Overview of Southeast Asia and Malaysia Market · Iskandar Mega Cities in 2025 Emerging Mega Cities...
Transcript of Overview of Southeast Asia and Malaysia Market · Iskandar Mega Cities in 2025 Emerging Mega Cities...
Presented to Malaysian Paint
Manufacturers’ Association
April 8, 2016
Overview of Southeast Asia and Malaysia Market End use industries and Paints & Coatings
“ We Accelerate Growth”
© 2015 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the prior written approval and consent of Frost & Sullivan.
Agenda
NOTE
Southeast Asia (SE Asia/ SEA), includes Indonesia, Malaysia, Thailand, Philippines, Vietnam, Singapore
2
1. Southeast Asia Macroeconomic environment
2. South East Asia Construction & Infrastructure Outlook
3 Malaysia - Coatings Market Snapshot
4 Conclusion
Southeast Asia Macroeconomic environment
Growth in Southeast Asia, though slowed down, is still at above average world
growth rates
6.8 7.0
6.8 6.6 6.4 6.3 6.4 6.6
7.8 7.8 7.4
6.8
6.3 6.0 6.1
6.3
5.6
5.0
4.5
4.9 4.9 5.0 5.0 5.0 5.1
6.9 7.2
7.5 7.5 7.6 7.7 7.7
2.3 2.2 2.4
3.1 3.1 2.7
2.4 2.0
-0.8 -0.5
0.9
1.5 1.7 1.6 1.6 1.6
2012 2013 2014 2015 2016F 2017F 2018F 2019F
Asia China SE Asia India US Euro
3.4
3.8 3.9 3.9
World Average
GDP Growth by regions (% y-o-y), 2012-2019
GD
P G
row
th (%
)
• Post a dip in 2014, Southeast Asia rebounded moderately to grow at ~ 5% in 2015, above the global average growth rate of ~ 3.5% in 2015
• World average has slowed down since 2011 (~ 4.2%), however, it is showing signs of moderate revival over next few years
3.4 3.4
3.5 3.8
4
Source: Frost & Sullivan
Macroeconomics
NOTE: SE Asia stands for Southeast Asia and includes 6 countries – Singapore, Malaysia, Indonesia, Philippines, Thailand, Vietnam
SE Asia’s economy, is still expanding rapidly, despite the overall slowdown
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
in U
S$
Bil
lio
n
Indonesia
Malaysia
Philippines
Singapore
Thailand
Vietnam
Overall SE Asia
GDP: $894 Billion
GDP: $2,543 illion
GDP: $3,428 Billion
GDP: $1,825 Billion
Source: IMF; UKABC; Frost & Sullivan
5
Macroeconomics
• Southeast Asia is projected to grow at a CAGR of ~ 7.5-8% during 2015-19, and is expected to be nearly double of its value in 2010
GDP scenario, Southeast Asia, 2000-19
Across all Southeast Asian economies, rising urbanization trend will contribute to the
construction industry growth, thereby, bolstering the demand in coatings market
Indonesia Philippines Malaysia
42%
53%
61%
58%
47%
39%
2000 2010 2020
Urban Rural
48%
49%
52%
52%
51%
48%
2000 2010 2020
Urban Rural
62%
72%
78%
38%
28%
22%
2000 2010 2020
Urban Rural
Thailand
31%
44%
56%
69%
56%
44%
2000 2010 2020
Urban Rural
Vietnam
24%
30%
37%
76%
70%
63%
2000 2010 2020
Urban Rural
Note: SE Asia includes Singapore, which is 100% urban, in addition to Indonesia, Philippines, Malaysia, Thailand and Vietnam
Source: Word Bank, IMF
6
Macroeconomics
• Rising middle class population and increasing disposable income will drive the growth in demand for high-quality coatings
• As the construction industry flourishes, the demand for various types of coatings will increase in each country
Rising middle class population and increasing disposable income will drive up the
demand for high quality coatings
7
Source: The New Global Middle Class: A Crossover from West to East., China’s Emerging Middle Class : Beyond Economic Transformation; Frost & Sullivan
• Southeast Asia is a growing market of ~ 620 million people with a combined GDP of ~ $2.5 trillion as of 2015
• Middle class in Southeast Asia is growing with surging urbanization, and is projected to account for 65% of the population by 2030, thereby, spurring the demand for high quality coatings
• Indonesia, Vietnam and Philippines have the largest population and also host fast growing middle class population, which will drive the demand for high quality coatings
Macroeconomics
South East Asia Construction & Infrastructure Outlook
Emerging Asia as a whole is tipped to be the world’s fastest growing construction
market, accounting for ~ 40-45% share in global construction market
9
North America and
