AkzoNobel Increasing In-House Resin Production

WEDNESDAY, FEBRUARY 23, 2022


Global coatings manufacturer AkzoNobel recently announced that it plans to invest in the expansion of in-house resin manufacturing. According to the emailed release, the expansion is expected to help build resilience against supply disruptions and act as part of the company’s Grow and Deliver strategy.

Already reportedly underway, the scale-up program will also contribute to achieving the company’s financial and Scope 3 (upstream) carbon reduction ambitions. AkzoNobel also notes that it is in line with its “People. Planet. Paint.” Approach.

“All of our businesses use resins, and while we produce a good proportion of what we need ourselves, commodity and other specialty resins need to be sourced from third parties,” explained Michael Friede, AkzoNobel’s Chief Commercial Officer for Performance Coatings. “Further investing in our own resin capabilities will help us to secure sustainable business growth, as well as supporting our innovation pipeline and sustainability targets.”

AkzoNobel reports that the plan, which was developed after an internal resins team investigated opportunities to add value and make the company more self-sufficient, includes investing in sites, equipment and people to optimally run them.

The company expects to contribute around 15-20 million euros (about $17-22.6 million) in EBITDA by 2023.

“It quickly became apparent that investing in our own resin capability was the way to go,” continued Friede. “It will enable us to secure raw material supply to optimally support our Grow & Deliver ambitions and, at the same time, we’ll look to generate extra value by leveraging and optimizing the volumes we don’t bring in-house with our network of external partners.

“We’re well aware that demand for resins is only expected to increase. Meanwhile, our resin manufacturing sites have extra production capacity available. So the decision to increase our investment in the production of resins at favorable economics is intended to add important value to our customers and our company.”

Resin Shortages, Supplier Efforts

Back in September, it was announced that due to a variety of factors, aside from the ongoing COVID-19 pandemic, the industry was witnessing a shortage and price surge in paint.

From the surge of demand by do-it-yourselfers stuck at home, to the strange freeze that took over Texas earlier this year and worsening supply chain issues, the coatings industry has been backed into a corner with no signs of when the market will improve, some experts said.

According to the Federal Reserve, the higher inflation is only “transitory” or temporary and appears to be showing signs of abating. The central bank’s report is backed by White House officials, who also state that while they’re sensitive to the rising prices, they foresee that supply chain issues will soon subside, having observed the slight downward trend in hardware, lumber and other building materials.

Wall Street economists have also reported to side with the transitory position.

However, despite the opinions of some of the nation’s leading economists and financial advisors, many believe that the current situation could persist well into 2022, further burdening many of the small businesses that are already struggling to make ends meet.

The major factors that will determine how persistent the inflation is in the industry, however, are how the nation will bounce back from Hurricane Ida and the functionality of global supply chains for the chemical industry. As mentioned, the Texas freeze earlier this year also affected the chemical industry, in that much of its petroleum production—a critical ingredient in paint—was slowed.

These shortages, seen mostly in epoxies and acrylics, as well as several types of solvents and additives, are the main issues the industry is facing now, according to equity analyst firm, Morgan Stanley.

In October, global coatings company RPM International Inc. reported that with the purchase of a 178,000-square-foot chemical manufacturing facility in Corsicana, Texas, the company was hoping to strengthen its supply chain and increase resin production amid global shortages.

Procured from ChampionX Corporation, RPM CEO Frank Sullivan told officials that the new plant would help add capacity of alkyd resin, a key material used in the company's Rust-Oleum paint.

The facility is owned and operated by the company’s Tremco Construction Products Group. In addition to acquiring the land, facility and equipment, the Tremco Group was expected to hire the plant's more than 80 existing employees and reports that it could potentially hire more employees in the future.

And, in an updated report in December, it was reported that the industry was still witnessing an increase in costs for raw materials that are becoming even more difficult to find due to supply shortages.

The British Coatings Federation issued a statement last month citing raw materials account for about 50% of all costs in the industry. Increases in energy and oil prices also reportedly more than doubled in the last 12 months, upping production costs.

The impact, BCF said, is “obviously very severe” with resins and related materials seeing a 36% price hike. For example, the average price for Solution Epoxy Resin is reportedly up 124% in September from this time last year.

Most recently, global coatings firm The Sherwin-Williams Company announced in a press release that it would be expanding its manufacturing and distribution capabilities in Statesville, North Carolina.

According to the release, the agreement signed with the state of North Carolina, Iredell County and the city of Statesville plans to significantly expand Sherwin-Williams’ architectural paint and coatings manufacturing capacity and establish a larger distribution facility.

The company announced its plans to expand as the nation continues to suffer from raw material and supply chain issues, particularly in the coatings industry. With the expansion, Sherwin-Williams intends to add millions of gallons of annual manufacturing capacity and sizable pallet storage capacity to support the increasing demand for architectural paint and coatings products.

Construction is expected to start by the third quarter of this year, with all work slated to be completed by the end of 2024. The manufacturing facility will continue to operate for the duration of the project.

   

Tagged categories: AkzoNobel; Asia Pacific; Business management; Business matters; Business operations; Coating Materials; Coatings manufacturers; Coatings raw materials manufacturers; EMEA (Europe, Middle East and Africa); Expansion; Industry News; Latin America; Manufacturing Plant; North America; Program/Project Management; Raw materials; Resins; Supply and demand; Z-Continents

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