Analysis of Asia Pacific Paint & Coating

Industry

Chemicals, Materials & Food Practice

Frost & Sullivan

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Table of Contents

Asia Pacific Paints and Coatings Industry

Asia Pacific’s paint and coating market

Macroeconomic trends influencing the paint industry in Indonesia

Market Driver and Restraint

Trend Analysis

5

APAC Paint Market – the market is still growing despite the global

economic crisis

Industry Overview

Paint and coatings is a high-growth market. In the last five years, economic boom coupled with industrial

migration from the west has led to a rapid growth of the paint and coatings industry, particularly within the APAC

region.

• The key countries driving much of the growth in this region are China, India, and some major ASEAN

countries namely Indonesia and Vietnam.

• Japan and South Korea, who although still maintain a relatively large share of the industry are more mature

markets with lesser scope for growth.

During the global economic crisis, most regions have seen a drop in the growth of the industry. APAC is an

exception, the market is more resilient achieving moderate growth, although the proportion is much lesser than

what was experienced in the past years.

China has become the fastest growing market in the Asia Pacific region, immediately followed closely by India.

• China has emerged as the second largest market next to the United States in the global landscape, and

accounts for around 50% of the total Asia Pacific market by value.

• The Indian paint market is mainly driven by a surge in domestic demand triggered by the country’s strong

economic growth and a shift of consumers to more affluent middle-income group.

In terms of market segmentation, decorative and protective coatings are expected to be the leading growth

markets in the Asia Pacific paint and coatings market. This is due to a rapid boom in the construction industry of

developing countries as well as a large number of industrial projects initiated by local governments as part of

their economic recovery plans.

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Asia Pacific is taking up more share

2001

2010

America: 2.5% CAGR Growth

32.9% 25.9 %

World volume in 2001: ~24 mio tonnes

APAC share expected to increase to 50% by 2015

Africa: 6.9% CAGR Growth

3.9% 4.5 %

Middle East: 7.9% CAGR Growth

1.6% 2.0 %

Europe: 2.6% CAGR Growth

34.6% 27.6%

Asia Pacific: 10%

CAGR Growth

27.0% 40.0%

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Market Revenue

24.055

29.107

34.515

40.193 43.525

48.101

53.553

0

10.000

20.000

30.000

40.000

50.000

60.000

2005 2006 2007 2008 2009 2010 2011

After a deep global recession, economic growth has turned positive in 2010.

In 2010, Asia Pacific region had the highest GDP growth, China driving the region.

Growth at about 7-8%p.a

2011 APAC Outlook: Economic Outlook slower than 2010 but remains high at

above 5%p.a.

Reve

nu

e (

mil

lio

n U

S$

)

Market Revenue Forecasts, 2005-2011

Note: All figures are rounded; the base year is 2009.

Source: Frost & Sullivan

Percent of Revenues by Region (World), 2009

Source: Frost & Sullivan

APAC 30%

Rest of

World 70%

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Market Break-up by type of coatings

Decorative coatings

27%

Protective coatings

11%

Industrial wood

coatings 13%

Powder coatings

10%

Automotive coatings

13%

Other coatings

26%

APAC – Nearly $ 45-50 billion market, growing at

about 10-15% / annum in 2009.

Decorative coating is the most popular segment in

the ASEAN region. In Philippines, Malaysia, India

and Indonesia, it occupied more than 50% of total

paint and coating market.

Followed by protective and wood coatings.

• China leads the market for protective

coatings which constitute more than 75% of

APAC wood and protective coating share

• High growth of industrial sector like energy

and power sector, oil and gas units,

infrastructure sector and manufacturing

industries

• Companies like AkzoNobel and PPG are very

active in this segment and they investing in

R&D to develop new eco friendly products

with better functionality and emphasis on

environment friendly product such as low voc

and water based Note: All figures are rounded; the base year is 2009.

Source: Frost & Sullivan

Paint and Coatings Percent of

Revenues by Segments

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Market Break-up by Geographic Region

China 62%

Malaysia 1%

Japan 14%

Thailand 1.9%

South Korea 6.9%

Vietnam 1.2%

India 6.5%

Australia 3.5%

Indonesia 2.3%

• China is the second larget market in the

world after USA. Paint production has

tripled in the last 5 years to approx. 7

mn tonnes.

• ASEAN 5 occupied 7% of total APAC

market. Much of the growth is from

Thailand, Indonesia and Vietnam.

• Decorative coating is the most popular

segment in the ASEAN region. In

Philippines, Malaysia, India and

Indonesia, it occupied more than 50%

of total paint and coating market.

• Japan’s market is considered as

mature and experiencing minimal

growth

• South Korea is mainly driven by

decorative, automotive and marine

coating.

Note: All figures are rounded; the base year is 2009.

Source: Frost & Sullivan

Paint and Coatings Percent of Revenues

by Geographic Region

10

-5

0

5

10

15

2006 2007 2008 2009 2010 2011 2012

World

China

India

Asean-5

Africa

Europe

Western Hemisphere (Americas, Caribbean)

Source: IMF(World Economic Outlook, Oct 2010)

GD

P G

row

th

%

Regional GDP Growth

After a deep global recession, economic growth has turned positive in 2010.

In 2010, Asia Pacific region had the highest GDP growth, China driving the region. Growth at

about 7-8%p.a

2011 APAC Outlook: Economic Outlook slower than 2010 but remains high at above 5%p.a.

Macroeconomic Outlook- Asia Pacific region had the highest GDP growth

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Indonesia real GDP growth rates

Growing faster than the world’s average

since the last 3 decades, except in 1998

when Indonesia was hit severely by the

financial crisis

Indonesia is the only major economy in

the region that had positive growth rate

during global economic crisis in 2008 .