Western Europe
CAGR (2015-24) ~ 3.2%
Asia
CAGR (2015-24) ~ 7.2%
USD 2.8
Trillion USD 1.5
Trillion
USD 2.0
Trillion
USD 1.5
Trillion
Central Eastern Europe
CAGR (2015-24) ~ 6.4%
USD
0.369
Trillion
USD
0.211
Trillion
Latin America
CAGR (2015-24) ~ 7.3%
USD
0.675
Trillion
USD
0.357
Trillion
Middle East and North Africa
CAGR (2015-24) ~ 11.0%
USD
0.469
Trillion
USD
0.183
Trillion
Sub Saharan Africa
CAGR (2015-24) ~ 11.7%
USD
0.219
Trillion
USD
0.081
Trillion
Source: BMI Research 2015; Frost and Sullivan
World construction industry value is set to grow to USD 6.1 Trillion by 2024 from USD 3.7 Trillion
in 2015, at a CAGR of 5.7%
Legend
2015 2024
Key SEA* economies - Large
population, increased urbanization
and rising purchasing power will
translate into sharp growth in number
of middle-income households within
Asia. Middle Class in Indonesia is set
to increase three fold by 2020 and
reach 100 million by 2030.
NOTE: * SEA ~ Southeast Asia, including Indonesia, Malaysia, Thailand, Philippines, Vietnam, Singapore
Construction overview
07/12/2015
10
Note: A Mega City is a city with population of more than 8.0 million and a GDP of US$250 billion or more.
Mega Region: Cities combine with suburbs to form regions with a population over 15 million. Source: Department of Economics and Social Affairs, UN;
International Institute of Applied System Analysis; Frost & Sullivan
Urbanization, and evolution of regions and cities: Malaysia By 2025, almost 80% of the Malaysian population will live in urban areas, up from 74% in 2015, the highest urbanization rate among the developing ASEAN countries
Greater
Penang
Klang Valley
(Kuala Lumpur (KL), Klang,
Kajang, Subang Jaya, Petaling
Jaya, Selayang, Shah Alam,
Ampang Jaya, Putrajaya,
Sepang) (11 million)
Iskandar
Mega Cities in 2025
Emerging Mega Cities after
2025
Mega Regions in 2025
In 2013, 93.5% of the population
lived in urban areas in Klang Valley.
FT-Selangor-Negeri
Sembilan No. of
states
Urbanization
Rate
Contribution to
Malaysia’s Urban
Population in 2025
8 >80% 68.3%
2 70–79% 14.6%
4 60–69% 13.5%
2 50–59% 13.6%
West Malaysia and Klang Valley account for nearly 80% and 24% respectively, of Malaysia’s total population.
Klang Valley to contribute US$253 billion to the GDP by 2025
Urbanization and the Emergence of Mega Cities and Mega Regions, Malaysia, 2025
Construction overview
07/12/2015
11
Infrastructure led investments and growth: Malaysia Construction industry growth to be driven by long-term infrastructure projects, and by Government initiatives such as ETP*, and 11MP**
Subdued real estate demand, largely due to the reduced growth in wider economy and residential oversupply, is
the key reason behind a relative slowdown in the construction industry value projections
Source: BMI; Frost & Sullivan
0%
2%
4%
6%
8%
10%
12%
14%
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
2013e2014e 2015f 2016f 2017f 2018f 2019f 2020f
MY
R b
illi
on
Infrastructure Residential and Non-residential
Y-o-Y real growth (%)
Construction industry value in Malaysia
Yo
Y re
al g
row
th (%
)
9.8%
17.6%
9.2%
7.1%
5.6%
4.8%
4.7%
4.6%
12.6%
10.0%
13.3%
8.5%
7.9%
7.1%
7.1%
7.0%
10.9%
11.8%
10.6%
7.6%
6.4%
5.6%
5.6%
5.5%
0.0% 5.0% 10.0% 15.0% 20.0%
2013e
2014e
2015f
2016f
2017f
2018f
2019f
2020f
Overall Infrastructure Residential and Non-residential
Projected real growth rates (%), Malaysia
NOTE: 1. e - estimated, f – forecasted
2. * ETP - Economic Transformation Program
3. ** 11MP – Eleventh Master Plan
Infrastructure
projected to
grow faster
Construction overview
Government
focusing on
supporting the
underserved
affordable
housing
segment
07/12/2015
12
• Hotspots
o Bangkok, Rayong and Chonburi (Pattaya)
• Driving segment
• Infrastructure ~ MRT, airport expansion),
• Residential ~ condominiums
• Non-residential ~ industrial, restaurants,
commercial shops
• The expansion of mass transit lines is likely to generate new
residential demand in Bangkok's neighboring townships like
Nonthaburi, Pathumthani and Samut Prakarn
• Chonburi is home to Thailand's largest seaport and as
such there is strong demand for logistics and warehouse
space.
