North America market report: Weak demand and expanding regulations affect coatings industry

30 April 2024

Ed Zwirn, New York, Heba Hashem, Niagara Falls and Keith Nuthall report on how the North American coatings sector is struggling with weak demand and expanding regulations

The North American paint and coatings sector has been treading water as it struggles against flat demand and increasing regulatory burdens. In the USA, the paint and coatings industry has faced declining sales volumes prompted by tailwinds in the construction sector. At the same time, industry value increased slightly last year, propelled by solid margins and growth in OEM (original equipment manufacturer) purchases and special coatings sales. 

“We estimate that, in terms of volume, the industry contracted somewhat (-1.8% compared to 2022), while industry value increased slightly (1.4%) to top US$34bn. All told, 2023 is considered a flat year,” said Edye Fox Abrams, Vice President of business development and marketing at The ChemQuest Group, a management consultancy: “Though a difficult housing market challenged the architectural coatings sector, OEM and special purpose coatings both grew compared to the prior year.” 

Abrams estimates that US sales volumes for architectural coatings were down by 4.6% in 2023, while value sales in this segment decreased by 4.4%. Sales of architectural coatings correlate highly with the health of the housing and construction markets and there were just under 4.09 million existing (so not new-build) home sales during 2023, their lowest level for 28 years, and down 19% year-on-year, according to the National Association of Realtors [1].  

And although Abrams expects “that last year’s contraction will continue into 2024,” so far this has not been the case, with January showing a 3.1% rise over the prior month, at the same time down 1.7% over January 2023: “We’re forecasting an overall volume decrease in 2024 for the US paint and coatings industry of 2.7%, with a 5.3% increase in terms of value, as formulators see margin normalisation. Tailwinds are anticipated to come from new residential construction, increased infrastructure spending and the likely end this year of the Federal Reserve’s tightening cycle.” 


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The plus side

On the plus side, American coatings major PPG, sees growth, however. CEO Tim Knavish wrote introducing the company’s 2023 annual report that the year delivered a “record financial performance through margin recovery, full-year operating cash generation of US$2.4bn and delivery of organic sales growth…” This was partly through a new focus on specialist sales to businesses, “which drove US$150M of incremental sales in the first year, including solid growth from sales of our innovative products for electric vehicles and powder coatings,” said Knavish. 

He said digital innovations such as the PPG LINQ cloud-based platform, which helps consumers choose colours for paint repairs, and the PPG MOONWALK paint mixing machines “contributed to nearly 2,000 automotive body shop installations for PPG.”  

Indeed, the USA OEM coatings sector, which grew in both volume (2.3%) and value (4.5%) in 2023, saw higher value segments such as automotive OEM expanding to offset lower or slowing demand for coatings on durable goods, consumer electronics and other products, said ChemQuest’s Abrams. She added that said volume and value both grew for the USA special purpose coatings sector as well during 2023, by 2.6% and 7.9%, respectively. 

As for another American major, Sherwin-Williams, it too has hope for the future, with its annual 2023 results seeing sales grow to a record US$23.05bn, according to CEO Heidi G Petz. She said the company’s Paint Stores Group “overcame a difficult demand environment characterised by challenging conditions in new residential and existing home sales markets…” That delivered US$12.83bn in sales during 2023, compared to US$11.9bn in 2022. She added that the company’s Consumer Brands Group faced weak DIY demand (with sales stalled at around US$3.3bn in both 2023 and 2022), but grew in its targeted Pros Who Paint market, said Petz. The company’s performance coatings division grew sales from US$6.7bn in 2022 to US$6.8bn in 2023 [2]. 

Regulatory challenges impacting sales

In Canada, the paints and coatings industry is, however, facing mounting regulatory challenges, potentially depressing sales. For instance, in 2023, the federal government department Environment and Climate Change Canada (ECCC) announced the risk assessment of 4,700 per- and polyfluoroalkyl substances (PFAS), which could increase to 10,000 in the coming years, according to the Canadian Paint & Coatings Association (CPCA) [3]. This is expected to be a burden on the industry as many of those chemicals are present in coatings, adhesives, sealants and elastomers. 

Additionally, the ministry has proposed lower volatile organic compounds (VOC) limits in all industrial segments, including architectural and industrial maintenance coatings; automotive refinishing; and industrial and commercial adhesives and sealants [4]. 


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Darrin Noble, CPCA Board Chair and President of British Columbia-based Cloverdale Paint, said that the industry has seen more regulatory change over the past two years than at any time in history: “The level and pace of regulatory change will likely lead to more bans and use-restrictions for chemical inputs in products,” he wrote in the CPCA’s 2024 report [5]. 

Some of the proposed regulations in Canada also need to be conducted in close collaboration with US Environmental Protection Agency methodology to avoid misalignment between the two markets and industries, which remains a crucial issue for the industry. 

“For the most recent set of regulations, we have emphasised the need for harmonisation of regulations across Canada with US – areas of regulatory non-alignment oftentimes create trade barriers and administrative burden. However, our advocacy efforts are ongoing,” Mark Silvey, Director of Corporate Communications at US-based PPG, told PPCJ. 

A major concern for the Canadian industry is the shift from a risk-based to a hazard-based approach in safety regulation, which may lead to instant bans of substances based on their hazard classification, regardless of their risk level in actual use and their impact on functional benefits like durability, according to Silvey. 

“At PPG, we think it’s important that raw material suppliers and formulators collaborate to ensure that regulations are applied reasonably and consider real-life risk assessments, not just hazard classification,” he said. 

Despite these challenges, the Canadian coatings market continues to flourish in certain segments. Over the past year, PPG’s Canadian paint brand Dulux saw an increase in traction for its products among new home construction, multi-family construction, and hospitality sectors in Canada, Silvey noted.  

Meanwhile, Nova Scotia-based GIT Coatings expects the latest regulatory changes, including the new VOC regulations, to create new markets for its sustainable products: “There is an increased focus and investment in sustainable solutions in Canada. When it comes to our coatings, they are 100% compliant. Our environmentally friendly coating has high solids (86%) and low VOC (3%),” said Patrick Wadden, Marketing Manager at GIT Coatings. 

Looking ahead, the paints and coatings market in Canada is expected to grow at a CAGR of 5.72% from 2023 to 2028, driven by demand from residential and commercial construction projects, infrastructure development, and renovation activities, according to India-based Bonafide Research [6].


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For more information, contact Keith Nuthall, International News Services.

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