The pigment market is going through a difficult phase. Although market research companies point to growth in their studies, the industry participants surveyed by the editorial team of European Coatings remain cautious in their assessments of the current situation and in their forecasts. In particular, the increasingly stringent regulations and high energy costs continue to cause concern for pigment manufacturers. By Damir Gagro

Geopolitical tensions lead to higher costs and
supply chain challenges

Geopolitical tensions remain a fundamental risk for the supply chains of iron oxide pigments from Asian production sites, according to Stefano Bartolucci of Lanxess.
In addition, container shipping on the routes through the Red Sea and the Panama Canal is currently affected, causing delays in shipments to and from Asia.

According to Bartolucci, transport costs from China to Europe and North America have risen sharply. Schneider agrees: ‘Geopolitical developments create obstacles that have to 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. The problems in the Red Sea have led shipping companies to avoid the Suez Canal and take the long route 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 the advantage to the paint and varnish manufacturers that they can minimise the effects of regional dependencies in the supply chain.

Bartolucci, however, points out: ‘Such a production structure also means a different cost structure for the supplier, in which regional factors such as higher energy costs in Europe must be taken into account. Stefan Ohren from Heubach sees pigment manufacturers under pressure from rising raw material prices and overcapacity in the market, which is leading to a very difficult market situation. The trend towards regional or local purchasing will continue, as global logistics are under pressure, which is why a strong European presence is of the utmost importance. In principle, Dr Lars Lücke from Harold Scholz is already seeing increased demand for raw materials from Europe. ‘Consumers in the DACH region do not want to rely exclusively on suppliers from the Far East, not least because of the experiences of the last two and a half years,’ he says.

Of course, EU pigments would have to remain qualitatively and commercially competitive, but consumers also know that they need manufacturers in the EU in the medium and long term. Nevertheless, Lücke is certain that Indian pigment manufacturers will gain market share in the EU in the near future.

Ears also views the current situation in the pigment market and particularly in the paint and coatings industry as very difficult. ‘Market demand is down by a double-digit percentage compared to the volumes we saw in the early 2020s,’ says Ohren. Bartolucci also confirms the double-digit decline. Global demand for synthetic iron oxide pigments for coating applications will decline by about 10% by 2023 due to the weakness of the construction industry and consumer restraint in the do-it-yourself sector, and then stabilise at that level. Lücke confirms the decline in the construction industry: ‘In the area of architectural paints, the economic slowdown caused by high interest rates and high real estate prices is clearly noticeable’. By far the most important sales market for the pigment industry is the paints and varnishes application area, which currently consumes around 5 million tonnes of pigments per year, as reported by Ceresana in its latest market study. Of this, around 2.5 million tonnes are used in interior and facade paints for the construction industry alone.

Now that manufacturers have reduced their inventories, Bartolucci expects a slight recovery in the EMEA region in 2024. In addition, he says, customers are restocking at short notice due to current uncertainties in global supply chains. Lücke is cautiously optimistic about the market. The economic trend in Europe is pointing slightly upwards, but there are still uncertainties in the supply chain, especially for organic pigments. He hopes that the positive economic trend will continue. ‘We need a tailwind to survive in the market and at the same time to 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 picks up again, the pipelines at all production levels will need to be refilled. This could even lead to bottlenecks in some areas. ‘Thanks to generous wage increases, end consumers have slowly overcome inflation. Therefore, an upward trend should soon be able to develop,’ says Schneider. In the medium term, he expects a robust recovery in the paints and varnishes market. However, it is difficult to estimate how long it will take to get there.