Relationships Rule in Architectural Coatings

By Cynthia Challener

Overcoming the challenges presented by the slowed economy and devastated housing market while facing rising raw materials prices, issues with some raw material availability, and increasing regulatory burdens will not be easy for the archi­tectural coatings segment. The building of stronger relationships between various links in the supply chain, however, is one approach that contractors, raw material suppliers, coating manufacturers, and architects find to be highly beneficial. Fortunately, it appears that business is im­proving in the coatings industry overall.

ln an Economic Benchmarking Survey conducted by the American Coatings Association in the second half of September 2010, nearly half of the manufac­turers and 85% of suppliers and distributors that participated in the survey reported that business had improved over a year ago. The most signifi­cant perceived risks facing the coatings industry for both manufacturers and suppliers, according to the survey results, are raw materials pricing and availability, lagging consumer demand, and regula­tory pressures. In response to raw material constraints, com­panies reported that they had substituted a different raw material or switched to a different supplier or grade of material where possible, or, alternatively, had only partially filled orders, discontinued production of one or more product lines, or ideal production capacity.

A number of respondents characterized the problem as an is­sue of their inability to pass along price increases to customers. Respondents indicated that volume reduction and margin shrinkage due to market price resistance as well as limitations on growth are resulting from raw material shortages and ris­ing prices. Some respondents, though, view supply issues as short-term concerns, with increasing regulations and political uncertainties presenting a greater risk for the long term.