Resin Review: Juggling Costs, Regulations, and the Need for Innovation

By Cynthia Challener

For resin manufacturers, it looks like 2008 will be a year for managing a number of different challenges. Spiraling energy and raw material costs will impact all aspects of operations. Regulatory compliance-particularly European REACH registration-will consume additional resources. The slow­down in the North American housing and auto markets will have a trickle down effect on other segments and affect the growth rate in emerging re­gions as well. Many producers are looking to innovation as a means for maintaining competitiveness and profitability in such a climate. With all of these cost pressures, though, it will be another challenge to find the funding necessary for effective R&D and new product development.

Growth in the mature U.S. coatings market has slowed to just 1 % per year, according to Steven Nerlfi of consulting firm Kusumgar, Nerlfi & Growney. He expects this rate to be maintained through 2011. “Demand for solvent-based coatings is declining. Consumption of cleaner coating tech­nologies, while increasing moderately, is not growing at a rate significant enough to dramatically overcome these losses. Naturally, demand for various resin types will reflect these conditions in the U.S. coatings market.”

Despite a decline in volume of sales, though, paint and coating producers in the U.S. managed to increase revenues from 5 to 10% in 2007 through price hikes and product mix effects, according to Daniel S. Murad, president and CEO of The ChemQuest Group, Inc. Globally, revenues in the paint and coatings industry were up 10-12%. “The resins market has had a similar ex­perience,” he notes, “and has been particularly disciplined and successful at passing along rising costs.” That discipline will be necessary throughout 2008 as well. “Many compa­nies expected the price of oil to remain at $70-$80/barrel and planned ac­cordingly. Now that oil is hovering around $ 100/barrel, we expect to see resin manufacturers pushing for price increases through most of the year,” Murad explains.