Why protective coatings are costing more?

Anti-Corrosion Methods and Materials

ISSN: 0003-5599

Article publication date: 1 December 2004

Citation

(2004), "Why protective coatings are costing more?", Anti-Corrosion Methods and Materials, Vol. 51 No. 6. https://doi.org/10.1108/acmm.2004.12851fab.007

Publisher

:

Emerald Group Publishing Limited

Copyright © 2004, Emerald Group Publishing Limited


Why protective coatings are costing more?

Why protective coatings are costing more?

International Protective Coatings have initiated product price rises to meet the continuing rise in raw material costs.

Mr Brian Smith, International Coatings' Protective Coatings Commercial Director said, “The decision to increase product prices is regrettable but inevitable in the current market. The costs of many raw materials critical to our business have increased significantly over the past year and are expected to increase further throughout 2004”.

Key raw materials used in today's sophisticated protective coatings include zinc, epoxy resins, titanium dioxide and specialist solvents – all of which have steadily increased in price. Epoxy resins producers are launching a range of price increases to counter the impact of high energy and feedstock costs. Titanium dioxide producers have already announced a US $150 per tonne rise and solvent prices have suffered from increased tension in the Middle East where the continuing high demand for crude oil caused the price to rise by 5 per cent last week alone to hit a 14-year high of almost US $40 per barrel.

Of particular concern however is the price of zinc which is used extensively in anti-corrosive products. World demand for zinc is increased by 4.2 per cent in 2003 and a supply deficit of 312 K tonnes is predicted for 2004 as inventories continue to decline. China is the world's biggest user of zinc with 23 per cent of world smelter capacity. Consumption in China is predicted to increase by 8-10 per cent per annum after an increase of 22 per cent in zinc consumption in the first 9 months of 2003 as infrastructure expanded by 25 per cent. The price of zinc has risen by over 25 per cent during the last 12 months to US $1,000 per tonne – its highest level since October 2000.

“The price of zinc is largely driven by the needs of the construction and automotive industries” said Mr Smith. “Since the use of zinc in anti- corrosive products is insignificant in terms of total global consumption our businesses do not enjoy economies of scale and we cannot leverage our purchasing strength for customer benefit.”

The situation is further exacerbated by the continuing decline in the value of the US dollar and the increase in steel prices. In the last 2 years, the dollar has declined by up to 29 per cent against other key currencies. With most global trade priced in dollars, this of course means further increases in the costs of raw materials. Since October 2003, steel prices have risen by US $300 per tonne and this rise has impacted significantly on paint can packaging costs.

“International Protective Coatings' position is that faced with such large increases in the cost of doing business we have little choice but to pass part of these increases on to our customers” said Mr Smith.