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Challenges and opportunities faced by the globalized coating industry (I)

challenges and opportunities faced by the globalized coating industry (I)

June 23, 2008

0 preface

the core value of "market economy" lies in promoting trade liberalization. Developed countries such as North America, Europe and Japan have realized free trade zones and eliminated tariff barriers. Since China's reform and opening up 30 years ago, especially after entering the WTO in 2001, it has basically completed the transition from planned economy to market economy. China's "market economy" status has been recognized by more and more countries and regions. "Economic globalization" is a double-edged sword for both developed and developing countries. This process is essentially driven by the basic interests of the country. Developed countries have completed the transfer of industrial chains in the process of globalization, that is, labor-intensive industries, high pollution, resource intensive and energy intensive industries have been transferred to developing countries, while expanding from relatively mature and saturated markets to emerging markets. As emerging economies and developing countries, they often take advantage of the opportunity of world industrial structure adjustment, adopt preferential policies to introduce foreign capital, exchange "market" for technology, establish export processing zones, use cheap labor and resources to develop export-oriented economy, promote economic development, enhance strength, and then gradually carry out industrial upgrading. Since the 30 years of reform and opening up, China has seized the opportunity of economic globalization and achieved sustained and rapid economic growth. China's economy has become the fourth largest economy in the world. The total foreign trade volume exceeds 40% of the national GDP, ranking third in the world. China's status as a "world manufacturing base" is determined. In 2006, te reserves were about US $1trillion. The rise of China has become an indisputable fact

in the process of economic globalization, while developed countries and emerging countries represented by China are infiltrating and relying on each other economically, conflicts and conflicts arise repeatedly with mtmarion lithium's plan to provide 200000 tons of lithium concentrate to Ganfeng lithium industry this year. In recent years, China, Europe, the United States and Japan have been constantly involved in disputes over non-tariff barriers - product safety, intellectual property protection, RMB exchange rate, anti-dumping and so on. Trade protectionism in developed countries is on the rise, involving political, economic, legal and cultural levels. More importantly, in the process of industrialization, urbanization, economic marketization and globalization, China must face and solve contradictions, promote the improvement of China's market economy, and further optimize the economic structure and export product structure

as an industry serving all industries of the national economy, especially the pillar industry, the coating industry has entered the fast lane of development with the rapid development of the national economy. Coatings for furniture, toys, household appliances, machinery and electronic products, ships and containers and other export products have gone global. With the sustained and rapid development of domestic economy, the investment in infrastructure construction (accounting for more than 30% of GDP) has stimulated the unconventional development of relevant anti-corrosion coatings (steel structure and concrete); The development of domestic demand markets such as real estate and automobile has promoted the growth of architectural coatings and automobile coatings at the rate of 15% ~ 20% per year. The output of coatings in China has increased from 1million T/A to 2million T/A for 10 years, from 2million T/A in 2001 to 3million T/A in 2004 for only 3 years, and from 2004 to 2006, it has increased by 1million T every year to 5million t. Despite the statistical problems, it is a miracle. Just as many western economists do not understand the sustained and high-speed development of China's economy, the development and trend of China's coating industry in recent years are also different. However, the development of the coating industry is bound to be inseparable from the economic environment, especially the contradictory and changing environment of economic globalization and market internationalization. The coating industry is connected with the chemical raw material industry at the top and the coating and terminal market at the bottom. As an intermediate industry of "processing service", its position is quite fragile and its ability to resist risks is limited. Under the pressure of rising chemical raw material prices, transportation costs and energy prices caused by the continuous rise of global oil prices, the impact on the coating industry is long-term and cruel, and the ability to transfer price increases to end users is extremely limited, so the profitability of the industry continues to decline. That is, from sudden profits to meager profits or return to normal profits, whether the coating industry can develop sustainably and healthily is a problem we must face

the coating industry does not belong to the eight protection industries related to national security and economic security that have been announced by the state. It is a highly competitive industry that is fully open to the outside world and is integrated into economic globalization and market internationalization (the emerging economies Russia and India are less open). The entry, introduction, digestion and absorption of multinational companies have greatly promoted the technological progress of China's coating industry, improved the management level and optimized human resources. While expanding to the world market through various export commodities, coating products and production bases have the opportunity to transfer and expand to other emerging markets (Asia, Latin America, Africa, Eastern Europe and Russia). Economic development has stimulated the continuous expansion of the domestic market. In 5 ~ 10 years, China's coating industry will still face a golden period of development (adhering to the international political environment of peaceful development), but at the same time, it will face a highly competitive, rapidly changing and risky economic environment. We must keep a clear head

2006 development status of the world coating industry

1.1 distribution of world coating output (see Table 1)

Table 1 Distribution of world coating output 10000 tons

of which North America, Europe, South Korea and Japan are mature and basically saturated markets, with an annual growth rate of 2% ~ 3%. North America showed negative growth in 2004 (affected by the real estate industry); China and India have the fastest development rates, reaching 15~0/~h11% respectively; Driven by the construction boom (Saudi Arabia alone invested US $1trillion), the Middle East grew by 7.9% in the past three years (sustainability is in doubt), and Russia grew by 5.4%

1.2 top 10 multinational companies in the world (see Table 2)