Projected to grow 7-8% by 2015

Expected to outperform

most ASEAN countries in

the next 5 years but

behind China and India.

Within the APAC region,

both Vietnam and

Indonesia show the

highest GDP projection

from 2009 to 2011.

Source: IMF, Analysis: Frost & Sullivan

Source: IMF, Analysis: Frost & Sullivan

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-

200

400

600

800

1.000

1.200

1.400

1.600

1.800

0 50 100 150 200 250 300

GD

P (

US

$ B

illio

n)

POPULATION (million)

GDP - POPULATION CHART 2010 - 2015

2010 2015

GDP versus Population

Indonesia and Vietnam are predicted to be the fastest growing countries in next 5 years with

increase in GDP per capita are likely to be 9% and above

Both countries are considered as important countries for automotive market

Size of bubble indicates per capita GDP

Malaysia

Thailand

Vietnam

Philippines

Indonesia

Source: IMF, Analysis: Frost & Sullivan

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Macro economic

GDP Growth

Purchasing Power

Construction Industry

.

Macro economic indicators influencing the paint industry in Indonesia

GDP growth is continuing

Considered as one of the fastest growing economies

The market is as large as it is volume wise is still “under-penetrated” from the

point of view per capita consumption of paint

With the rising GDP per capita, consumer are paying more to their lifestyle, and

spend more on consumer goods such as paint.

Indonesia has a considerable of wealthy individuals, and the high end of the

market is quite strong

The construction industry is expected to grow steadily over the next couple of

years as government is allocating money in many project in order to stabilize

economy

Growth of Industrial Market

.

Strong growth of the end-use industrues such as in automotive, wood furniture,

shipping and packaging.

Many infrastructure project such as power plant, bridges and marine sector.

Regional Growth .

Indonesia is performing well, especially in the palm oil industry. This attracks

investors into the country.

The country is a key investor hub in the region, thereby offering benefits to foreign

investor.

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Focus on environment-friendly products

Trend toward mergers and acquisitions and emergence of key local

participants

Greater scope for paint usage due to the huge population and growing

affluence of middle class Indians

Growth in infrastructure projects

Expected to be the fastest growing paint market in Asia over the next

couple of years. It is also likely to be the second largest growth market

in Asia volume wise.

Infrastructure development to overhaul the standard of living

Regional center for Japanese OEMs

Technological trends toward green products; the Thai Government has

initiated the eco-car project

Government to promote the country as a shipbuilding nation

Growing popularity as a manufacturing hub

The decorative market migrating from low tier to mid and premium

tiers

China

India

Indonesia

Thailand

Vietnam

APAC Focus

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Ma

rke

t D

rive

rs

Ma

rke

t R

es

tra

ints

Growth of end used Industries

Low Purchasing

Power Rising Raw

Material Cost

Imp

ac

t

Low

High

Imp

ac

t

Low

High

Market Drivers and Restraints

Source: Frost & Sullivan.

Market Drivers and Restarints for paint and coating Industry in APAC during 2010-2011

Low Operating Cost

Greater

Economic

growth Product Innovation

e.g. Enviromental

friendly

Stringent

Environmental

Regulations

Social, economic

and political

threats

Increase infrastructure

spending

Reduced

export

demand

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Future Trend

Market Trend

Market Trends Smart coating

Sustainable coating

Value added dirt resistance

High performance coating

Value added heat reflective

Eco Friendly

Market Trends of Paint and Coating Industry

Source: Frost & Sullivan.

Current Trend

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Future Trend

2

3

1

Smart Coating

Nano coatings are considered a type of smart coatings as they are composed of extremely tiny

particles and consist unique characteristic such as extreme flexibility, aesy adhesion, resistance to

corrosion and microbacterial growth.

High Performance Coating

Fluoropolymer coating is well known for its high performance property. It has a long life cycle and

hance, is more cost efficient.

Sustainable Coating

The growing interest in “greener” coating has spurred many manufacturers to look into several

technologies that will make them more environmentally friendly. Therefore, demand high

functionality coating which also has less capability to help conserve energy is expected to increase

in the coming years

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Mega Trend in Paint & Coatings Industry

SMART Infrastructure:

Multimodal Transport

Hubs Providing Excellent

Air, Rail, Road

Connectivity to Other

Mega Cities

SMART

Technology:

Intelligent

Communication

Systems

Connecting

Home, Office,

iPhone and Car

on a Single

Wireless IT

Platform

Satellite Towns: Main

City Centre will Merge

with Several Satellite

Towns to form ONE BIG

MEGA CITY SMART Cars: Atleast 10% of

Cars will be Electric Vehicles.

Free Fast Charging Stations at

every half mile

SMART GRID:

Infrastructure to

Enable Real time

monitoring of

power flow and

Provide Energy

Surplus Back to

the Grid

SMART

Energy: 20%

of Energy

Produced in

the City will

be

Renewable

(Wind, Solar

etc)

SMART Buildings: At

least 50% of buildings will

be Green and Intelligent

built with BIPV. Around

20% of the buildings will be

Net Zero Buildings.

Source: Google Images

Snapshot of a SMART Mega City Plan in 2025

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Key facts in APAC region

Economic

Outlook

Segment

Technology

Automotive

Marine

Protective

Green coating technology and high performance coating technology: low

VOC, multifunctional coatings, bio-renewable raw materials to energy

efficiency

GDP growth of Asia Pacific region was 7.1% in 2010, being the highest

compared to other regions. 2011 is expected to be 5.1%.

Country Major countres are China, India, Japan, South Korea

Growing markets are countries such as Indonesia and Vietnam

“Asia is where the growth of paint and coating industry is”

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