Nippon Paint Price Hike Reveals Three Major Challenges in the Coatings Industry

Recently, Nippon Paint issued a notice about price increases for its latex paint products, which sparked widespread attention and discussion within the industry.

Experts pointed out that, in the current sluggish market environment, few companies are able to achieve price increases. Even with a price hike, it does not fully cover the added costs, leading many companies to operate under low-profit, zero-profit, or even loss-making conditions. The reasons behind this phenomenon are complex, but supply-demand imbalance is undoubtedly the core factor, planting the seeds for vicious low-price competition.

Three primary factors contribute to this situation:

1. Overemphasis on production growth in the coatings industry over the long term has led to production capacity expanding faster than market demand. Many coatings companies attempt to reduce costs by increasing production while adopting low-price strategies to capture market share.
2. Innovation in products heavily relies on upstream raw material suppliers, resulting in technological homogenization and severe product similarity. There are relatively few differentiated and personalized products.
3. The low industry concentration has led to a fragmented and poorly regulated market, with varied business conditions across companies. Some low-quality or poorly managed companies frequently adopt low-price competition strategies to survive, disrupting market order.

A coating company executive told the media that although rising raw material prices and other cost increases have indeed brought operational pressures, especially given weak market demand, the pressure is even more pronounced. However, the company currently has no clear plans for a price hike, choosing instead to adjust strategies based on market conditions. In light of weak demand and fierce market competition, price wars are already intense. Moreover, domestic effective demand is insufficient, so even if prices rise, it is unlikely to increase sales volume. On the contrary, it may lead to a loss of market share.

Coating industry observer Li Mingyue analyzed that the difficulty of raising prices is closely related to current market demand and the industry's development status. Many companies worry that price hikes will cause them to lose their cost-performance advantage, thereby threatening their survival.

Li Mingyue believes that addressing the root causes of price hike challenges lies in curbing low-price competition. Rising raw material prices and other costs are issues that must be faced in the course of development, but long-term vicious price undercutting is the primary obstacle to profits and hinders the industry's shift toward high-quality development.

Li Mingyue further explained that, aside from macro-level factors, continued low-price competition among companies is the core issue behind the industry's current difficulties. New products experience price drops shortly after their launch, presenting serious challenges to the survival and development of the industry.

In theory, companies with brand influence can resist low-price competition and leverage niche product advantages to combat it. However, in reality, the situation often deviates from expectations. While some companies successfully develop new products to enhance value, effectively mitigating high-cost issues and achieving good profits, competitors quickly slash prices, causing new products to lose profitability.

Li Mingyue emphasized that irrational price undercutting, not costs, eats into company profits and challenges the industry's healthy development. For some companies, addressing excessive price competition is more urgent and critical than raising prices. If internal price wars persist, the entire industry will face enormous challenges, with many companies operating at a loss or even going bankrupt.

Efficiency and quality are the core elements for the industry's future high-quality development. Implementing the dual-control and dual-carbon policy is a major step toward promoting high-quality development. In this context, if vicious price competition is not effectively curbed, high-quality development will be unattainable.

While some company costs are gradually converging, creating conditions to alleviate low-price competition, the market still struggles to achieve comprehensive self-discipline. Li Mingyue suggests that only through a comprehensive analysis of the deeper causes affecting the coatings industry, correctly understanding the market impact of adverse factors, can the industry and companies find new growth opportunities.