The pigment market is going through a difficult phase. Although market research companies indicate growth in their studies, industry participants surveyed by the European Coatings editorial team remain cautious in their assessments of the current situation and their forecasts. In particular, increasingly stringent regulations and high energy costs continue to cause concern for pigment manufacturers. By Damir Gagro
Market research firm Markets and Markets predicts an average annual growth rate of 4.5% for the global pigment market between now and 2029. The market size would grow from around €15.4 billion to over €19 billion. Ceresana also predicts an increase in demand. This is expected to increase to more than 14.5 million tonnes worldwide by 2032.
Industry players are not as positive about the future. “For 18 months, the industry has had to contend with weak demand. Earlier this year, a turnaround appeared to be on the cards, with some paint and varnish manufacturers sending positive signals. However, he now seems to have lost weight again. In my opinion, this means that the market is stable at a low level,’ says Axel Schneider of CG Pigment Europe. Andreas Dyckerhoff of Bruchsaler Farbenfabrik says the overall political and economic situation is very volatile and leads to a tense situation.
Demand for pigments is sluggish, especially in Germany and Europe, where business is stagnant. “From what we have heard from the market players, only outside of Europe was the first half of the year more satisfactory. Now, however, there are also signs of a slowdown at the start of the second half of the year. A return is not yet in sight,’ says Dyckerhoff. According to Markets and Markets, the pigments market in the Asia-Pacific region is growing strongly and is expected to be the fastest growing market by 2029. The region’s rapid industrialization and urbanization, increasing infrastructure investment and expansion of the automotive, construction industries and packaging are among the growth engines. In addition, the growing middle class and its growing disposable income has increased the demand for consumer goods, which in turn increases the demand for pigments in products such as paints, varnishes, plastics and printing inks.
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Geopolitical tensions lead to higher costs and
supply chain challenges
Geopolitical tensions remain a fundamental risk to iron oxide pigment supply chains from Asian production sites, according to Lanxess’ Stefano Bartolucci.
In addition, container shipping on routes through the Red Sea and the Panama Canal is currently affected, causing delays in shipments to and from Asia.
According to Bartolucci, shipping costs from China to Europe and North America have skyrocketed. Schneider agrees: “Geopolitical developments create obstacles that must be circumnavigated in the truest sense of the word. The pigment market is largely supplied by products from China and India that have to be shipped to Europe. Problems in the Red Sea led shipping companies to avoid the Suez Canal and take the long way around Africa. This costs time and money and causes delays in the supply chain. Suppliers such as Lanxess, which have a global production network with regional sales structures, offer paint and varnish manufacturers the advantage of being able to minimize the effects of regional dependencies in the supply chain.
However, Bartolucci points out: “Such a production structure also means a different cost structure for the supplier, where regional factors such as higher energy costs in Europe must be taken into account. Heubach’s Stefan Ohren sees pigment producers under pressure from rising raw material prices and overcapacity in the market, leading to a very difficult market situation. The trend towards regional or local procurement will continue as global logistics are under pressure, which is why a strong European presence is of utmost importance. In principle, Dr. Lars Lücke from Harold Scholz is already seeing an increased demand for raw materials from Europe. “Consumers in the DACH region do not want to rely solely on Far Eastern suppliers, not least because of the experiences of the last two and a half years,” he says.
Of course, EU pigments should remain competitive in terms of quality and trade, but consumers also know that they need EU producers in the medium and long term. However, Lücke is confident that Indian pigment producers will gain market share in the EU in the near future.
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The construction industry as the main customer is in decline
Ears also considers the current situation in the pigment market and particularly in the paints and coatings industry to be very difficult. “Demand in the market is down by a double-digit percentage compared to the volumes we saw in the early 2020s,” Ohren says. Bartolucci also confirms the double-digit decline. Global demand for synthetic iron oxide pigments for coating applications will decline by approximately 10% by 2023 due to weakness in the construction industry and consumer retention in the DIY sector, and then stabilize at this level. Lücke confirms the decline of the construction industry: “In the area of ​​architectural paints, the economic slowdown caused by high interest rates and high real estate prices is clearly visible.” By far the most important sales market for the pigment industry is the paint and varnish application area, which currently consumes around 5 million tonnes of pigments per year, as reported by Ceresana in its latest market study. Of this, approximately 2.5 million tonnes are used in interior and facade paints for the construction industry alone.
The situation on the European market remains difficult
Now that manufacturers have reduced their inventories, Bartolucci expects a slight recovery in the EMEA region in 2024. In addition, he says, customers are realizing at short notice due to the current uncertainties in global supply chains. Lücke is cautiously optimistic about the market. The economic trend in Europe is slightly upward, but there are still uncertainties in the supply chain, especially for organic pigments. He hopes the positive economic trend will continue. “We need a tailwind to survive on the market and at the same time manage the transformation of the chemical industry towards climate neutrality,” says Lücke. For Schneider, the long period of market weakness has slowly but surely led to a reduction in inventory levels. As soon as the market recovers, pipelines at all levels of production will need to be refilled. This could even lead to traffic jams in some areas. “Thanks to generous wage increases, end consumers have slowly outpaced inflation. Therefore, an uptrend should be able to develop soon,” says Schneider. In the medium term, a robust recovery is expected in the paints and varnishes market. However, it is difficult to estimate how long it will take to get there.
In particular, Ohren and Dyckerhoff do not expect a change in Europe. “Based on recently published ifo business climate indices, we do not expect any tailwind from the European macro economy. In particular, the value for the German construction industry fell to the lowest level of the index since 2015,’ says Ohren. According to Dyckerhoff, the mood is currently bad. The construction industry, for example, is at rock bottom. In addition to the strained economic situation, the pigment industry has to deal with a lot of red tape. “There are ever new restrictions, regulations and approval procedures. If this continues, at this rate, I see mid-sized companies in danger in the medium term. Nobody wants to go through that anymore and the result would be the migration of the pigment industry from Germany and the EU,’ warns Dyckerhoff. In addition to high costs in Germany and the EU, he is particularly concerned about the EU’s Green Deal, which leaves many question marks. He questions whether SMEs will be able to meet the demands at all and remain competitive in such an environment. “However, every risk and every challenge also offers opportunities. It is important to recognize and take advantage of these. As a medium-sized family business, we see our advantage in the flexibility that allows us to react quickly to new market demands,’ he says confidently.
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