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Paints, Coatings Are Integral to Saudi Future

Monday, August 1, 2016

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As the Kingdom of Saudi Arabia (KSA) seeks to drive sustained economic growth in the region, the agency created to help manage its investment opportunities has solicited information on its prospects in paints and coatings production.

The Saudi Arabian General Investment Authority (SAGIA) selected The ChemQuest Group Inc., an international business strategy firm specializing in specialty chemicals, to undertake a technical and market study of paints and coatings within Saudi Arabia, ChemQuest announced.

Invest Saudi logo
The ChemQuest Group Inc.

Business strategy firm ChemQuest Group Inc. will assist the Saudi Arabian General Investment Authority in defining a profitable, organic-growth-oriented business investment case for the production of paints and coatings products in Saudi Arabia.

The Cincinnati-based firm will provide its recommendations, developed on the basis of competitive criteria from model countries such as the U.S., Germany and China, in a manner that conforms to the kingdom’s Vision 2030 strategy.

Saudi Arabia’s Vision 2030 objectives (designed to help shift the KSA economy away from a dependence on oil) will be implemented through 2030, with robust improvements underway now through 2020, the firm says.

SAGIA Acting Governor, His Royal Highness Prince Saud Bin Khalid Al Faisal, said the agency looks forward to using the ChemQuest data to better understand how Saudi Arabia’s strengths can be used to create a robust paint and coatings industry.

“The rapid growth of the paint and coatings sector in the Kingdom, and our large basic petrochemical industry is a strong foundation upon which the sector can be built,” he said. “ChemQuest’s expertise and recommendations will enable us to fill the path to success we seek in paints and coatings.”

Building Its Case

Through research and analysis, ChemQuest said it will define a profitable, organic-growth-oriented business investment case for the production of paints and coatings products in Saudi Arabia to meet growing regional demand in the Middle East, amid persistent import gaps. 

It will also develop critical benchmark requirements for best investment practices within the global paint and coatings industry.

paint lab
© iStock.com / mumininan

The SAGIA looks forward to using the study data to better understand how the kingdom's strengths can be used to create a robust paint and coatings industry.

In the end, the company will deliver a best-in-class financial investment model for SAGIA that outlines the short- and long-term competitive advantages (and investment attractiveness) of producing paints and coatings within Saudi Arabia, with a special focus on identifying and overcoming barriers to sustained growth and profitability, or otherwise limiting foreign and local investments.  

“ChemQuest’s deliverable will include a financial snapshot of each future year,” according to President/CEO Dan Murad.

The firm will lay out the business fundamentals and the “Path to Success” to give SAGIA a clear understanding of how to address distinctly different coatings sectors and mitigate the risks associated with external business uncertainties, he explains.

“SAGIA is eager to implement ChemQuest’s comprehensive recommendations to fulfill its profitable vision of building state-of-the-art factories to produce paints and coatings for protecting and beautifying Saudi Arabian assets,” he adds.

The KSA Market Picture

The three pillars of the Vision 2030 strategy—the kingdom’s position as the heart of the Arab and Islamic worlds, becoming an investment powerhouse, and its strategic geographical position—are vital to Saudi Arabia’s emergence as the “Center for the Paints and Coatings Supply Chain” through its “Vision for Paints and Coatings,” according to ChemQuest. 

Global coatings represent a $140 billion industry, growing at a 5 percent compound annual growth rate (CAGR) from 2015 to 2020, the firm says.

paint lab
© iStock.com / mumininan

Saudi Arabia reportedly has access to key raw materials within the Middle East and is well positioned to serve Africa to its west and India and Southeast Asia to its east.

Saudi Arabia has access to key raw materials within the Middle East, it notes, and is well positioned to serve Africa to its west, which is growing at 5 percent CAGR, and India and Southeast Asia to its east, growing at 7 percent CAGR. 

Moreover, ChemQuest adds, in 2015, paint and coatings demand in KSA was 1,200 kilotons by volume valued at $1.75 billion, growing at a 5-year CAGR rate of 4.9 percent between 2015 and 2020. This was largely driven by driven by decorative and architectural coatings used by the KSA in construction, it says.

Other drivers included industrial durable goods production, small business growth driving its use of industrial OEM paints and asset protection driving special purpose coatings use in the region. 

A Competitive Player

To this point, KSA’s basic chemical industry has prospered because of ports designed for bulk trade, according to the firm. KSA’s plan to leverage low-cost oil production will further develop local downstream intermediate raw materials and end-user industries, it says. 

For select molecules, KSA will support investments required to become the low-cost producer of intermediates, the firm notes. To achieve economies of scale, it will expand not only the addressable market beyond the Middle East to include Africa, India, China and Southeast Asia, but also the end-market scope beyond paints and coatings to include markets that use the same intermediates, such as adhesives, sealants, inks, textiles, nonwovens, plastics, and personal care- and home-care products.

While the paint and coatings industry in the Middle East, Africa, India, China and Southeast Asia is currently underdeveloped, the region is emerging rapidly, the firm notes.

Moreover, it says, KSA competes effectively with China by offering financial incentives for market players such as tax reduction, reduced tariffs, easier access to funding, reduced prices on land and government subsidies.

   

Tagged categories: Asia Pacific; ChemQuest; Coating chemistry; Coating Materials; Coatings; Construction chemicals; EMEA (Europe, Middle East and Africa); Latin America; Market; Market forecasts; Market research; Market trends; North America; Paint; Raw materials

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