Table 2 top 10 multinational companies in the world in terms of output value of coatings

in addition, there are 1 multinational companies with an output value of US $10 billion to US $2billion; $500million to $100 million, 8; $200million to $500million, 24

the top 10 companies have basically not changed much. The top 50 companies in the world have produced 80% of the world output, indicating that the intensive degree and trend of the coating industry are basically stable, and the annual output value of more than 100million US dollars can enter the top 60. At present, in addition to multinational companies, there are also Guangdong China Resources Group, Shanghai paint company, Guangzhou Zhuhua group, Hunan Xiangjiang, Dabao chemical, and garberry, which should be selected into the top 60 coatings in the world

according to the data of 2006, the concentration of China's coating industry has gradually increased. The output and sales revenue of the top 20 companies increased from 23% ~ 52% and 20.0% in 2005 to 24% ~ 38% and 20.39% in 2006. Both the concentration and internationalization are far from that of multinational companies. In the United States, there were more than 2000 companies before 30 years, reduced to 1600 before 20 years, decreased to 1200 before 10 years, and reached 970 before 5 years. By 2006, there were 850 companies. The more they are concentrated, the more difficult it is. The larger the company is. There is still a long way to go from thousands of coating enterprises to 1000 ~ 2000 in China

the United States has achieved concentration through mergers and acquisitions in a fairly mature market economy environment, while China is still in the primary stage of market economy and faces huge development space. Therefore, the coexistence of many small and medium-sized enterprises and large enterprises will continue for a long time, and the development of small and medium-sized enterprises cannot be ignored. Unlike North America, there are still a large number of small and medium-sized, family owned enterprises in Europe and Japan

1.3 comparison of profits and profitability

the profits of coating companies in developed countries, which are relatively mature and saturated, are relatively stable, with an annual growth rate of 2% ~ 3%, and fluctuate in an all-round way with economic development, sometimes even with negative growth. For multinational coating companies, different departments present different situations. The composition of their profits is different from that of different departments in China. The composition of their profits is related to the asset appreciation and stock income generated by mergers and acquisitions in China. According to the statistics of China in 2006, the profits and growth rate of coating multinational companies in emerging markets far exceed the annual average profit rate of the company. See Table 3 for examples

Table 3 profit growth rate of some multinational corporations

the average profit rate of China's coating industry in 2006 was 6.82%, 0.83% higher than that in 2005, which is far higher than that in developed countries. This is a normal phenomenon. The larger the company and multinational corporation, the higher the actual profit and growth rate, which is in line with the development law of economic globalization. The reason for the transfer from mature markets to emerging markets is to strengthen the comparative advantage in international trade. Domestic competition leads to international expansion. The international market can extend the life cycle of some products, reduce R & D costs and promote profit growth

1.4 main problems faced by the industry growth

the coating industry in developed countries is characterized by the so-called "maturity" and the basic "saturation" of the market. "Maturity" means that the concentration of the industry is relatively high, and multinational companies dominate the development of the industry; The laws and regulations are relatively sound, the company's management meets the requirements of modern enterprise system, the business integrity is high, the industry is standardized, self disciplined and the market access is institutionalized; The market of general architectural coatings and industrial OEM coatings is "saturated" with low growth rate. In recent years, we have been faced with such profit reducing factors as the rise in raw material prices, transportation costs and energy prices caused by the rise in oil prices, as well as more stringent environmental protection regulations - haps and VOC., As well as the REACH regulations registered and approved by EU chemicals, the transfer of investment and industries to emerging economies and the return of manufactured products have led to industry imbalance, resulting in the reduction of employment opportunities and the contraction of some industries. These will further promote industry integration, more active M & A and resource restructuring, and look for new markets and profit growth points in developing countries. At the same time, we will promote technological innovation, energy conservation and consumption reduction, and more environmentally friendly product development, so as to enhance our core competitiveness

as a representative of emerging economies, China can provide cheap labor, rich raw material resources and broad markets. However, the development of the coating industry is relatively "immature". The huge market demand and relatively weak industry foundation have given birth to a large number of small and medium-sized enterprises. After the government stripped off the industry management function, the industry association did not follow up and fill in some necessary functions in time, and the formulation of corresponding laws and regulations lagged behind, resulting in the lack of self-discipline and "self" protection mechanism for the industry and enterprises, disordered competition and blind development, and some enterprises did not operate in good faith; After entering the WTO, the formulation of corresponding laws and regulations lags behind, not to mention the multi departments in the implementation process, the power is not clear when installing the pressure testing machine, and the law enforcement is not strict. At the same time, there is still a big gap between domestic enterprises and multinational companies in terms of management concept, modern enterprise management system and talents. For quite a long time, industry structure adjustment, especially domestic and foreign mergers and acquisitions, must face these "immature" problems in domestic capital integration

1.5 positioning of the company in the market under the background of economic globalization

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regardless of the size of the coating company, it must have the vision of global operation and understand the characteristics of competition in the international competitive market. Generally, developed countries divide the coating companies into five categories:

(1) domestic companies: positioning in the domestic market, considering that the development space of the domestic market is sufficient, And it has considerable competitiveness (at present, the vast majority of Chinese enterprises are the same)