https://newsletter.en.creamermedia.com
Africa|Business|Components|Freight|Manufacturing|Resources|supply-chain|transport|Manufacturing |Products
Africa|Business|Components|Freight|Manufacturing|Resources|supply-chain|transport|Manufacturing |Products
africa|business|components|freight|manufacturing|resources|supply chain|transport|manufacturing-industry-term|products

Industry struggling with materials shortages, price increases

PAINTING A PICTURE The long-term outlook for the industry currently is that current demand for decorative paint will last for another few years, before it eventually levels out

TARA BENN Sapma members should work with us to become stronger. Working collectively, our voices can be heard by government and regulatory departments in South Africa

4th June 2021

By: Cameron Mackay

Creamer Media Senior Online Writer

     

Font size: - +

A shortage of raw materials, coupled with substantial raw-material price increases, has placed the local coatings industry under pressure, states South African Paint Manufacturing Association (Sapma) executive director Tara Benn.

“A complex mix of demand and global chemical plant production issues, as well as scarce transport resources for key raw materials, is placing strain on the supply chain. This has enormous implications for the coatings industry, which has already been hit by the Covid-19 lockdowns last year.”

Benn notes that these raw materials include epoxy resins and solvents, which are normally imported from Europe, and are used to make paint in South Africa.

She highlights a number of reasons for this shortage in coatings raw materials, and the resultant price increases in South Africa.

The first is an increase in demand for paint and raw materials from the Southern African Development Community (SADC) countries, owing to these SADC markets having lost a significant supply of imported materials from China, India and the Middle East because of Covid-19-related shipping restrictions.

“Companies in the SADC then turned to South Africa to provide alternative supplies, which, although providing welcome new business, nevertheless drained local supplies,” she explains.

Further, heavy snowstorms and subzero temperatures earlier this year in the US have forced several key US raw material suppliers to halt production.

Benn states that, according to the European Paint Council (CEPE), the shortage of raw materials is an “immense burden” for the global coatings sector, as raw material prices account for more than half of the cost of finished products.

Since January last year, the costs for key components, such as epoxy resin, have risen by 60% in Europe, while prices for solvents have increased by up to 123%, according to CEPE estimations.

The closure of several plants in Europe during Covid-19 lockdowns also led to raw material suppliers invoking force majeure to contractually break supply obligations, she claims.

Rising transportation costs, owing to the sharp rise in oil prices and a shortage of containers, have also contributed to this demand and price increase for raw materials.

The pandemic lowered commodity demand and, therefore, the traffic and volume of containers moving geographically between regions decreased; however, as demand increased again, sea freight costs skyrocketed, she adds.

“Sapma estimates that, on average, sea freight costs have gone up by 40% to 55%.”

Benn adds that the current situation is exacerbated by the unexpected rapid economic recovery in China, which is also fuelling demand for key raw materials.

Local Demand

There is also “a massive demand” for decorative paint, specifically in the local coatings industry, says Benn.

This comes on the back of the global coatings industry reaching record sales for decorative paint last year.

To keep up with this demand, she suggests that most local paint manufacturing businesses have introduced extra shifts in the manufacturing process to keep up with current demand.

“Local manufacturers have been forced to take advantage of these opportunities to supply on demand. A lot of the local companies have also extended their current paint ranges to include additional ranges to assist the market in other ways.”

Benn expects the SADC countries to attempt to increase stock levels and overbuy raw materials and paint.

She argues, however, that if businesses do this, it could have a detrimental effect on the market because raw material manufacturers and suppliers might not be able to keep up with initial demand, with labour costs increasing because of overtime that would have to be implemented in factories.

In addition, holding more stock would be more expensive for the manufacturers, while smaller companies would also not have the required capital to keep extra stock.

Despite these attempts to increase stock levels, Benn expects the factors affecting materials supply and costs to normalise by the end of the year.

“Currently, the long-term outlook for the industry is that current demand for decorative paint will last for another couple of years, and manufacturers will see a steady climb in demand that will eventually level out.”

Sapma assists its members in keeping up to date with information on raw materials supply and demand.

Edited by Zandile Mavuso
Creamer Media Senior Deputy Editor: Features

Comments

Latest Multimedia

Photo of Martin Creamer
On-The-Air (01/11/2024)
1st November 2024 By: Martin Creamer

Showroom

Avlock International
Avlock International

Avlock International is a leading manufacturer and distributor of Specialized Fastening Systems.

VISIT SHOWROOM 
Rittal
Rittal

Rittal is a world leading provider of top-quality integrated systems for enclosures, power distribution, climate control, IT infrastructure and...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Magazine round up | 01 November 2024
Magazine round up | 01 November 2024
1st November 2024

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.061 0.15s - 178pq - 2rq
Subscribe Now