The Paint Industry Dyed in Rosy Hues

Recovery of Upstream Industries, Ban on Overpainting, and Expectations for Government Stimulus Measures

Starting next year, when the 'No Spray Paint Law' is enforced, spray paint will be prohibited for painting buildings such as apartments, requiring the use of rollers or brushes instead. In this case, costs will approximately double, leading to a significant increase in demand to complete repainting within this year. A worker is seen painting the exterior wall of a high-rise building in Seoul. Photo by Mun Honam

[Asia Economy Reporter Kim Jong-hwa] Expectations within the industry are growing for a recovery in the paint market, driven by the rebound in upstream industries such as construction, automotive, and shipbuilding, as well as the government’s housing supply policies. In particular, the paint industry anticipates a steadily upward trend for about 4 to 5 years once construction on the 3rd phase new towns begins.

The government announced a plan last week to supply 830,000 housing units following the 3rd phase new towns initiative as part of the 2.4 real estate measures. In upstream industries, the improvement in the shipbuilding sector is becoming clearly evident.

Korea Shipbuilding & Offshore Engineering recently secured orders for a total of 14 vessels in January alone, including six ultra-large liquefied natural gas (LNG) powered container ships from Asian shipping companies. Samsung Heavy Industries also received orders from global shipping company Pan Ocean for one LNG carrier and two large container ships, while Daewoo Shipbuilding & Marine Engineering is expected to have secured orders for two LNG carriers last month and ten ultra-large crude oil carriers this month, marking a flood of orders since the beginning of the year.

The automotive sector has seen steady growth in domestic sales since the third quarter of last year, and with the government’s hydrogen economy activation and the global increase in electric vehicle demand, the eco-friendly vehicle market is expanding, gradually improving profitability.

‘Bbumchil’ This Year is the Last, Demand for Apartment Repainting Increases

The ‘Bbumchil Ban Act’ to be enforced from next year is also good news for paint industry sales. According to the revised Enforcement Rules of the Air Quality Preservation Act amended last year, from next year, spraying paint on apartment exterior walls at construction sites will be completely banned. Since brushing and rolling require more than twice the labor cost compared to spraying, demand to complete painting within this year is surging rapidly.

Both Noroo Paint and Samhwa Paint saw orders for related volumes increase from the second half of last year, resulting in a 35% year-on-year increase in sales in the repainting business division.

The domestic paint market size is approximately 3.5 to 3.6 trillion won, with KCC, Noroo Paint, and Samhwa Paint forming the ‘Big 3’. The industry expects KCC and Noroo Paint, which produce not only architectural and industrial paints but also highly profitable automotive and ship paints, to benefit relatively more.

Exchange Rates and Oil Prices Are Negative Factors

Exchange rates and oil prices are likely to act as negative variables for the industry. Since the fourth quarter of last year, prices of major raw materials in the additive group, including oil, titanium dioxide (pigment), polyol, and monomer, have all been on the rise. Most raw materials for paint, such as pigments, resins, and additives, are imported. The proportion of imported raw materials in paint production costs varies by company but averages around 60 to 65%.

The industry saved considerable costs in raw material imports due to the weak won in the first half of last year. However, the won strengthened from the second half of last year and continues to do so this year. International oil prices have fully recovered to pre-COVID-19 levels and remain on an upward trend. Rising raw material prices increase paint production costs, leading to margin declines.

An industry official said, "While external factors such as rising oil prices cannot be ignored, the paint industry is more influenced by domestic factors like government stimulus measures than by external factors," adding, "The government’s bold housing supply announcements have such a strong impact that they can dispel concerns about rising oil prices. It is a very positive signal."

This content was produced with the assistance of AI translation services.