Abdul Rahim Chughtai: Paint & Coating Industry in Pakistan

Mr. Rahim was the third speaker at ECHEMI Coating Forum & Procurement Conference, who is the old friend of ECHEMI. Mr. Rahim is the vice president of Asia Dyestuffs Industry Federation. Mr. Rahim visited ECHEMI in April 2017, which made a full preparation for this conference. In his speech, Mr. Rahim said that coating industry is one of the biggest consuming industries in Pakistan. The market shares of decorative coating, surface coating and special chemical are large, and the demand growth in Pakistan and Asia will continue to increase. Currently, the consumption volume of Asia occupied 50%-55% of the total in the global market. In 2016, the real estate occupied around 6.71% of the GDP, and the growth rate remained at 3.99% in the past three years. Furthermore, Mr. Rahim analyzed the major influencing factors in the coating market, raw materials and downstream markets. 

Ⅰ Paint & Coat Industry in Pakistan

The Paint and Coat industry is one of the most heavily demanded industries in Pakistan. The present size of the decorative paints, surface coatings and special chemicals market in Pakistan is assessed to be approximately between Rs.33 -38 billion. This market size is growing by 5-10 percent annually, depending on expansion in the economy and investment in industry.

Demand in Asia continues specially in Pakistan to rise faster than elsewhere in the world, and the region now accounts for 50–55% of global consumption on a volume basis. In 2016, the housing sector’s share in GDP was 6.71% and it has maintained a growth of 3.99% over the past three years. (Pakistan Economic Survey 2016).

Ⅱ Some facts of Paint & Coat Industry in Pakistan

This growth is evident in the fact that the two paint giants, AkzoNobel Pakistan (previously ICI paints) posted a turnover of Rs 7.2 billion in 2015, compared to Rs 6.9 billion in the previous year (ANPL Annual Report 2015), and Berger, a turnover of Rs 5.08 billion in 2016, compared to Rs 4.3 billion in the previous year (Berger Annual Report 2016).

The industry is divided into two segments; the organized one, accounting for 30 to 40% of the market, and the unorganized segment that takes in the rest. According to an estimate, over 350 units of paints and varnishes are operating in unorganized sector. Their products are of various standards and their cost of production is comparatively low.

In the organised sector, major players include the multinationals (AkzoNobel Pakistan, Berger, Jotun, Kansai, Nippon) and local companies (Happilac, Brighto, Diamond, Master and Nelson). The number of paint and coatings producers in Pakistan is large, but most are regional producers, with only 10 or so large multinationals. Among the local producers Happilac & Brighto contribute market share of more than 50%

Most of the major multinational companies operate in the areas of decorative paints, industrial paints, powder coating, automotive paints and construction chemicals and coatings producers are Akzo Nobel, Kansai Paint, Nippon Paint, Berger, Gobis, BASF, Axalta (formerly DuPont’s automotive coatings) have production in Pakistan.

Ⅲ Classification

Pakistan's Paint Industry classifies its paints generally into six types as under:

> Defence Service Paints

> Marine Paints

> Decorative Paints

> Building Paints

> Industrial Finishes

> Special Paints

In recent years after the China-Pakistan Economic Corridor (CPEC) project, there has been impressive growth in construction in Pakistan, which has given opportunities to all players in the paint and coatings industry. Commercial and residential building construction, which utilizes decorative paints, has seen growth. With the steady progress in country's economy coupled with rising construction activities after China-Pakistan Economic Corridor (CPEC) project, demand for paints and coatings has been picking up. This has enabled the companies to expand their product ranges to cater to the rising demand for paints and coatings. Pakistan’s unique geostrategic location enables it to capture Central Asia and Middle Eastern paint and coat markets.

Afghanistan is considered as one of the massive reconstruction place and has turned out to be the perfect market for Pakistani exports – around 90 percent of Afghanistan’s paint requirements are being met from Pakistan. At the same time, new construction is increasing which is incremental business; about two-thirds of decorative paint goes into existing houses that are being renovated or repainted and a third goes into brand new construction. Overall with the economy and housing market growing, the demand for consumer paints and Coating Materials has also grown.

