Europe's wood coatings sector is one in which there are pockets of sluggish growth or even decline but others in which there has recently been strong increases in demand, particularly in Central and Eastern Europe(CEE).
It is a relatively fragmented market,which offers a lot of opportunities to medium-sized and small coatings producers who have the flexibility to exploit gaps in supply and to respond quickly to changes in demand.
The multinationals have been reporting slow wood coatings growth or weak sales in Europe as a whole,which they catergorize as a mature market in the global context, since much of the existing growth is coming from the emerging economies in Asia and Latin America.
However, SME wood coatings producers in Europe, particularly in Germany, Austria, Switzerland and a lesser extent Italy, have been recording much more robust growth from the major outlets of construction,furniture and flooring.
In parts of Western Europe,which have been hit by a post-recession slump in the construction market,demand for wood coatings for new buildings has been rising because of a rising preference for less expensive timber-framed houses.
"Wood is not necessarily cheaper than other building materials but it does allow houses to be constructed much more quickly because components of the building are pre-fabricated,"said a sales executive at one wood coatings business."At a time of weakness in construction, wood is a way of reducing costs."
There is also in some areas a buoyant demand for wood coatings in new upmarket luxury accommodation where potential occupants expect large amounts of wood panelling, flooring and furniture, as well as wooden window frames.
The biggest growth in demand for wood coatings is currently in the CEE and Russia and other countries in the former Soviet Union.
In Europe only 15 percent of wood coatings demand was in Central and Eastern Europe in 2000.But by 2015 over 25 percent wood coatings sales should be in CEE, according to figures presented to a recent coatings meeting in Dublin, Ireland, by Orr&Boss Inc, a consultancy from Clinton Township, Mich., U.S.
A lot of this additional demand in the CEE region will come from continued sturdy growth in its construction sector,while construction activity in Western Europe is forecast by Orr&Boss to be among the lowest in the world.
In the first half of this year there was a 25 percent increase in the numbers of new homes completed in Poland,according to PMR Consulting,a Polish-based market research organisation.The quantity of apartments offered by property developers in the country's major urban centers is now higher than in 2007-08 before the financial crisis.
Construction activity has also been busy in urban Russia,particularly at the higher end of the market,which has a big demand for wood coatings.PMR reports that around 70 percent of all newly built residential houses in Moscow are now in the business-class category.
Wood coatings demand in Eastern Europe has also been boosted by the region becoming a center for furniture production.A lot of manufacture of furniture and other wooden products has shifted from Western to Eastern Europe because of low production and raw material costs.
A large proportion of Europe's plentiful supplies of wood are in its eastern region.There are 1.02 billion hectares of forest in Europe,around 25 percent of the world total and considerably more than its share of the total global land mass.
Wood coatings businesses with advanced technologies,efficient customer services and geographically located to have easy access to Eastern Europe are benefitting considerably from its growth in demand.This is particularly the case with SMEs in Germany and Austria.
However wood coatings producers are also gaining from the powerful influence of fashion and style on wood products across the whole of Europe.At present a need for people to show individuality is being combined with a liking for nature and purity.
"Individuality and authenticity are in demand,"said Jasmin Rutpprechter,a marketing executive at Adler Lacke,Schwaz,Austria,a specialist in wood coatings."Creativity knows no limits when it comes to pieces of furniture."
A current trend is for wood in furniture and other parts of the home to be untreated,which requires special effects from wood coatings and stains.There is also a preference for coarsely textured surfaces equivalent to a"rough sawn"look,which need specific types of lacquer.
This natural style contrasts with a desire for modernist wood products with clear lines and smooth surfaces and also for furniture of classical design with a polished appearance.
The variety of vogues in the wood products market offers great scope among wood coatings producers for customization backed by close cooperation with wood workshops and professional painters.
The requirement for customization is a major reason why wood coatings businesses in Europe are able to sell their products at premium prices.Environmental regulations,which limit emissions of volatile organic compounds(VOCs)and have triggered a shift to more costly waterborne coatings,have also been a factor behind higher prices.
Orr&Boss says that even in 2000 there was a 15 percent price premium on wood coatings in Europe compared with the global average.By 2015 this will have risen to a 40 percent premium,according to the firm.
Adler Lacke reported€67 million($87 million)in sales in 2006 on an output of 15,000 tons,most of it wood coatings.Last year it recorded revenue of€83 million,20 percent higher than five years previously but on an output of 15,500 tons or only three percent more.
One of the fastest growing wood coatings specialists is Renner Italia,Bologna,which was set up by its Brazilian owners Renner S.A.in 2004 when sales amounted to€2.5 million.Last year its revenue totalled€62 million from a volume of 17,000 tons.
3-H Lacke,Hiddenhausen,Germany,now part of the German Remmers Group,last year went through a revival after expansions in distribution structure and upgrading of production processes with an emphasis on high quality products in its mainly wood coating portfolio.
"The turn-around in 2011 showed us that our efforts to optimize sequences and processes are paying off,"said 3-H's managing partner Frank Sieverding,while stressing the advantages of the company's"proximity to customers."
Hesse-Lignal,Hamm,Germany,another SME wood coatings producer,has not only been more active in Eastern Europe but also areas of Western Europe.
Its UK subsidiary,Hesse-Lignal UK,has been expanding rapidly through a network of dealers.It is expecting to become one of the major players in the UK market.
The durability of the growth rates of SMEs in wood coatings will,however,be tested by the predicted slow growth in national GDPs across most of Europe,even in CEE,over the next few years.
