BCF Information note - Raw Material Prices for Paint Manufacturers March 2022
Higher raw material prices, energy and freight costs hitting decorative paint and industrial coatings manufacturers hard
29 March 2022
A new raft of higher raw material prices has again hit the decorative paint and industrial coatings industry in recent weeks with increased energy and freight costs adding further to manufacturers problems on top of growing concerns caused by the war in Ukraine and new uncertainties about the direction of the world economy.
According to the ONS, raw material prices in the paint sector are now up 20% in February compared with a year ago, easily outstripping the 15% increase for UK manufacturing as a whole, while many critical raw materials are up by more than three times this level or more.
As of today (29 March), Brent spot prices were up 75% on a year ago with materials such as N-Butanol and Xylene, for example, showing similar increases. Elsewhere, higher prices were seen for resins and related materials with Epoxy Resin prices up 110% in the last year and Nitrocellulose prices 40% higher.
For pigments, prices increased in most areas with Titanium Dioxide 22% higher in January at a new high of £2,836 per tonne. Packaging prices were also sharply higher in recent months with, for example, 2.5 litre round tins seeing an increase of 44% and with plastic containers up by a similar amount.
All this is before further price announcements in recent days come into effect with many suppliers also imposing surcharges and force majeure in some cases.
Inevitably, this means higher prices and with inflation now impacting on both business and consumer confidence this will further dampen demand in general over the next year. Tighter household and business budgets are also expected to see priority concentrated on essential areas of expenditure.
Much higher energy costs are also having a major impact with gas and electricity prices up by eye watering amounts. According to the governor of the Bank of England, consumers are now facing an even bigger shock from energy prices this year than during the 1970s oil crisis.
Figures from Ofgem show gas prices per therm at £210 in January this year up from just $48 at the start of 2021 and with similar increases being seen for electricity prices. Member companies are also reporting plenty of cases where suppliers have applied energy surcharges in recent weeks.
Global Container Freight Rate Index
Adding to companies’ problems are supply issues relating to the availability for many raw materials with this continuing to be a major concern for all firms. This has been the case since the easing of Covid-19 restrictions earlier last year but now with these added issues and sharply higher freight costs adding further to paint manufacturers worries. Freight costs have more than doubled since this time last year.
Further complicating the current position is the situation in Ukraine which is now disrupting global markets in multiple areas. For example, with Russia and Ukraine being major sunflower oil growers the war is now having a knock-on effect in alkyd resins. In addition, many minerals come from Russia some of which cannot easily be substituted while export routes by land through Russia are also being disrupted aside from the dreadful humanitarian costs of the war.
In China, a new wave of further Covid-19 lockdowns is further reducing feedstocks available for the European market.
It all means a perfect storm with higher raw material prices, sharply rising energy costs, much higher freight costs and a huge amount of uncertainty caused by the worsening situation in Ukraine.
BCF press release - Raw material availability and price hikes may end up as 2021’s biggest issue
10th March 2021
Lack of availability of key raw materials and packaging, and significant price increases are causing significant disruption to the coatings and printing ink industries in the UK and across Europe.
There are four significant trends affecting raw material prices:
- Strong global market demand has led to shortages on many raw materials
- The oil price has risen by 58% since November (currently $68 a barrel)
- The global shortage of shipping containers has led to a sharp rise in transport costs from Asia to Europe thus further restricting supplies to Europe.
- Additional non-tariff costs related to the new UK customs arrangements with the EU are adding to the cost of imported raw materials into the UK from Europe.
However, there are also some specific reasons for some of the recent increases.
Solvents are one category where prices are going through the roof. Some examples in BCF’s monthly raw material prices survey shows the largest increases in solvent prices in January 2021 versus 12 months ago are acetone (123%) n-butyl acetate (91%), IPA (41%) and n-butanol (54%). A critical issue here are two force majeures at major chemical plants producing butyl acetate.
In January, BCF issued a press release reporting sharp price increases for epoxy resins, of as much as 60% in Q3 2020. Similar problems are affecting the market for polyester resins with factory closures in Singapore and Sweden as well an explosion at a factory in China adding to the difficulties. There are also problems with bisphenol-A with stocks being diverted to polycarbonates. Neopentyl glycol and methanol are also both reported to be in short supply.
Concerns have also been raised about pigment shortages, such as red and yellow iron oxide. Plastic polymers are also in short supply, affecting availability and prices of packaging, with 5L paint cans 10% higher than at the same period last year, and tin plate has had a similar increase.
“Given that raw materials and freight comprise the majority of the overall cost to produce paints, coatings and printing inks, this trend will have a major impact on the operations of BCF member companies,” said BCF CEO Tom Bowtell. “Where possible, BCF members will seek to mitigate higher costs via internal process optimisation measures, alternate sourcing and increased efficiencies”.
ENDS
