International coating giants Kansai Paint, AkzoNobel, Nippon, Axalta all announced that they raised their prices in April. Domestic companies such as Bardez, Bauhinia, China Resources Coatings, and Garbo Lilie have also announced that they have also raised prices. Price notifications, for most of the products, have generally risen between 5% and 25%. The price increase of domestic paint companies is very strong, mainly in the Guangdong region. Other paint provinces like Jiangsu and Shandong have only a few companies. Rising, and did not cause the prices of paint companies nationwide to keep up. Why is it so difficult for paint companies to increase prices?
In 2017, raw material prices helped paint companies increase their prices, but many raw materials fell sharply in the first quarter of this year.
Since last year, the main filler of titanium dioxide in paints has gone up. The coating film forming materials such as epoxy resin, polyurethane resin and vinyl resin have all surged, which has greatly reduced the profit margin of the paint industry. Next, environmental supervision, production suspension, production restriction and transportation The rising cost of logistics has driven coatings companies’ costs to become higher and higher, and some paint companies will find it difficult to survive without rising prices. However, since 2018, various raw materials have seen price corrections in the short-term, such as the drop in maleic anhydride by 30%. Oxygen resin decreased by 22%, and solid epoxy resin decreased by 16%. This provided a breathing opportunity for paint companies, virtually reducing the production cost of paint companies. This is also the reason why many paint companies across the country have not followed up.
Low price vicious competition, making downstream users very sensitive to price
Although China is a big paint country, high-value-added mid-to-high-end markets have always been monopolized by foreign capital, and homogenization of low-end and middle-end markets is a serious issue. Price warfare is the magic weapon for survival. After years of accumulation, downstream users are very sensitive to prices. Therefore, paint companies dare not rashly raise prices because you increase prices, and downstream users do not recognize them, fearing to give customers away.
In spite of these pressures, many companies with social responsibilities have issued shouts calling for the industry to reduce low-cost vicious competition and establish self-discipline in the industry. For example, previous paint companies such as Pentium Paint had once called for the industry to end vicious competition. For the enterprises that have already entered the park, not only the new investment in production equipment is great, but also the cost investment in environmental protection and safety, logistics transportation of dangerous goods, etc. are all significantly higher than that of paint companies of the same scale. However, other paint companies without retreat into the park rely instead on Low cost, In the current situation that raw material prices for coating production have remained high, low-cost machines will occupy the market at a low price. In this market environment with high specification costs and low non-standard costs, vicious competition has become a major issue that disrupts the paint market.
Most downstream distributors do not support price increases
It is difficult for paint companies to increase prices, and they have a lot to do with the status quo of dealers. Many paint companies are concerned about the price/performance advantages of the products in the market after the price increases, thus losing the dealer resources and affecting their viability in the short term.
It is understood that only a few dealers up to a certain level of optimism are optimistic about price increases. Most dealers do not support price increases for paint because many traditional store retails are difficult to do now. If it is a wholesale model, it is even more difficult to do so. Once the price increases, if the downstream consumers do not buy it, the price increase will be difficult to implement.
Therefore, domestic paint companies have earned more profits for low value-added products over the years. Unlike foreign brands, they are earning higher value-added profits. It is like Foxconn and Apple (7194, -208.00, -2.81%). ) Like the company, most of the profits of an Apple mobile phone are earned by Apple, and Foxconn can only earn a low processing fee. If the production cost rises by 100 yuan at the same time, Apple can bear it. Foxconn can't stand it. To get rid of this dilemma, the industry can only promote self-discipline in the industry, reduce vicious competition, focus on product development, differentiate products, and form complementary advantages. Only in this way can a national brand have a rising day.