak 2001 base. The market for refinish coatings will benefit from the continuing popularity of larger vehicles such as sport utilities, minivans and pickup trucks.

Shipments of maintenance and special-purpose coatings will exhibit below-average gains, although forecast growth will increase from the recent pace of this sector. Industrial maintenance coatings will reverse recent declines to post solid gains through 2006. This sector remains a stronghold for solventborne coatings due to demanding applications such as marine coatings. In part, the stronger volume gains will reflect a more concerted shift to waterborne coatings.

In a separate Freedonia Group report, analysts say that total world demand for paints and coatings is expected to increase 3.7% annually through 2005. The primary factor promoting these favorable long-term gains during this period will be a sustained expansion in global fixed investment spending, which is forecast to rise nearly 5% annually in real terms. One of the major macroeconomic trends that will promote greater demand for paints and coatings will be a favorable long-term expansion in global per capita income levels. In particular, stronger income levels in developing regions will continue to boost the ranks of the working and middle classes, thus creating new demand for major consumer goods. North America and Western Europe will offer gains of 2.7% through 2005, though for North America this growth represents a decelleration from its 1995 to 2000 pace, while for Europe it represents a slightly more favorable outlook. The North American industry is rising off a strong base after a sustained expansion that began around late 1992. A recent study conducted by Brussels, Belgium-based Irfab Chemical Consultants says that the 2001 global thermosetting powder coatings market reached 2 billion pounds and is expected to reach 2.2 billion pounds this year. Europe leads the way with about 43% of the total, followed by Asia, with 26%; North America, 23%; and the rest of the world, 8%. Penetration of powder coatings varies by country and region. Annual growth rates will also vary, from 4.5% to more than 10%. Polyester epoxy hybrids dominate the powder coatings industry, representing on a global scale approximately 55% of the market, followed by polyesters, epoxies, polyurethanes and acrylics.Editor's Note: Industrial Paint & Powder would like to thank the many readers who took time to participate in this year's market survey. To gather information for the survey, questionnaires were mailed in September to a representative sample of senior-level manufacturing managers at 3,500 U.S. finishing locations. A total of 775, or 22%, were returned. (Only responses from the 716 that apply paint or powder coatings were tabulated in the results.) A sample this size offers a 3.5% margin of error at a 95% confidence level. This survey's intent is to highlight industry trends rather than set specific dollar expenditures for individual sectors of the market. We welcome comments and suggestions regarding the survey. Send them to