Capital Spending Increases Sharply for Paint and Coating Manufacturers Aiming for New Capacity and Product Diversity

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Producers of paints and coatings have spent very few capital dollars in recent years as the economy slowed and energy costs continued to increase. In a recent analysis of research completed by Industrialinfo.com producers in this segment of the Chemical Processing Industry (CPI) are preparing nearly $200 million in new capital investments for 2004 and 2005 compared to just over a $100 million in the past two years. In previous years, most capital was allocated for pursuing niche markets that seemed to be more resistant to the poor economics surrounding them. Now, with a recovery in sight, many producers are preparing to invest in new capacity for almost every sector, including architectural, industrial, and automotive.

Dow Chemical Company recently announced plans to invest significantly in a latex emulsions unit addition at their Taft, Louisiana site (Plant 1013357; PEC 02005329). Investments in technical paints and coatings such as powder coatings, aerospace, electronics, packaging and others will represent a significant portion of spending for new capacity. Continued improvements in the domestic economy combined with an increase in demand from Asian countries, like China, where growth is in the double digits for nearly every industry sector will help drive spending.

Click the image to the right to view a sample project by Akzo Nobel plus a regional analysis of spending by state for 2004 and 2005. For further details on the 26 projects listed in the analysis, contact Industrialinfo.com's Member Center at 1-800-762-3361.

Architectural coatings have been the one exception; performance has remained very strong, as low interest rates have continued to bolster residential remodeling and new home construction. The abundant supply of industrial coatings has led many producers to focus on product enhancements rather than new capacity. These enhancements of industrial coatings were aimed at high performance and specialty coatings to serve niche applications and provide the best in heat or chemical resistance. Producers of OEM automotive paints have experienced a decline in demand since early 2003 and its possible that this sector will not improve greatly for another year or more.

A majority of the spending forecast for the next two years will be unit additions and plant expansions, representing an estimated $159 million, with the remaining spending targeted at upgrades, compliance, or energy projects. This reinforces the industry's positive outlook on future spending and presents a substantial opportunity for equipment and service providers. There is only one major project on hold and only two cancellations currently being tracked by Industrialinfo.com, which also bodes well for this industry segment.