Opportunities for commodity & speciality chemicals in the paints &
coatings industry
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Paints & coatings are functional
products that cover, protect and embellish the underlying surface to which
they are applied. The extent of each of these roles depend on the use –
paints applied on our walls, for instance, have as much an aesthetic role as
a protective one; in industrial coatings, the emphasis is reversed.
From a chemicals standpoint, paint is a
complex mixture of several ingredients each of which has a role to play in
delivering the functionality desired. The choice of ingredients is determined
by the performance to be delivered, the economics of doing so, competitive
forces and regulations, if any. Product innovation in industrial coatings, in
particular, is often driven by the consumer and accomplished in teams that
include ingredient suppliers, the paint manufacturing companies and the
consumer.
Switch to water-based systems
Paints can be water- or solvent-based and
there is a trend to move to the former – not just for architectural coatings
that decorate our walls, but even in demanding areas such as automotive
coatings. These shifts are driven by regulations that restrict the emission
of volatile organic compounds (VOCs) known to have harmful effects on human
health and/or the environment. These shifts pose challenges – the most
important of which is meeting the rigorous performance requirements.
Solvent-based systems have several years of optimisation behind them,
stemming from a long history of use, and replacing them involves significant
effort.
Array of chemicals
Several types of resins are used in paints
– alkyds, acrylics, epoxies, phenolics, urethanes etc. – and each of these
has its strengths and weaknesses. Underlying this diversity is a commonality
of function, viz. bind all other ingredients in a formulation to form a film
that eventually dries (by itself, or aided by the action of heat, light or
catalysts), to cover and protect the underlying surface.
Although a paint is often described by the
nature of the resin system used, several other ingredients – some in very
small amounts – are crucial for performance. The range of performance
chemicals, also referred to as coating additives, include surfactants, dispersing
agents, preservatives, thickeners, driers, anti-skinning agents, to name just
few, are vital. While some can be described as specialties, several have come
to become pseudo-specialities or even commodities, with several vendors
offering ‘me too’ products that essentially do the same job. The additives
are delivered by an array of companies and few, if any, offer more than a
handful of products. Procurement in the paint industry is hence a complex
exercise with each company having to deal with several vendors.
Dependency on imports
India has a vibrant paint industry likely
to see several years of growth, given the ongoing infrastructure build-up in
the country. From an ingredients standpoint there is a great dependency on
imports, which is worrying, but can be viewed as diversification
opportunities for chemical companies. The import dependence stretches from
high volume products such as pigments, resins and some solvents, to several
high value specialities. In some cases, the import dependence is in the raw
materials needed.
Competencies in pigments
Start with pigments – the most important of
which is titanium dioxide. The rutile grade, best suited for paints, is
manufactured only by one small producer, Kerala Minerals and Metals Ltd., and
its inability expand has left the market open to imports. Import numbers are
rising year-on-year in line with growth in the market, with some of the gap
also being plugged by imports of the cheaper anatase variety, mainly from
China. The irony here is that India has substantial reserves of the basic raw
material – ilmenite – that can be upgraded to serve as feedstock for a
world-scale pigment plant. Efforts by the Tata group several years ago to
build one such project, in partnership with a leading technology vendor, were
stymied by land acquisition problems, and the project seems to have been
dropped. There have been a few half-baked announcements since, but nothing
has come to fruition yet or a possibility in the near term at the least.
For paint companies, titanium dioxide is
the single largest component in a typical formulation and companies here –
and elsewhere – have taken several steps to reduce its cost impact. These
efforts have been in three directions: substitution of the more expensive
rutile with cheaper anatase (as mentioned earlier); use of cheaper iron oxide
for coloured shades; and use of speciality resins to lower the loading of
titanium dioxide pigment.
While local availability of most other
inorganic pigments is not much of an issue, there are several organic
pigments where import dependency is still high, even as India has a
world-leading position in some others. The phthalocyanines are a good example
of the latter; India is now the dominant supplier of green and blue pigment
to global markets. Most producers are located in Gujarat and there is
substantial capacity to meet requirements well into the future. In the case
of a few other other pigment classes such as quinacridones and carbazole
violet, there is a fair degree of self-sufficiency, and only about 20% of the
requirements are imported. The handful of domestic players making these, have
to their credit invested in research, and developed customised surface
treatment technologies that enable them to meet the exacting requirements of
premium customers. In the case of azo pigments – another important pigment
category – almost all of the requirements are met by imports from China and
this is unlikely to change in the near term. China’s domination stems from
integration to raw materials and large scale of operation, though weak environmental
norms have a role to play. Potential investors will need to carefully
evaluate competitiveness before taking a plunge in this competitive domain.
Raw materials for resins
Among the popular resin chemistries for
water-based coatings, are acrylic emulsions and these require several raw
materials that are all imported: butyl acrylate, ethyl acrylate, methyl
methacrylate, styrene monomer, etc. India does have a vibrant resins industry
that meets most requirements, but the need to import raw materials is a
constraint only now being addressed. Even at the current levels of
consumption – which are low as compared to world averages – the volumes of
monomers needed to meet domestic requirements are enough to justify one or
even two-world scale plants. The good news is that at least on the acrylics
front one project is now in the implementation stage and one more is in the
drawing board. In the case of styrene, however, no project is on the cards
even though India’s requirements are now well past 700-kt (though a bulk is
used not in the paints industry, but for making the thermoplastic,
polystyrene).
Alternative chemistries – such as vinyl
acetate-ethylene copolymers – are also finding a place in the Indian coatings
market, but these too need to be imported. Domestic availability will expand
markets, and it is likely that the next few years will see the first
investments in plants to make these.
Bio-based options
While most solvents used in paints are
petroleum-based and likely to stay that way, there is a trend – at least
internationally – to move towards ‘greener’ options including some bio-based
ones (fully or partially). A good example is ethyl lactate, which has the
advantage of being biodegradable, non-corrosive and non-toxic, without
compromising performance in paints. The solvent has good wetting power for
most pigments and has been shown to enhance the performance of resins.
Technologies to produce lactic acid via the biotechnology route are
commercial and with bio-ethanol available in India – from sugar cane molasses
or cellulosic biomass – a preliminary case for investment in an ethyl lactate
plant as a bolt on to a lactic acid/polylactic acid facility exists.
Prospects for performance chemicals
Significant opportunities exist in the
domain of coating additives: in surfactants, defoamers, coalescing agents,
thickeners etc. Amongst thickeners, cellulose ethers are an important product
class and the market is still a preserve of a handful of multinationals.
India is well placed on cellulose – especially if it can exploit its large
and sustainable resource base of bagasse – but the business is demanding,
with a high commitment to innovation to develop a range of products to meet
customer needs.
While petroleum-based products and
chemistry will continue to be a mainstay for paints & coatings, there are
niche opportunities opening up for use of ‘greener’ options – of course with
no compromise on performance. Paint companies even in India are now touting
claims such as ‘odour free,’ ‘low-VOC,’ ‘formaldehyde-free’ etc. and
ingredient suppliers have an opportunity here, as these niches will expand.
Regulatory impacts on the paints &
coatings industry have so far been limited, but that could change in the near
future, and drive a reformulation of coatings, which will repercussions for
raw material suppliers. In areas such as biocides there is now a large body
of work to demonstrate what is safe and what is not, and while these restrict
the choices available they do expand business prospects for products deemed
safe.
In several ways, the Indian paints and
coatings industries will continue to be an important driver of growth for the
chemical industry. The latter needs to better leverage the opportunities
posed by the former.
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Ravi
Raghavan
CHWKLY 14MAR17
1 comment:
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