Thoughts on the rise of raw materials in the coati

Survival of the fittest: thinking about the rise of raw materials in the coating industry

survival of the fittest: thinking about the rise of raw materials in the coating industry

September 13, 2017

[China coating information]

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titanium dioxide soared by 80%, TDI rose by nearly 200% throughout the year, various solvents increased by an average of 40%, and construction lotion increased by nearly 50%, The rising prices of raw materials throughout 2016 made the living conditions of coating enterprises increasingly difficult

however, after entering September 2017, the prices of titanium dioxide, TDI (curing agent), solvent, resin, lotion and other coating raw materials once again ushered in a collective surge (the third wave of this year), which is even worse

in March 2017, in response to the sharp rise in raw materials, packaging and logistics costs, companies such as garberry, bards, sankeshu, Metz, Changjiang, Jotun, Haihong old man and others adjusted the prices of their products, which was the first wave of price increases in 2017

from July to August 2017, according to incomplete statistics in the "paint classic", in the second wave of price rise in 2017, dozens of enterprises adjusted prices, such as Nippon (long run fat), garberry, Valspar (China Resources), zhanchen, Astor, Dabao chemical, Baichuan, Huilong, Mickey, digital color, Shiquanxing, Lanyang, Huayang Chemical, French American paint factory, jinzhanhong, etc

in the face of the rising rhythm of raw materials "one wave is not flat, one wave rises again", coupled with labor costs, logistics costs and environmental protection pressure, coating enterprises generally can't bear it in 2017

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the price increase of some titanium dioxide enterprises in September

the "three waves" of price increases in 2017 have made people in coating enterprises complain incessantly. Due to the rise of raw materials, most coating enterprises will face the situation that most of them will not be able to bear the cost pressure and collapse, while the small ones will suffer losses in profits. However, in the author's opinion, this price storm will make the entire coating industry staged a competitive race for the survival of the fittest

in addition, the author believes that at present, environmental protection is a major concern of the state, and large-scale raw material chemical plants must be the focus of attention. As the wind of environmental protection blows harder and harder, China will vigorously rectify the raw material enterprises that fail to meet the standards in the upstream enterprises of the coating industry. Although the Environmental Protection Bureau has actively avoided the "one size fits all" model for coating enterprises, it is inevitable that many manufacturers of coating raw materials have been injured, rectification and rectification, and shutdown. This makes the rise of raw materials more inevitable. The trend of rectification will be a long-term policy, so the rising trend of raw materials will not stop for a while

actively deal with difficulties

the price of raw materials remains high. In this price rise storm, the paint manufacturers are the most hurt. According to the 2016 semi annual report of some enterprises, the profits of most enterprises have declined. The revenue of Bauhinia paint fell by 18%, and the profit fell by nearly 70%! China paint group also suffered a loss of HK $17.62 million, and its net profit plummeted by 197%! Paint enterprises must find measures as soon as possible to slow down the damage caused by the price rise

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the semi annual report of some enterprises in 2016 shows that the profit of enterprises has decreased seriously

◤ I. price rise has shifted pressure

in the three waves of price rise this year, according to incomplete statistics, dozens of enterprises have adjusted their prices, including larger coating enterprises such as nippon, Carlyle, Valspar, zhanchen and so on, It is enough to see the impact of this price rise on the coating enterprises that VTT is still developing PLA production process based on extruded foam. Price adjustment is indeed a way to transfer cost pressure. Raising prices means transferring price pressure to the downstream

but the current situation is that manufacturers' price increases can bring real benefits, and some brands can also use this to hype, but the price increase is afraid of encountering more resistance. Think about the price rise carefully. Some people put forward that "the price transition is only superficial, but at a deeper level, it has brought about structural effects, including channel control, promotion management and so on". Due to different interests, price increases will encounter various resistance in the implementation, and the implementation process of price increases is the balance of multiple interests

after all, especially for most small and medium-sized enterprises with low bargaining power, the soaring cost of raw materials has made them face the dilemma of "it is difficult to survive without price increases, and price increases lose price advantages", which is even worse

in addition, in the price transition, manufacturers are more concerned about the price implementation and market share of the terminal. However, considering the channel structure, some of the last 16 Before the experiment of pendulum impact testing machine, it is necessary to comprehensively check whether each mechanism works normally, and the terminal operation has a heavy weight at present. Therefore, in the follow-up work of price increase, we should focus on the operation of post terminal channels. Through solid and effective post terminal channel operation, we can stabilize and improve the sales of other channels, because this is the key factor related to whether the price increase has become an opportunity for brand reshaping

