PWM market: everybody is in the pool but to different depths

PWM market: everybody is in the pool but to different depths
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Why do some paint-work material producers go bankrupt, while others are thriving in the crisis?

The “Interlakokraska-2016” exhibition which took place at the beginning of March in the Moscow Expocenter did not seem decadent, though many had predicted that it would. Bright mounts, no care for economy, lots of visitors at the displays, lively foreign speeches… dozens of companies came to the exhibition from abroad…  


The business program was good. All of the acute problems connected with paint-work materials production were discussed at the International PWM forum organized within the exhibition’s framework. Leading domestic producers of PWM gathered at a round table dedicated to current trends on the PWM market.  

However, some fleeting anxiety could be felt in the atmosphere and in the short interviews the participants gave to our journal and in their prognoses.  

 “Finishers” feel worse than “industrialists”

2015 was rather hard for the PWM segment, as all market participants admitted, especially in the market for decorative and texture paint: people are doing fewer repairs because money is being spent on everyday needs.  

— In the first half of 2015 everything went topsy-turvy, Valery Abramov, Director General of the “Russkie Kraski” (Russian Paints) company said, describing the situation at his enterprise, which occupies the decorative coating niche. — The second half was easier, but the beginning of 2016 is again complicated…

Valery Abramov shared his prognoses for the future. According to him, the decorative paint market, sad as it may seem, will continue to decline. There are no provisions for growth as yet.

And the market of industrial paints will grow, though the traditional players will be in different positions depending on their speed in occupying available niches. Nobody promises an absence of complications: as we know, automobile and railway companies are reducing their limits. However, some very powerful customers have appeared on the market: defense industry enterprises, who have both the will and finance to purchase big volumes of PWM.


The powder paint market seems better than the decorative paints segment, but some foreign countries having left the market and our producers are closer to customers paying rouble prices.

Besides this, some construction sites stopping work also impacted upon the market.

— Construction consumes less and less in terms of the “finish the construction and forget” approach, said the Director General of the “Lakra” company, Gennady Sobko.  — Besides, there are hardships with payments: it is withheld and then we cannot pay our suppliers. So, we are all in one and the same puddle but to different depths.  

… and dispersion producers have rushed forward

There is prosperity and wealth on the dispersion (PWM extenders) market. The thing is, 50% of raw materials for the production of PWM were formerly obtained from abroad. The rouble fall “washed away” foreign deliveries, and, as a result, Russian producers began to buy domestic extenders.

— The extenders market grew by 12% last year, Oleg Kuzin, Director General of the “Akrilan” company (in the city of Vladimir) said at one of the round tables at the “Interlakokraska - 2016” exhibition.

— Significant delays with imported dispersion deliveries made our specialists doubt the final payments to our foreign partners (nobody could predict how the rouble would behave), so many producers turned to domestic extenders. The Vladimir company’s tonnage growth was 30%, and such serious player as “Sibur” also enlarged their deliveries.

However, dispersion deliverers admit that constant and steady work with small-size distributors, which formerly had not been heeded, also reaped rewards.

Nevertheless, dispersion producers worry about whether the growth will continue. On the whole, expectations are high.


Those who found success were in the right place at the right time

The Director of Commerce of the ETS company, Grigory Balmasov, thinks that wealthy dispersion producers are a temporary phenomenon.

— Now we do not know which criteria should be used for totaling results, said the top manager. — One of the criterion may be very good (tonnage, for example), another could be appalling (financial results in different currencies). Formerly, the criteria used to coincide…

Mr Balmasov confessed that he is not as joyful about the future as his colleagues who are producing extenders.

— Yes, domestic dispersions are displacing imported ones, he admits. — What we have now is not the result of steady work but, I would say, a “blip”. And it will provide a nice life for some colleagues only in the near time.  

Systematic import replacement, from the expert’s point of view, must develop over decades. Those who are succeeding at the moment have simply found themselves in the right place at the right time.

By the way, for Grigory Balmasov’s company the year was almost a carastrophe: chemical feedstock in roubles is becoming cheaper due to falling oil, so the company’s figures were falling.  


The import replacement ‘flag’ is slightly troubling

It should be noted that even those who have a good thing going understand the importance of systematic work.  

— The replacement of imported compounds with domestic in a product is a long process, Oleg Kuzin thinks. — It is easier to produce cheaper (and more in-demand) products and to make a profit.

Many admit that the flag of import replacement hung by the Russian Government is hardly flying proud. This is partly because those who want to deal with the problem end up in a blind alley: there are no primary materials for manufacturing complex products. For example, we have a special problem with the production of domestic polyester resins.  

It is not sufficient to send different letters and circular orders. Many large players on the market think that the domestic producer should be supported. With us, it is quite different: foreign producers are being supported. For investing in our industry, they are given the best business in the sphere of PWM.


Formaldehyde and lead are again in the paints

By the way, having replaced foreign partners in dispersions production, we have lost greatly in pigments, though there are domestic enterprises, e.g. “Tambov pigment”. There is no import replacement in this sphere at all.

— Import replacement is no more than a nice motto, admits the Head of the “Centrolak” association, Gennady Averianov. — We fully support domestic products in different segments, but it is necessary to develop interconnections inside the industry, including technical standards and regulations.

That is why new producers’ associations are now being created, e.g. the Paint Quality Association. Its task is to unite PWM producers on a voluntary basis for the joint development of quality increase.

The Head of the Association, Sergei Fedotov, remarks that there are few positive phenomena in the sphere of paint quality. Currently, producers are trying to make production cheaper, and this is happening mainly at the expense of quality performance. As a result, quantities of harmful components, such as formaldehyde or lead, are growing.  

According to Sergei Fedotov, this tendency is impermissible - winning at the expense of cost on the local market will lead to losing in the long term. Actually, producers should not make profits from complications suffered by customers. The latter should be sure of the safety of the purchased product, though it may be cheap.  

And PWM certification is being carried out only on a voluntary basis as the moment. This is the topic of a special talk, for us to return to later on.