• Hotspots
o Ayutthaya, Kanchanaburi
• Driving segment - Infrastructure
(transportation and energy projects)
• Residential ~ driven by condominiums and
apartments
• Non-residential ~ driven by hotels
• Hotspots
o Nakhon Ratchasima, Khon Kaen,
Nakhon Panom, Nong Khai
• Driving segment – Infrastructure (rail and
bridges)
• Residential ~ driven by condominiums
• Non-residential ~ restaurants, shops, hotels
(mainly in Nakhon Ratchasima)
• Large property developers such as Land and
Houses, Prueksa Real Estate, Sansiri, AP
and Quality House – Property Investment,
are investing heavily in NE
• Hotspots
o Chiang Mai & Pisanulok ~ high
demand for condominiums,
o Chiang Rai, Pak Nam Pho, Mae
Sod district ~ gateway to
Myanmar,
o Chiang San and Chiang Kong ~
gateway to Laos
• Driving segment – Infrastructure
(high speed rail projects)
• Residential ~ driven by
condominiums
• Non-residential ~ driven by
restaurants and commercial shops
• Hotspots
o Surat Thani, Phuket, Hat Yai ~
gateway to Malaysia
• Driving segment - Non Residential
(hotels, restaurants, commercial shops,
resorts)
• Residential ~ driven by apartments
• Infrastructure ~ driven by rail and energy
&
&
Urbanization, and evolution of regions and cities: Thailand Bangkok & East to continue to grow substantially across all 3 segments; South leads in forecasted non-residential construction activity; North and NE to witness significant infrastructure development
Construction overview
07/12/2015
13
Infrastructure led investments and growth: Thailand In line with continual growth in public investments such as Infrastructure Investment Plan 2015-22 (~ THB 2.4 trillion), construction industry growth in Thailand to be led by infrastructure development
Private residential and non-residential (e.g. corporate office) demand is driven by growing urbanization,
development of the AEC, lower cost of living and lower corporate Income tax
Source: BMI; Frost & Sullivan
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
0
100
200
300
400
500
600
2013e 2014e 2015f 2016f 2017f 2018f 2019f 2020f
TH
B b
illi
on
Overall Construction Y-o-Y growth (%)
Construction industry value in Thailand, 2013-20
Yo
Y g
row
th (%
)
NOTE: 1. e - estimated, f – forecasted
Unstable political
climate, Ruble
depreciation
Government's push for infrastructure, easing monetary conditions, surge in investments from
Chinese and Japanese buyers, and near-term political stability has resulted in a positive outlook for
the forecasted period from 2015 onwards
Construction overview
Number of new condominiums in Bangkok’s central business
district is expected to surge 64% to 12,000 units this year, 70% of
them driven by the high-end and luxury segments
07/12/2015
14
Urbanization, and evolution of regions and cities: Indonesia Over 175 Million Indonesians to live in urban areas by 2025; Mega City Jakarta to contribute nearly
US$700 Billion to Indonesia’s GDP by 2025; Mega Region JaBoDeTaBek to account for 11% of
Total Population by 2025
Source: BAPPENAS; Department of Economics and Social Affairs, UN; International Institute of Applied System Analysis; Frost & Sullivan
Construction overview
07/12/2015
15
Construction industry growth in Indonesia to be driven by massive demand from low end and luxury property – leading to a shift towards low priced and high priced coatings
55% 47%
48% 45%
53%
52%
0%
10%
20%
30%
40%
0
40
80
120
160
200
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Residential and Non-residential Infrastructure Construction Industry YoY Growth (%)
Co
nstr
uc
tio
n I
nd
ustr
y
Va
lue
(U
SD
Bil
lio
ns)
Construction Industry Value in Indonesia, in USD Billion, 2008-18
