2006 Painting a Picture of the Coming Year for Coatings

By Cynthia Challener

As we approach the end of 2005, it is natural to look ahead and won­der what the New Year will bring. How will the devastation caused by Hurricanes Katrina and Rita impact the coatings market? Will the reconstruc­tion effort balance out any negative effects? Rising energy and raw material costs will again be a key part of the story, as will the (in)ability to pass on price increases. Consolidation within the paint and coatings industry will continue, largely impacting small regional players. The trend toward ever stricter regulatory requirements with regard to VOCs and HAPs will also be part of the story again in 2006.

Cost management and maximization of pro­ductivity and efficiency will be the keys to success in the coming year. In the United States, the volume of coatings sales in 2004 totaled 1.6 bil­lion gallons. In 2005, an increase of 2.3% in volume is expected, but for 2006 that growth rate is predicted to fall to 1.8%, according to Dr. Thomas Kevin Swift, senior director-Economics & Statistics with the American Chemistry Council. This projected decrease in the growth rate reflects the ex­pected slow down in the growth of the gross domestic product (GDP) for the U.S., which has dropped from 4.2% in 2004 to 3.5% in 2005, and will see a further slide to 3.0% in 2006. The largest end-use for coatings is in construction and housing, which ac­counts for 56% of sales.

The next largest applications are furniture (7%) and automotive (6%), according to Dr. Swift. All segments of the coatings mar­ket-architectural, OEM, and industrial maintenance-will be affected by a slowing economy and increasing fuel and raw material prices in 2006.
“However, recent assessments of the impact of Hurricanes Katrina and Rita indicate that the economy will weather this storm better than originally ex­pected,” notes Dr. Swift, which is good news for the coatings industry.