Many Pakistani companies have technical collaboration arrangements with some of the leading international manufacturers including the largest paint company in China, Japan, Germany, UK, Turkey, etc… which provides assistance in developing paint and coating raw materials, decorative paints, automotive paints, general industrial finishes, powder coatings, protective coatings, vehicle refinishes business, road safety, government and marine, construction and marine, construction chemicals, printing inks, auxiliary products, construction chemicals, adhesives, vehicle refinishes, industrial paints, etc.

Ⅳ Raw Material Market in Pakistan

Paint & Coat industry uses about 300 different types of raw materials for producing various kinds of paints. With the increase of demand of paint and coating products, need of raw materials, whether in the decorative paints, automotive paints, general industrial finishes, powder coatings, protective coatings, vehicle refinishes business, road safety, government and marine, construction and marine, construction chemicals, printing inks, auxiliary products, construction chemicals, adhesives, vehicle refinishes, industrial paints, etc… has also been increased.

The major imported raw materials include pigments, zinc oxide and TITANIUM OXIDE.

Manufacturers, quality managers and from all over Pakistan are looking for the right raw materials, equipment and technologies. Foreign companies in Pakistan's paint industry have been fairly active. In fact quite a few of the leading paints manufacturing units were sponsored by foreign manufacturers and are operated in collaboration with local entrepreneurs. The interest of foreign investors in this industry appears to be due to the fact that most of these companies began their operations in Pakistan as importers and traders of paints which were manufactured by their principals in the home country.

Some of the local paint manufacturing enterprises have also established paint manufacturing factories in the Middle East countries in collaboration with the host country's investors. Such joint ventures by Pakistani sponsors are reported to have been established in Kuwait, Afghanistan and Lebanon while more such opportunities are being explored in Saudi Arabia, UAE, and other countries of the Gulf.

Ⅴ The Demand for Coating and Paint in Pakistan

The main consumers of paints and varnishes are Government and semi-government organizations such as Defence Service, Shipyard, Railways. WAPDA, Dams; Government Road Transport Agencies etc. The private housing sector is estimated to account for 20 per cent of total paint consumption in the country. The demand for paints and varnished is derived from expansion in construction, building, manufacturing, transport and other sectors. The country has yet to go a long way in its development efforts, for the pursuit of which a five year plans have been formulated.

Moreover, a favourable turn in the investment outlook in the private sector, brought about by a desired change in the industrial and economic policies of the Government, is expected to contribute to a pick-up in the private industrial sector. In view of this, there appears to exist a sizeable potential for further strides in the country's paints industry. The demand for paints in conservatively estimated to increase by 20 per cent annually during the next five years. Moreover, the development of chemical industry is also taking place in collaboration with Chinese enterprises and in view of this, most of the raw materials used by the paints industry, are expected to be produced and manufactured locally during the next five years.

Ⅵ The Export of Coating in Pakistan

Pakistan's export performance in regard to paint and varnishes is not very encouraging. Major exports of paints and varnishes include colours prepared, enamels, paints oil, paints prepared, pigments and varnishes. Pakistan exports paints and varnishes to a number of countries, prominent amongst them being Saudi Arabia, Japan, UAE, Dubai, Bangladesh, Singapore, Sri Lanka and Oman.

Pakistan exports mainly conventional type of paints mainly to Middle Eastern countries.

Ⅶ Conclusion

In recent years after the China-Pakistan Economic Corridor (CPEC) project, there has been impressive growth in construction in Pakistan, which has given opportunities to all players in the paint and coatings industry. Commercial and residential building construction, which utilizes decorative paints, has seen growth. Demand in Pakistan to rise faster than elsewhere in the world, and the region now accounts for 50–55% of global consumption on a volume basis. With the increase of demand of paint and coating products, need of raw materials. As the economy and housing market growing, the demand for consumer paints and coating materials has also grown. In view of this, there is a great potential for further strides in the country's paints industry. Because of the flexible government policy and the rising demands,foreign investors in this industry are welcomed and join hands with Pakistani local companies.