IPA President s Page

Excerpt: Crude prices have fallen globally and, while the going is good, the paint industry can enjoy lower input costs and greater earnings

IPA President's Page

Time to Rejoice

Crude prices have fallen globally and, while the going is good, the paint industry can enjoy lower input costs and greater earnings. It takes more than 300 different raw materials to produce paint and most of these are petroleum-based. Besides titanium dioxide, which constitutes approximately 30 per cent of the manufacturing cost, there are other petroleum-based raw materials, which comprise 40-50 per cent of the total raw material consumed. Hence any changes in crude oil prices impact prices and profitability of the paint industry.

The rapid fall in oil prices inevitably raised the expectations of customers. However, paint manufacturers stock upto two to three months of raw materials; these would have been procured at higher prices. Therefore, any downward revision in prices emerging out of lower crude prices accrued only after a few months, as most of the manufacturers of paint carry high cost inventories.

With a boom in the housing and construction sector in India and the expectations of a good harvest and festival season, the requirement for decorative paints is expected to increase in the second half of 2015. Although the demand for industrial paints is lukewarm, it will probably rise. Domestic and global auto majors have long-term plans for the Indian market, which is good for automotive paints. Increased industrial paint demand, especially powder coatings and high performance coatings, will also propel the revenues of paint companies. It remains to be seen whether key players can cash in on this and make it a win-win situation for all. This seems likely, given the good news of the drop in crude prices.

Jayakumar Krishnaswamy
President
Indian Paint Association

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