The European coatings industry under the epidemic has 'gradually recovered'

After the European governments partially lifted a series of measures to contain the coronavirus (COVID-19), the European paint industry has been slowly recovering.

The European blockade led to a sharp decline in the region’s GDP in the first half of this year, especially in the second quarter, when economists expected output in some countries to fall by more than 20%.

Currently, the coatings industry and its customer industries, such as construction, automotive, machinery, electrical and electronic equipment industries, are facing the prospect of recovering from a deep recession in the rest of this year and 2021. Hope this goal can be achieved without losing millions of jobs and thousands of enterprises.

Some coating companies in Europe have more advantages than others, and they can stand out from the new crown pneumonia and use the opportunity to consolidate their market position during the economic recovery.

In general, large multinational companies active in many markets in and around Europe have performed much better during this epidemic compared to SMEs that rely on local or regional customers.

Although there are various emergency government programs in Europe that can provide grants, loans and subsidized wages to support companies of all sizes during the crisis, especially small and medium enterprises.

Some small companies are so pessimistic about their chances of surviving a pandemic, so much so that they have rejected government-backed proposals for cheap loans.

The European Commission, the European Union’s executive agency in Brussels, predicts that the EU’s total GDP will fall by nearly 7.5% this year after the summer recovery begins.

According to the previous "European Economic Forecast for Spring 2020" released by the European Commission, output in the Eurozone fell by 3.25% in the first quarter and output in the second quarter is expected to fall by 12.25%. The 19-member Eurozone, which includes all major European economies except the United Kingdom (now a non-EU country), accounts for the majority of EU GDP.

The European Commission said that the economy of 27 EU member states will rebound to about 6% next year, except for the United Kingdom, which has officially withdrawn from the EU. This still means that by the end of 2021 the total EU GDP will be lower than 2019 levels.

Economic uncertainty due to COVID Paint industry associations and companies have given up any attempt to predict this year
"In general, it is difficult to make any serious predictions about our market," said Christoph Maier, head of business and finance at the German Paint and Printing Ink Industry Association (VdL).

AkzoNobel has strong business in Europe and Asia, especially China. At least before the end of this year, AkzoNobel has shelved its profit targets related to cost reduction and other plans. Although operating income increased by 31% in the first quarter of this year, during this period, net income fell by 5%, mainly due to the COVID crisis.

In a recent investor report, the company said: "In response to the major market chaos caused by the COVID-10 pandemic, we have suspended key parts of the transformation and suspended our financial ambitions for 2020."

Most European manufacturing sectors were not banned by legislation during the blockade imposed in March. Instead, due to other restrictions and safety regulations, they had to stop production.

In the automotive industry, its parts, components and appearance are the main exports of industrial coatings. Due to the plunge in demand, there is a shortage of parts from major sources such as China, the implementation of isolation and home policies, and restrictions on cross-border transportation of goods.

In the construction industry, another major customer department of coatings, the central and regional authorities have adopted a tougher attitude towards the opening of the site because of the greater need for safety agreements, including issues such as social distance and hygiene.

The main restrictions on production during the shutdown of the paint industry itself are the sharp drop in demand and difficulties in the raw material supply chain
After the blockade of the downstream value chain of coatings was relaxed, a huge impetus for resuming work was that the government issued guidance on the safe working conditions of COVID, especially when the society is far away. In addition, employers have been negotiating with employees regarding safety agreements applicable to specific factories or locations.

The guidelines and agreements help to revitalize the construction industry. The construction industry has the largest number of workers in the coating value chain, from paint production to paint construction and paint applications for personal decoration.

Neil Ogilvie, CEO of the British Paints and Decorations Association (PDA) explained: "People's demand for painters to decorate homes has been suppressed, but it is not clear how to decorate in accordance with the COVID Safety Rules."

He continued: “Now the British government has published guidance on how to safely complete paint spraying and other work in people’s homes. Our members can now work at home with confidence and ensure that they work safely.

Driven by the recovery of the automotive industry, other industries that may recover faster are industrial coatings. David Park, Public Affairs Manager of the British Coatings Federation (BCF) said: "The industrial coatings industry is critical for many of our members. Restarting production will be a real boost for them."

For the German coatings industry, the rise in demand for industrial coatings is particularly important because it depends on automotive and other engineering customers. A VdL spokesman said: "We hope that all industries can achieve economic recovery, especially in the industrial coatings sector that has been hit hard.

However, the biggest worry in European industry is that the recovery after the new coronary pneumonia will be derailed due to the second wave of pandemics.

Economic recovery will depend on whether COVID can continue to be strictly controlled
Maier said: "Despite the temporary success in stabilizing the spread of infection, the second wave of pandemics can reverse the beginning of the economic recovery at any time."