US MMA market likely to benefit from Sherwin-Williams expected growth in paints

The US methyl methacrylate (MMA) market could benefit from strong home remodelling rates.

Paints producer Sherwin-Williams sees architectural paints as the main driver of its sales, according to the company's industry overview presentation.

The following chart shows North American paints and coatings sales mix by category for 2018, according to Sherwin-Williams.

STRONG US HOME REMODELLING

Sherwin-Williams cites US residential remodelling as a main driver, with residential remodelling at two-year highs so far in 2019, according to data from the Harvard Joint Center for Housing Studies (JCHS).

The company also states that consistent price appreciation in home values is giving owners incentive to remodel their homes.

Another factor encouraging home renovation is the trend of ageing in place, where home owners remain in their existing housing as they grow older. According to the JCHS, this trend is “fueling strong growth in the remodeling market.”

However, new home production remains low even though demand for new housing is strong in the US.

Incomes, mortgage rates and ability to obtain loans are just a few factors weighing on new home ownership.

Overall, homeowners are more likely to renovate their current housing than to purchase a new home, as evidenced by the downward trend of monthly housing starts in the following graph.

AUTO DEMAND

The number of miles driven continues to climb in the US, in turn driving automotive refinish demand for paints and coatings.

However, domestic auto production continues to fall, as evidenced by the following chart.

Auto production is also a key market for MMA, as much of downstream polymethyl methacrylate (PMMA) goes into automotive parts.

PMMA is making gains over other polymers like polypropylene (PP) inside a vehicle, with some manufacturers opting for PMMA "piano black" because of its astatic properties.

A little more than half of US MMA goes into downstream PMMA, according to ICIS Consulting and Analytics, highlighting just how critical MMA is for the automotive sector.

WHAT THIS MEANS FOR MMA

Demand for MMA remains steady but continues on a downward trend following the faltering sentiment on the US economy.

One MMA producer said they expect the paints and coatings sector to increase by 4-5% year on year, though they have seen a slowdown from the acrylic sheet and polymer sectors due to tariffs.

The paints and coatings sector is a large part of the US MMA market.

The downward trend in US auto production could offset gains from the paints and coatings sector, as auto production in March was at a low not seen since the 2008 recession, according to the US Bureau of Economic Analysis.

OUTLOOK

Housing start numbers can help predict future MMA demand.

According to Sherwin-Williams, housing starts translate into paint sales 12-18 months later, depending on the length of construction.

The recent uptick in housing starts could indicate strong future paint demand, and in turn an increase in MMA demand.

The median age of homes in the US also continues to rise, which ultimately leads to more remodelling and repainting of the ageing homes, which could also strengthen future MMA demand.

The US MMA market is expected to track GDP and the construction market tightly, reflecting its close link to the economy.

The question that remains is whether the current and predicted uptick in demand from paints and coatings be enough to offset the declines from slowing automotive production.

Major US producers of MMA include Arkema, Dow Chemical, Evonik and Lucite.