43.3
94.5
173.8
130.5
72.7
Co
nstru
ctio
n In
du
stry
Yo
Y G
row
th (%
)
• Strong middle class consumer spending made the residential business segment (houses, apartments and
condominiums) the largest contributor to Indonesia's property growth, accounting for about 60 percent of the total
property sector
• Indonesia is already being plagued by a backlog of 13.5 million property units and therefore President Joko Widodo
launched the “One Million Houses Program” in April 2015 - construction of 10 million new houses for the
country’s low-income people between 2015 and 2019
• Implementation of “Green building code” will slowly increase the demand of green materials
• Indonesian government announced it will allow foreigners to own luxurious apartments with a minimum value of IDR 5 billion – leading to 20% growth in luxury property NOTE: * RPJMN - National Medium‐Term Development Plan;
** MP3EI - Masterplan for the Acceleration and Expansion of Indonesia's Economic Development Plan
Historical (5-Year)
CAGR ~ 16.89% Projected (5-Year)
CAGR ~ 12.96%
Source: BMI; Frost & Sullivan
Period CAGR (%), Residential and Non-residential CAGR (%), Infrastructure
2008-13 13% 21%
2013-18 13.8% 12.2%
Indonesia plans to invest USD 150 Billion in RPJMN* (2010-14) and USD 468 Billion in MP3EI**, with 70% of the combined total of this investment
to be fetched via PPP projects
07/12/2015
16
Construction industry growth in Vietnam to be driven by the positive regulatory changes, robust economic growth and favourable funding conditions
0%
10%
20%
0
5
10
15
20
25
30
2014 2015 2016 2017 2018 2019 2020 2021
Residential and Non-residential Infrastructure Construction Industry YoY Growth (%)
Co
nstr
uc
tio
n I
nd
ustr
y
Va
lue
(U
SD
Bil
lio
ns)
Construction Industry Value in Vietnam, in USD Billion, 2014-2021
Co
nstru
ctio
n In
du
stry
Yo
Y G
row
th (%
)
• The residential building segment is on track for a recovery, with strong growth in demand in 2015. Easing of foreign
ownership restrictions will also help to spur demand, in turn boosting construction activity.
• With a considerable number of foreign manufacturers setting up production bases in the country, demand is also
on the rise for industrial properties, including industrial parks, warehouses and logistics facilities
• Vietnam’s growing middle-income class and its influx of foreign investment has resulted in rising demand for
better quality homes and commercial buildings and has also boosted the upmarket property segment, which is
dominated by foreign developers
• Introduced new ‘Housing Law’ and the ‘Law on Real Estate Business’ (passed in November 2014), which reduce
the restrictions on foreign ownership of residential and commercial properties
Historical (4-Year)
CAGR ~ 5.49% Projected (4-Year)
CAGR ~ 6.54 %
Source: BMI; Frost & Sullivan
Period CAGR (%), Residential and Non-residential CAGR (%), Infrastructure
2014-17 5.46% 5.61%
2018-21 8.00% 6.71%
07/12/2015
17
Construction industry growth in Philippines to be driven by growth in public construction activity as the government's Public-Private Partnership programme gains traction and sustained momentum in private construction activity
0%
10%
20%
0
10
20
30
40
50
60
2014 2015 2016 2017 2018 2019 2020 2021
Residential and Non-residential Infrastructure Construction Industry YoY Growth (%)
Co
nstr
uc
tio
n I
nd
ustr
y
Va
lue
(U
SD
Bil
lio
ns)
Construction Industry Value in Philippines, in USD Billion, 2014-2021
Co
nstru
ctio
n In
du
stry
Yo
Y G
row
th (%
)
• The upcoming elections in mid-2016 will weigh on growth, as a likely shift in leadership will cause a review of planned
and ongoing development projects.
