Coating firms hit by realty downturn

The coating industry faces overcapacity and excessive inventories as the property market stagnates after years of prosperity.

Coatings include such products as paint, resin and adhesives, all of which are used in the construction sector.

According to figures from the National Bureau of Statistics, real estate investment was up just 6 percent in the first four months of 2015 to 2.37 trillion yuan ($387.8 billion). That was a marked slowdown from the year-earlier period, when investment grew 16.4 percent.

The China National Coating Industry Association has forecast that the sector's output this year will be about 17.6 million metric tons, compared with 16.48 million tons in 2014.

Companies in the industry are also being challenged by the new Environmental Protection Law, which took effect on Jan 1. The law requires paint and other coating producers to spend more on technology and emphasizes "green" coating products.

Companies that are already active in the environmentally friendly segment stand to benefit, such as Shanghai Kinlita Chemical Co Ltd, which is listed on the Shenzhen Stock Exchange.

Manufacturers of coatings are facing the same disruption from the Internet that many traditional producers are dealing with.

Coatings producers have long followed a traditional marketing model, under which products were delivered to a nationwide network of dealers that sold to consumers.

But many consumers are now buying almost everything online, including paint for their homes. How to capture those consumers is a challenge for the industry. Coatings manufacturers must use big data to analyze consumer behavior and preferences, industry experts said. They should also introduce products that match modern interior design concepts.