◤ second, store materials and prepare for trouble

store raw materials and be prepared for trouble. This is a way to prepare for a rainy day. At a time when the price of raw materials is soaring, purchasing strategies before the price rises to a more unacceptable level can alleviate the impact of the upcoming price rise. The fluctuation of the raw material market in 2016 has a great impact on the profits of Dongfang Yuhong. Therefore, in order to deal with the risk of raw material price fluctuation, Dongfang Yuhong has decided to make appropriate use of the off-season to increase reserves and reduce procurement costs. In addition, enterprises such as Keshun waterproof, Feilu shares and Qianjiang high tech are also determining the best procurement and storage of raw materials. There is no doubt that the manufacturers must have realized that the price of raw materials may rise. With the continuous news that raw material manufacturers have stopped production for remediation, we can also see the toughness of environmental remediation measures. Part of the shutdown and rectification has made the supply of raw materials more unstable. Therefore, the author believes that in such an unstable situation. The rising trend of raw materials will not change. Storing raw materials in advance is convenient to cope with the rising price storm, which is of strategic significance to control the soaring price of products and maintain profits

on the contrary, if all major enterprises realize the importance of raw material storage and start to purchase raw materials in batches, it is unknown that the high price of raw materials will be prolonged in the face of the widening gap between supply and demand

◤ III. technology research and development

the sharp rise in the price of raw materials is a huge test for downstream coating enterprises. The test is not only the emergency measures for raw materials, but also the strength of an enterprise

why do you say so? Because technological innovation and product research and development are long-term positioning and strategic goals. Whether there is a price war or not, this should be the core of enterprise development. At no time can we abandon the creed of technological research and development. It is very difficult for enterprises engaged in price wars and seeking profits to deal with the risks of enterprises with technology research and development. For enterprises with a long-term vision and taking technology research and development as the basis of their own development, this is an effective method under the pressure of rising raw materials

technology research and development includes two levels: first, for upstream raw material manufacturers, the price of raw materials they rely on for survival is high. If we can find raw materials to replace it to innovate technology, it can not only alleviate the pressure of raw materials rising, but also provide opportunities for upstream raw material enterprises to develop and expand profits. Second, for enterprises or consumers in the downstream industrial chain, it is also a way of innovation to improve the existing products and improve the performance of products from the perspective of consumers

◤ IV. credit cost

enterprise credit is the key to maintain customers and maintain enterprise profit growth. In the tide of rising prices, despite the inevitable decline in profits, good corporate credit can ensure the stable supply of goods and the relative stability of sales

some established enterprises have played the credit card. Kede technology's response is to establish a strategic partnership with raw material suppliers to maintain the stability of market supply; In addition to adjusting the price, Jiunuo shares also takes measures to establish a long-term cooperation strategy with customers

under the market relationship of rising demand for raw materials, it is actually a soft strategy for coating enterprises to maintain strategic cooperation with upstream raw material manufacturers through their accumulated corporate credit. Maintaining a stable relationship with upstream manufacturers can ensure a relatively stable source of goods. Although the prices of titanium dioxide, resin, TDI and other raw materials are bound to rise, a relatively stable cooperative relationship can ensure the stability of prices, so as not to let enterprises get their feet in the storm of price rise

corporate credit is not only to establish strategic cooperative relations with upstream manufacturers, but also to protect the profits of enterprises relatively stable for end consumption. Good enterprise credit means that dealers and customer sources are relatively stable. Although the inevitable rise in prices may reduce enterprise sales, it will not lose too many customers and profits. In this tide of rising prices, stable customers have played an umbrella for enterprises to prevent further decline in profits

natural selection, survival of the fittest

natural selection, survival of the fittest. This is the survival law of nature and the survival law of the paint industry. According to the inevitable law of historical development, the situation of "many but scattered" in China's paint market will be reduced, and the market concentration will be increased. The "price storm" caused by the rise of raw materials will accelerate the reshuffle of the market

although the impact of the rise in the price of raw materials on enterprises is inevitable, China's coating enterprises are mixed. According to incomplete statistics, there are nearly 10000 large and small coating enterprises. The different strength of enterprises means that the impact of the rising price tide on enterprises is different. Those who have the ability will win the world. Therefore, the author believes that this "price storm" is both an opportunity and a challenge for different enterprises

for some enterprises that are used to using the inferior method of price war to seek short-term benefits in the market, this may be a disaster. The rise of raw material prices will inevitably lead to the rise of enterprise costs, which may lead to the decline of enterprise profits. In the face of such a situation, enterprises that choose price war may seek profit margin by reducing costs, that is, choosing lower quality raw materials to produce products with worse quality, so the price war will intensify

however, will consumers choose products with low price and low quality or products with high price and high quality? The quality of products is always the first priority of consumers. After facing the decline of profits, apple first launched the 5C series products with low price and lack of functions in 2013, but the sales did not rise. Therefore, in 2014, Apple launched the Apple 6 series products with high-end positioning, which are widely used, but the profits increased greatly. Therefore, it seems that consumers need good products rather than low-priced inferior products

small and medium-sized paint enterprises will lose a large number of customers if they don't think about how to innovate and how to improve the quality of products, and only blindly fight the price war. Maybe I can't see it when it's calm at ordinary times, but in this situation of rising raw materials and people's self-confidence in enterprises, some enterprises that compete maliciously and don't want to make progress must