future of anticorrosion coatings in the marine engineering sector in china - gcis

© Copyright 2014 GCiS China Strategic Research 1

Jason KongGCiS China Strategic Researchwww.gcis.com.cn

鸿鸿美美经经济济信信息息咨咨询询有有限限公公司司

Future of Anticorrosion Coatings in the Marine Engineering sector in China


Marine Anti-corrosion Coating Key Overview

Market Size: 2013 market size for marine engineering anti-corrosion coatings in China is around RMB 7.5 Bn, approx 21% of total China market

Market Growth: Marine engineering industry was the biggest end-user sector in 2013 but underwent a significant slump between 2011-2012 resulting from delayed effects of the global financial crisis. Shipping orders increased in 2013 and expected to recover in next few years, but still pose many risks

Segmentation: Relatively fragmented coating supply market, top 10 suppliers combined generally account for <35% of each target product segment

Foreign vs. Domestic: Foreign suppliers account for significantly larger market shares individually, though domestic companies account for a larger proportion for the overall market

Products: Increasing trend for higher quality products in the marine engineering sector

Marine engineering industry is the biggest sector for anticorrosion coatings in China, and despite a downturn in the shipbuilding industry in recent years, there was a noticeable rebound in 2013, which is expected to be reflected in the marine anticorrosion sector around 2015


Overall Anticorrosion Coating Market Breakdown

The anti-corrosion market was approximately RMB 36 Bn in year end 2013, with the marine engineering sector accounting for the biggest proportion of 20.8% (RMB 7.5 Bn) and closely followed by the construction industry. Epoxy is the most commonly used type of anti-corrosion coatings in the marine industry

Source ： GCiS

Marine20.8%

Construction20.7%

Container11.6%

Chemical10.2%

Petrochemical9.9%

Transportation8.3%

Power7.8%

Other10.8%

Epoxy31.4%

PU25.7%

Zinc20.8%

Acrylic4.9%

Fluoro-carbon3.2%

Cl. Rubber3.1%

Other10.7%

Marine Anti-corrosion Coating

Overall Industry Breakdown Key Anticorrosion Coating Product Breakdown


Source ： GCiS

Overall Sectors Opportunity Comparison

Despite the recent downturn of the marine sector, many industry players agree that this is relatively cyclical sector and believe that this industry still holds the most opportunities for growth

Industry Rating Comments

Marine 8-High-end products-Recovery of market

Transportation 7 -Expanding rail network

Power 7-Turbines and renewable energy

Petrochemical 7-Increasing energy demands

Chemical 6.5-Relatively large market with steady growth

Construction 6-Increasing steel structures, but uncertain industry

Container 6-Low quality requirements and industry downturn

Metallurgy 4-Steel industry has overcapacity

Hardware & Machinery 4

-Small market and limited demand


Industry Segment Opportunities


Source ： GCiS

Marine Engineering – Foreign vs. Domestic

Breakdown by company type is largely dominated by domestic companies accounting for 96% of the anti-corrosion market, though the Foreign companies account for a relatively large portion of the market share by volume and an even greater portion by revenue.

Foreign DomesticAkzoNobel Jiangsu Yejian

Jotun PaintMarine Chemical Research Institute

HempelNantong Omelon Anticorrosion

PPG Jiangsu Lanling Chemicals

CMP Shanghai Zhenghua

COSCO KansaiGuangzhou Pearl River Chemical

KCC Corporation Zhejiang Yutong

Nippon Paint Tianjing Dowill Chemical

DuPont Zhongshan Daoqum

Sherwin-Williams Yung Chi Paint & Varnish


Some Top ACC SuppliersForeign vs. Domestic Company Market Shares


Source ： eworldship.comIncludes Bulk Carrier, Tanker, Container ship, Liquefied gas tanker, Offshore ships and other large industrial use ships

Marine Engineering – Trends

Shipping industry has undergone significant downturn in previous years, as a result of global financial crisis, though number of orders has picked up again in recent years. The coating industry is however expected to lag behind in the changes in shipping, given these are mega sized ships that typically require 2 years to complete before applying the coatings

Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-140

20

40

60

80

100

120

140

160

180

Nu

mb

er o

f S

hip

Ord

ers Current Situation

•Overcapacity

•Decreasing profits

•Concentrated Market and Further Consolidation

•Recovering industry

•Environmental Friendly Products


Number of New Ship Orders – China


Market Growth

The market for anticorrosion coatings was worth around RMB 7.5 Bn in 2013 and is expected to continue decreasing slightly in 2014. The anticorrosion market is expected to begin recovering in 2015 following the delayed effects of the increased number of new orders from the shipbuilding industry.


