The Canadian Paints and Coatings industry (North American Industry Classification System – NAICS – 325510) consists of manufacturers of paints, varnishes, lacquers, shellacs, and stains. This industry is divided into two unique subsections – architectural and industrial. Each subsection is approximately equal in size in terms of shipments and total value of sales.
The architectural coatings sub-sector depends largely on the performance of the construction sector. This sub-sector is comprised of exterior and interior house paints, primers, sealers, varnishes and stains. Products in this sector are typically sold in large retail chains such as Canadian Tire, Wal-mart, Sears, Rona, Home Depot and individual paint stores.
The industrial sub-sector is closely connected to the automotive, industrial equipment, and major appliances sectors. Industrial coatings include automotive paints and sealants, can coatings, coil coatings, furniture finishes and road marking paints. These products are typically sold directly to end-users. The paints and coatings industry is heavily dependent on raw materials because of the many types of formulas and compounds.
Many of the larger industrial coatings manufacturers are headquartered in southern Ontario, with plants and distribution centers in other provinces. The majority of the larger firms operating in Canada are foreign owned subsidiaries and joint ventures headquartered in the United States and Europe.
Canadian subsidiaries and joint venture partners of larger international firms are not required to do much research and development but look to their respective parent companies to supply them with the necessary technology to produce or to further enhance the products they manufacture. Other firms in the industry that produce paints and coatings in Canada look to their suppliers of raw material for advancing technologies that are specific to their input materials. This avenue of technological advancement and formulation is where most paint companies derive their products competitive advantage. This method also allows for companies to produce and design products to satisfy demands in a specific market.
As with many industries in Canada, the paints and coatings industry follows the same trend of a heavy cross border exchange of goods with the United States. In 2007, approximately 83 percent of imports originated in the United States, and 91 percent of exports were destined to the U.S.
The Canadian paints and coating industry realized shipments of US$1.7 billion in 2007. Imports grew to $992 million, up 3 percent from 2006, of which 83 percent, or 821 million came from the U.S. Canada’s paint and coatings industry is considered to be a mature and highly competitive market. However, with both end user sectors (architectural and industrial) growing there is lucrative potential for U.S. products in the market.
In 2007, Canadian new and resold housing sales improved over 2006 levels at 228,343 and 520,000 units, respectively. Forecasts for 2008 indicate overall sales will slow slightly; however, with mortgage rates set to remain within 25-75 basis points of current levels coupled with a strong Canadian dollar, the real estate market is expected to remain stable through 2008. Moreover, the Canadian Mortgage and Housing Corporation (CMHC) maintains the economy will remain consumer driven, especially given the strong dollar, which will translate into increased investment in the home: renovations and upgrades. This in turn will spur demand within the paints and coatings industry, setting the stage for market growth over the coming year.
New automotive sales reached their second highest recorded levels in 2007, up 1.5 percent from 2006 to 1,690,548 units. Growth has continued into 2008, as sales in January and February have surpassed their totals of a year ago. Moreover, Canadian roads host over 19 million used vehicles, the ongoing maintenance of which drives the automotive parts market, a substantial sector for the paints and coatings industry. Additionally, the industry-wide trend to advance “eco-friendly” technologies has led to increased opportunity for new paint and coatings technologies within this sub-sector. The need for new technologies combined with industry growth underscore the position of the automotive sub-sector as a catalyst for demand in 2008.
As with architectural paints and coatings, the industrial sub-sector demand will expand on the strength of the economy. Industry Canada expects higher technology areas of this sub-sector to fuel demand, where new technologies are being applied to meet current industry needs as product sales and services abound. These include environmental sustainability, construction and maintenance, equipment manufacturing, coatings and road marking paints.
Major Canadian cities are following Europe’s example in applying green technologies to their core infrastructure and new developments. Presently, Toronto is in the early stages of implementing a Green Development Standard that promotes construction of environmentally friendly buildings. These standards will result in improved air and water quality, reduce green house gas emissions and enhance the natural environment. Nano-paints, utilizing nanotechnology that will address green standards, will find a growing market for its eco-friendly composition, replacing conventional wall and exterior paints. R&D of nanotechnology is opening doors for U.S. companies with this expertise given the increasing social and political attention to global warming. Demand for nanotechnology also remains high in the automotive sector, as major manufacturers are replacing conventional vehicle paint with this new technology as they look to market the “green” benefits of their products. Nano-paints and coatings have also made headway in the marine and military markets.
By Madellon Lopes