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Paint industry to boost Processed Chemicals demand [Oct 2011]

Paint is a raw material intensive industry. It takes over 300 different raw materials, used in form of processed chemicals. Over the last ten years the paint industry has grown at a CAGR of 12-13 per cent and in the next five years it is expected to grow at the CAGR of 11-12 per cent. Therefore, the anticipated growth in paints industry to drive demand of processed chemicals. An OEM Update reportDemand of processed chemicals required to produce paints seems to be quite buoyant. This is because paint industry which is the prime consumer of processed chemicals seems to perform quite well despite recession. The per capita consumption of paints in India is still low at 1.25 kg as against 51.7 kg in Qatar, 38 kg in Singapore or 25.8 kg in the United States. Even China has a per capita consumption of 2.5 kg and Sri Lanka 3.5 kg. India has a long way to go therefore, the future of the industry in India is quite bright and altogether for the processed chemical industry based on the demand potential.
The potential processed chemicals sector holds, on account of the size of the Indian paint industry, can be estimated from the fact that the size of the Indian paint industry is ` 13,600 crore both organised and unorganised sectors. Of this ` 8,600 crore is contributed by organised sector which constitutes 54 per cent of the total volume and 65 per cent of value.
Over the last ten years the industry has grown at a compounded annual growth rate of 12-13 per cent and in the next five years it is expected to grow at the CAGR of 11-12 per cent. The industry has a positive correlation with the country’s gross domestic product as both have the same growth drivers.
Paint is a raw material intensive industry. It takes over 300 different raw materials, used in form of processed chemicals; most of the raw materials are petroleum based. Titanium dioxide is the largest consumed raw material. It constitutes about 30 per cent of the total production cost. Besides, this, there are petroleum based raw materials which constitute 40-50 per cent of total processed raw material consumed. Hence any movement in crude oil prices will impact the prices and profitability of paint companies.
Market Profile & Growth TrendsKey paints players are expandingThe leaders in organised paint industry, which are also large consumers of processed chemicals, are Asian Piants with over 40 per cent market share, Kansai Nerolac (20 per cent) Berger Paints (19 per cent) and ICI paints (12 per cent).
All the key players are in expansion mode which holds promise for processed chemicals suppliers. Asian Paints has enhanced its capacity at its facility in Himachal Pradesh for power coatings and Maharashtra for industrial coatings. Berger’s facility in Jammu has also started contributing to its top line performance, albeit on the lower side. Kansai Nerolac is putting up a green field facility at Hosur in Tamil Nadu and is carrying out capacity at its Lote Parshuram and Bawal plants. The expansion augurs well for processed chemicals suppliers.
Eco-friendly paints augur specialised processed chemicals demandThe chemical producers feeding the paint industry need to take note of the fact that paint producers are adding new concepts based on the emerging requirements of the customers. A new concept that is being added in India is the use of eco-friendly paints. The eco-friendly paints calls for requirement of specialised processed chemicals. Conventional paints have more than 1,000 chemicals and substances such as formaldehyde and benzene. These chemicals may lead to health problems. Low level exposure to paints based on lead pigments may irritate or burn the eyes, nose and throat and skin and cause reactions headaches, dizziness or nausea, while some can cause kidney or liver damage or respiratory problems. Taking cue of the harm that can be caused some paint companies have been working pro actively towards elimination of led based pigments and switch to substitute non toxic raw materials.
Thus eco-friendly paints are non toxic with low volatile organic content, have no odour and can be tinted to nay colour with non toxic units. They are produced from fewer than 250 chemical components and more than 98 per cent of these chemicals are derived from plant sources and minerals. The raw materials are also low in toxic substances, renewable and feature a low environmental footprint. 
Emulsion paints gaining better acceptance Taking the trend for developing newer products further, consumers are looking forward to new product launches, some for application in special areas. Accordingly companies are increasing making changes in the chemical composition of the paints, thereby requiring new processed chemical variants. New trend are being characterised by more options such as ranges of colours finishes. Additionally, the trend towards water based coatings is likely to set in both for industrial and decorative applications. There has been a higher growth of emulsion paints for interiors vis-à-vis distempers. The increasing use of economy emulsion is in place of lower priced distempers. Similar is the trend for exteriors where emulsion based coatings are now preferred against cement based coatings. Continuously looking for better products, more and more consumers are switching to marginally higher priced emulsions where they can get more durable and better looking finishes in a wider range of colours. These are some of the new developments characterising demand in the paint industry, processed chemical producers needs to take note of. 
In spite of economic slowdown, the Indian paint industry is growing, though at a slower pace. It has tremendous potential for growth in the coming years. The decorative segment has outpaced the industrial segment and has the potential to grow as and when the automobile business improves. All of these hold well for processed chemical industry.

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