Source ： China’s ministry of information and technology, GCiS

20082009

20102011

20122013

2014[E]

2015[E]

2016[E]

2017[E]

2018[E]0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Ch

ina

Sh

ipp

ing

Ind

ust

ry V

alu

e (R

MB

Bn

)

0

1

2

3

4

5

6

7

8

9

10 Marin

e AC

C M

arket Reven

ue (R

MB

Bn

)

Coating Shipping

CAGR 6.6%

Shipping Industry and Marine Engineering ACC Coating Growth & Forecast


Regulations & Policies

The main policies relating to anticorrosion coatings are primarily targeted at developing more environmentally friendly products while those targeting the marine engineering sector are focused on creating structure in the industry and upgrading existing shipping fleet to increase efficiency


Regulating Entities & Associations

Key Regulations & Policies

•Ministry of Environmental Protection (MEP)

•China Coatings Industry Association

•China Industry Anticorrosion Technology Association

•National Technical Committee of Paints and Pigments for Standardization

•Chinese Society for Corrosion and Protection

•General Administration of Quality Supervision, Inspection & Quarantine (AQSIQ)

"Healthy Development of the Shipping Industry" • Environmental development 1 of 7 key targets• Vessel Scrapping Subsidy

White list – 51+21 companies that can enjoy special subsidies and benefits not available to companies omitted from the list

• “Beijing hopes to see 10 major yards account for 75% of country’s share of shipbuilding”

Environmental protection• Low Carbon New Standard Specification – lead free

coatings and water-based type to decrease environmental pollution

• Guideline for implementation of IMO performance standard for protective coatings for dedicated seawater ballast tanks in all types of ships

• ISO12944 (quality requirements specifically for anticorrosion coatings)Source ： GCiS


Drivers and Inhibitors

Comments

Shipbuilding industry is expected to recover from the previous

economic downturn, but persisting overcapacity leads to low

profits that can hinder the quality of coating used and the

incentive to invest in new ships.

There is greater demand for high-end coatings, especially in the

shipbuilding industry, however price is still a critical factor that

cause many end users to employ lower-end products.

Chinese standards for the target products were tightened in

2011, improving the position of higher-end suppliers, but are still

lower than those used abroad

Suppliers are investing in a wider variety of longer-lasting

specialized coatings and domestic product quality is slowly

catching up with foreign ones, but many fake and low-quality

products are still prevalent in the market.

Major foreign market leaders produce most or all of their

coatings in China, with lower prices making these products more

attractive to the domestic market. But at the lower end of the

market there is fierce competition and excess capacity.


Source ： GCiS


Despite the downturn in the global shipping and shipbuilding market, this is still one of the most important industry in the China market and the quantity of anticorrosive coatings usage will continue to remain significantly large in the shipping industry in the long run.

-----Coatings Supplier

Anticorrosive coating prices will likely remain relatively similar, as the downstream shipping industry has not been doing very well, and raw material prices have remained relatively stable thus far, therefore no need to adjust prices.

----Coatings Supplier

With the advancement in domestic technology, the market share of domestic companies are likely to increase, but there still remains a noticeable gap between domestic and foreign product performance

-----Distributor

Price and quality are the two most important factors in our purchasing decision, as we use a lot of it and shipbuilding industry has one of the highest requirements for anticorrosive coatings.

----End-user

Important Industry ViewpointsMarine Anti-corrosion Coating


5 Forces AnalysisMarine Anti-corrosion Coating

Source ： GCiS


Marine Industry Anticorrosion Coatings – Key Summary

Conclusion:

Product: Requirements for anticorrosive coatings are already quite high in general though

requirements for quality are expected to further increase in the future, while technology of

domestic products are expected to improve as well.

Shipping Application: Shipping industry has undergone a downturn in past years, of which

there seems to be a revival in 2013, however this is not expected to be reflected in the usage

of anticorrosive coatings in the shipping application until 2015.

Price: Most of the industry players generally believe that prices of anticorrosion coatings will

remain relatively stable, as raw material prices has been steady

Suppliers: Domestic suppliers are expected in slowly catch up in terms of product

technology, though still lack behind in terms of market share in the near future

Regulations: Governments are pushing for stricter requirements relating to anticorrosive

coatings and also a consolidation of the shipbuilding industry, which would likely cause a

similar effect in terms of suppliers of anticorrosive coatings to this industry, whereby

individual suppliers may become more focused on specific industry sectors.



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future of anticorrosion coatings in the marine engineering sector in china - gcis

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