The economic operation of the paintindustry shows three major characteristics

On November 2, 2022 Asia PacificInternational Coating Industry Development Conference was held in the form of alive webcast. At the conference, Liu Jie, Acting Secretary General of ChinaCoating Industry Association, made a theme report on "Economic Operationand Trend Analysis of China Coating Industry", pointing out that theeconomic operation of the coating industry presents three major features: rawmaterial price shock, accelerated class differentiation and weak downstreamconsumption. He suggested that relevant enterprises should pay close attentionto the development changes of this industry and key areas of upstream anddownstream, and adjust their strategies in time to cope with the currentsituation.

According to Liu Jie, since this year, theproduction and operation of Chinese coating enterprises have shown segmentedgrowth and decline in differentiated development trend.

The report shows that from January toAugust this year, China's total paint production of about 225.997 million tons(including the output of enterprises under the regulation), down 4.3%year-on-year; total main business income of about 289.76 billion yuan, down 2%year-on-year; total profit of about 14.11 billion yuan, down 26% year-on-year.

From the situation in each province,January to August, the majority of provinces have a decline in paint productionyear-on-year. In particular, Guangdong, Shanghai and other places affected bythe epidemic, the decline was larger. Among them, Guangdong, which has been animportant support for the industry's production growth, fell 4.2% year-on-year.

"Overall, the economic operation ofthe paint industry this year presents three major features." Liu Jiepointed out that, first, upstream raw material price shocks led to increaseduncertainty. Affected by geopolitical conflicts and epidemics, mining andchemical raw material fields frequently appear price increases and shortages,international chemical giants (European companies) are facing energy andpetrochemical raw material crises, and a vacuum situation in the internationalmarket.

Second, stratification accelerated.Different scales of enterprises to accelerate the stratification, and"specialization" type development has become a new hot spot. This isof strategic importance to stabilize the upstream and downstream industrialchain.

Third, the downstream consumption is weak.At present, the downstream consumption slump has been the consensus of thecoating industry. The growth of real estate industry is slowing down and theperformance is not good. The paint industry, which is closely related to realestate, is naturally affected.

At the same time, Liu Jie pointed out that"underwater life, climate action, health and well-being" and otherkey words closely related to green health, become the global coating industry'ssustainable development direction. To this end, China's coatings industry shouldalso keep pace with the development of the global coatings industry and focuson the four key points of "responsible consumption and production,sustainable cities and communities, health and well-being, and qualityeducation". The details include waste management recovery and recyclingprograms, green product management system, and the proportion ofenvironmentally friendly products.

For the development trend of the domesticcoating industry in the later stage, Liu Jie said that the general direction ofstabilization and supply assurance at the macroeconomic level will not changein the future, and the downstream market stabilization and improvement trend isobvious. Especially the industrial field, such as automotive, furniture,machinery, electronics and other fields will increase the demand for coatings.However, the signs of real estate market turning stable in the second half ofthe year are still unknown, and the impact on the architectural coatings marketis still large. All related enterprises should do a good job to cope withinventory and accounts receivable.

"From the market point of view, thesupply of paints is expected to be relatively sufficient in the fourth quarter,and the average market price will fall. However, after entering the autumn andwinter, due to the Russian-Ukrainian conflict, the epidemic and other factorswill intensify energy and chemical raw material tension, the gap in Europe andthe United States in terms of fine chemical products will continue to increase,and the cost will also rise rapidly. This will have a certain siphon effect onChina's related products market, domestic exports are bound to grow." LiuJie analysis said, comprehensive view, the fourth quarter of China's coatingindustry or overall rebound, production and sales growth is expected to reboundto about 3%, profit growth rate will narrow, but the real turnaround is stillfacing a severe test.

For this reason, Liu Jie reminded thecoating enterprises to do a good job of the corresponding capital, raw materialprocurement to protect the work, in order to cope with the possible upstreamprice increases, downstream demand slowdown in the overall situation.