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Dylan Carter and Ekaterina Mereminskaia report on how Ukraine’s paint sector has been harmed by the invasion from Russia, whose paint and coatings sector pivots towards stability
The Ukraine and Russian paint and coating sectors have both experienced major change since Russian military forces invaded Ukraine last February (2022), but as with the war, Ukraine’s industry has suffered much tougher damage.
Indeed, all sectors of the victim country’s economy have been hit hard by Russian military attacks and economic disruption, but none more so than Ukraine’s vulnerable chemical-based industries. The war has resulted in a heavy toll on civilians, with 9,369 killed by July 31 (2023), according to the UN.
War and sanctions have certainly starved Russia-based paint producers of raw materials and essential additives, said Viktor Bernik, an independent expert of the Russian paint and coatings market. However, he added: “Around 80 to 90% of the supplies from Western countries that have been cut off now were replaced by raw materials from China and other countries.”
Before the war, Ukraine’s paints, coatings, and varnishes industry produced 300,000-400,000t/yr, according to the Ukrainian Paint and Coatings Association. The majority (80%) was destined for the domestic market .
Because of the invasion, fundamental logistical problems continue to plague the industry, though losses to capacity and distribution are “not critical”, according to research from the Cherkassy Research Institute of Technical and Economic Information in the Chemical Industry (NDITEKHIM) released last July (2022). Many major paint producers are still operational in the safer Western regions of Ukraine, such as Zip and Meffert Hansa Farben, in the Dnipropetrovsk region; Ikrom-EKT and Kyivskyi LFZ, in Kyiv; Snezhka-Ukraine, in Lviv Oblast; and Helios Ukraine, in Cherkasy.
“March and April (2022) were atypical for the [paints and coatings] sector due to an almost complete suspension of activity in the leading consumer segment… Moreover, there was an avalanche-like decline in demand for (paints) in all regions of the country,” a report  published July 2022 by NDITEKHIM noted.
In the report, drafted on behalf of Ukraine’s ministry of economy, researchers said that many producers found themselves in areas under control of Russian occupying forces, such as in the Kharkiv, Zaporizhzhia, and Kherson regions. According to NDITEKHIM, as of July 2022, around 40% of paint producing factories were non-operational because of the war.
The Ukrainian Paint and Coatings Association declined to comment on the state of the industry faced with war damages, claiming that the information was now “sensitive.” The Association previously told PPCJ that Russia’s invasion had destroyed many warehouses filled with finished products.
Certain enamel paints are needed by the Ukrainian army. Ukrainian volunteers, for instance, have painted donated vehicles with special military alkyd enamel  before sending them to the front. Ukrainian websites freely sell specialised military paints to help vehicles be prepared for war .
The Russian military is certainly targeting the sector. After 500 days of war, Ukrainian paint factories still regularly fall victim to Russian bombardment, especially those near to areas where fighting is taking place. In March, in the frontline city of Kramatorsk, in the Donetsk region, Enamel Paint Factory LLC, was damaged by Russian shelling .
In the Kherson Oblast, the impact of war damage on the paint industry has caused significant disruption. In Chornobaivka, which was the scene of intense early fighting in March 2022 for the control of Kherson airport, residents are feeling the economic impact of war damages. A paint factory was destroyed, hurting the local economy .
The Ukrainian paints industry still faces tough conditions. The biggest problem, the NDITECHIM report notes, is the critical lack of materials, such as organic solvents, which are barely available. This affects the supply of semi-finished alkyd enamels, which are needed by the Ukrainian army.
“The main issues of the [paints] sector are low demand, lack of stable order from the supply of products, the presence of unused products in warehouses, loss of logistics connections and difficulties with the supply of raw materials. The key factor is low demand,” the report concluded.
Russian economy exhibiting resilience
By contrast, the Russian economy, and its paint and coatings sector, is exhibiting resilience having endured more than a year-and-a-half of full-scale war with Ukraine.
Surprisingly, Russia’s GDP is even showing signs of growth, with a reported 0.6% increase from January to May (2023) compared to the same period in 2022, according to Russian statistical service Rosstat . However, the EU’s embargo on Russian oil and petroleum products, along with a resulting price cap on sales to non-EU countries, has significantly impacted the country’s budget, resulting in a deficit of Russian Roubles RUB3.4trn (US$37 bn) from January to May . This eased the next month to RUB2.6trn (US$28bn) from January to June.
Despite facing sanctions that prohibit the import of materials and equipment crucial for paint and coating production, Russia’s domestic production of polymer-based paints and coatings is thriving. According to Rosstat, from January to May 2023, production surged to 162,000t, a remarkable 14.5% increase compared to the same period in 2022, bouncing back from an 8.1% decline in the first five months of 2022.
However, construction companies purchasing paint and coating materials have faced a 10.4% price hike from January to May 2023 compared to the same period in 2022. The official overall inflation rate hit 4% in July (6% average January to May), with the Bank of Russia central bank raising base interest rates to 8.5%, and some economists saying the real inflation rate was higher .
In any case, international paint manufacturers have been shuttering their Russia-based plants and and have left Russia.
Denmark’s Hempel ceased all operations in Russia on March 1, 2022, and permanently closed them on April 6, 2022, completing sales of these assets this Juily (2023) . Similarly, Finnish company Tikkurila’s owner, PPG Industries, announced its intention to “activate options to exit Russia” in June 2022, with the first quarter of 2023 showing lower sales volumes (-3%) as it continues divestiture-related sales .
Norway’s Jotun’s exit from Russia was equally significant, selling its Russian subsidiary, Jotun Paints LLC, in July 2022 to Russian company Atomstroykomplex . Dutch company AkzoNobel suspended most of its performance coatings activities in Russia following EU sanctions, with its residual business being locally operated .
War and sanctions have certainly starved Russia-based paint producers of raw materials and essential additives, said Viktor Bernik, an independent expert of the Russian paint and coatings market. However, he added: “Around 80 to 90% of the supplies from Western countries that have been cut off now were replaced by raw materials from China and other countries.” The matches are far from perfect though, forcing Russian manufacturers to adjust their formulations and production processes, “resulting in a decline in the quality of many well-known paint brands on the market, while their prices increased,” he told PPCJ.
That said, some manufacturers have taken advantage of new suppliers and reduced prices, noted Bernik. Moreover, “with foreign companies leaving the Russian market, entire niches were freed up and now local paint producers are actively filling those gaps,” he said, saying that one smaller Russian producer, which he would not name, managed to increase production capacity fourfold: “It’s quite remarkable, considering peaceful times didn’t offer such opportunities. However, other [paint manufacturers] have been unable to adapt to new realities and are experiencing significant sales declines and are winding down their production, as they struggle to adapt their production processes to the new realities,” noted Bernik.
A good example of such changes in the decorative coating segment is that Tikkurila, which used to lead the Russian market, has been replaced by Moscow-region based company Lakra at the top spot. Powder coatings sourcing has also switched, now mainly coming from south east Asia and the Middle East including Turkey, Pakistan and China. However, decoration consumers have found buying popular effects and shades much more challenging, said Bernik. Supplies of common industrial paints, such as coil coatings for metal surfaces, have also decreased or been halted by international suppliers. Russia’s automotive industry is also feeling the impact, experiencing a shortage of popular colours for the local market, said Bernik.
For more information, contact Keith Nuthall, International News Services:
Tel: +44 (0) 207 193 4888; Email: [email protected]
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