The State of the U.S. Coatings Industry 2021: Resurgent Growth Meets Shortages, Allocations, and Late Deliveries

By George R. Pilcher

Much has happened since last year, when I last addressed the State of the U.S. Paint and Coatings Industry in the August 2020 issue of CoatingsTech. At that time, I indicated that no one other than the most committed optimist would predict anything better for 2020 than a global economy suffering from a minimum of a 4-7% decrease in the global Gross Domestic Product (GDP), compared to the 2019 pre-COVID-19 prediction of an increase of 2.9%.

Clearly, I was being a bit of a pessimist because, thanks largely to a v-shaped recovery, the global GDP for 2020 declined by only 3.3%, and the U.S. GDP by 3.5%. Estimates for 2021 from the World Bank suggest global GDP growth of 5.6%, and 6.8% for the United States, with China leading the pack at a whopping 8.5%, so recovery is well underway.

This is not to say that things are “back to normal”—not by a long shot. Despite the recovery, global output will still be about 2% below pre-pandemic projections by the end of this year.¹ Moreover, at the end of June 2021, the entire supply chain was a mess:

• Production of virtually everything used in manufacturing industries, such as paint and coatings, cannot keep up with demand.
• Shipping costs doubled and, in some cases, tripled; load-to-truck ratios were up anywhere from 400%–1,700% year-over-year, April 2020–April 2021.
• Just as the great ports of the United States were beginning to become less backed up in May, a coronavirus outbreak forced Chinese authorities to shut down parts of Guangdong province, which is home to Yantian, one of the world’s busiest ports and a major gateway for containerized exports. As of late June, the port was only back to 70% capacity operation, with approximately 50 ships backed up, and roughly 350,000 loaded containers stranded on the docks.²
• In April 2019, the price of a common lumber western spruce and fir two-by-four was around $400 for every 1,000 linear board feet. The price rose to approximately four times that amount by late May 2021, hitting just over $1,600 for every 1,000 linear board feet, before dropping to $960 in June.³ Lead times extended to 12 weeks or more, up from only two weeks or less, pre-pandemic.
• As a result of the “Great Freeze” in February 2021 on the Gulf Coast, production across the Permian Basin dropped by an average of more than 2 million barrels/day over three days during the third week in February. ⁴ As of the end of June, we found that a surprising number of products from this area are still subject to force majeure and/or allotment and the supply chain, with individual product exceptions, won’t be fully functional until early in 2022.
• Epoxy resins, for all intents and purposes, are simply not available, a situation that will also not be rectified until early 2022.