By George R. Pilcher, The ChemQuest Group, Inc.
“My concern, however, is that decision makers are too often caught in traditional, linear (and non-disruptive) thinking or [are] too absorbed by immediate concerns to think strategically about the forces of disruption and innovation shaping our future.”
— Klaus Schwab, The Fourth Industrial Revolutioni
I would like to begin this article by assuring all of CoatingsTech’s readers that “all is well—the raw material supply chains have returned to normal,” but I cannot. What I can say is that the statement is more like 85–90% true. There are still a few issues, typically with special materials that are not in broad general use, and also with certain alkyd and acrylic emulsion resins, but the majority of the bread-and-butter resins, solvents, pigments and additives of the U.S. paint and coatings industry are generally available, albeit with slightly longer lead times (at least as of early March, as this article is being written), and significantly higher selling prices than was the case three years ago. The supply chains are being helped, of course, by the fact that large portions of the paint and coatings industry, especially architectural, were seasonally down during Q4 2022, and because of the hoarding that had taken place between 2021 and Q3 2022, paint and coatings production during Q4 was largely made with the expensive raw materials that the industry collectively had in stock already.
Activity in January 2023 was nothing to write home about, but the de-stocking of raw materials held in the paint companies’ warehouses continued well into January, with a certain amount of spillover into February. Things began picking up for raw material orders in February, and it is reasonable to assume that the overall industry, along with its supply chain partners, will exhibit solid, but certainly not outstanding, performance by the end of Q1. My personal crystal ball doesn’t yield a lot of insight beyond Q1, although there seems to be a general consensus among both the raw material suppliers and the coatings producers in most segments that Q2-Q4 will give solid, although unexciting, performance. There is uncertainty, rather than fear, about the future among formulators. We are not seeing, at least as of early March, layoffs in paint, coatings, and inks manufacturers, although RPM announced in January that it was cutting production amid falling orders.ii
No one among the broad array of raw material suppliers, distributors, and coatings producers with whom I regularly have contact expects to see significant supply chain disruptions during 2023, but they tend to temper this feeling by adding one or more of the following qualifying phrases, “Assuming that:
- We do not have a recession.”
- “Neither the Russians nor the Chinese do anything to disrupt the global supply chains.”
- “We don’t have additional devastating earthquakes like the ones that hit Türkiye and Japan.”
- “Interest rates drop.”
That is, of course, asking a lot, but it is probably as realistic as it is possible to be in early 2023. As is generally the case, people in the industry tend to be thinking tactically, and there is certainly nothing wrong with that . . . unless it keeps them from learning the most important lesson taught by COVID-19: tactics alone aren’t sufficient as we move into the future. They must be accompanied by strategy, because the future is likely to be increasingly uncertain for global industry, and the only way in which we can be as prepared as possible to deal with future uncertainties is by putting strategic plans and systems in place that are able to anticipate future disruptions of various types, and create long-term plans for both avoiding such disruptions, and for dealing with them if they cannot be avoided.
Continue reading in the May-June digital issue of CoatingsTech.