• The Housing and Land Use Regulatory Board (HLURB) has set a target to construct 1 million housing units by
2016, and also announced the construction of over 300 condominium projects in Metro Manila, most of which will
be allocated to the mid-market segment
• The robust growth in the domestic construction industry is sustainable largely because of the phenomenal low interest
rate regime
• Besides strong residential project construction, other factors that will drive the growth of the construction sector are the
strong services income coming from the business process outsourcing (BPO) sector and the robust remittance
inflows that will boost housing demand
Historical (4-Year)
CAGR ~ 6.84% Projected (4-Year)
CAGR ~ 6.73 %
Source: BMI; Frost & Sullivan
Period CAGR (%), Residential and Non-residential CAGR (%), Infrastructure
2014-17 6.86% 6.76%
2018-21 8.91% 8.44%
Malaysia - Coatings Market Snapshot
Trends in other key end-use industries
07/12/2015
19
Infrastructure led investments and growth: Malaysia Construction industry growth to be driven by long-term infrastructure projects, and by Government initiatives such as ETP*, and 11MP**
Growth potential in Malaysian housing market is modest compared to other key SE Asian economies - Malaysia’s
mortgage to GDP ratio is >30%, which is well above that for Indonesia, Thailand and the Philippines
Source: BMI; Frost & Sullivan
26.6 32.1 36.1 39.6 42.6 45.5 48.6
51.9
14.7
16.6 19.3
21.5 23.6
25.8 28.2
30.7
0%
2%
4%
6%
8%
10%
12%
14%
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
2013e2014e 2015f 2016f 2017f 2018f 2019f 2020f
MY
R b
illi
on
Infrastructure Residential and Non-residential
Y-o-Y real growth (%)
Construction industry value in Malaysia
Yo
Y re
al g
row
th (%
)
9.8%
17.6%
9.2%
7.1%
5.6%
4.8%
4.7%
4.6%
12.6%
10.0%
13.3%
8.5%
7.9%
7.1%
7.1%
7.0%
10.9%
11.8%
10.6%
7.6%
6.4%
5.6%
5.6%
5.5%
0.0% 5.0% 10.0% 15.0% 20.0%
2013e
2014e
2015f
2016f
2017f
2018f
2019f
2020f
Overall Infrastructure Residential and Non-residential
Projected real growth rates (%), Malaysia
NOTE: 1. e - estimated, f – forecasted
2. * ETP - Economic Transformation Program
3. ** 11MP – Eleventh Master Plan
Infrastructure
projected to
grow faster
Subdued real estate demand, largely due to the reduced growth
in wider economy and residential oversupply, is the key reason
behind a relative slowdown in the construction industry value
projections.
Construction
Government
focusing on
supporting the
underserved
affordable
housing
segment
Confidential 20
While overall automotive production has slowed down in recent years, it is expected to grow at CAGR ~ 3-3.5% over next 3-5 years, due to a modest economic growth rebound
Vehicles produced (‘000) Vehicle distribution
• Malaysia has emerged as a the third largest automotive production hub in the Southeast Asian region
• Automotive production in Malaysia is expected to reach 722,501 by 2019, at a CAGR of 3.5% between 2012 and 2019
• The Malaysian Government is increasingly focusing on boosting the production of energy-efficient vehicles such as
hybrid vehicles, electric vehicles, and other vehicles powered by alternative fuels such as Compressed Natural Gas
(CNG), liquefied petroleum gas (LPG), bio-diesel, ethanol, hydrogen, and fuel cell
• The government declared exemptions on import tax and excise duty on Completely Knocked Down (CKD) hybrid
vehicles imported between 1 January 2014 and 31 December 2015. For CKD electric vehicles, the period has been
extended till 31st December 2017
Source: Department of Land Transport
0
200
400
600
800
1000
1200
1400
2012 2013 2014 2015
Motor
Bus
Heavy Truck
Cars
Light CommercialVehicle
Light Commercial
Vehicle 5%
Cars 50%
Heavy Truck 0%
Bus 0%
Motor 45%
Automotive OEM
Confidential 21
Growth in number of vehicles on road has been slow especially over the past 2-3 years (CAGR 2012-14 ~ 2.8%), signalling dip in car sales
Vehicles on road (‘000) Average vehicle distribution
Source: Department of Land Transport
0
2000
4000
6000
8000
10000
12000
14000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
CAGR ~ 6.6%
Passenger 92%
Commercial 8%
• Removal of fuel subsidies has led to higher operating expenses for manufacturers and distributors and reduced
disposable income for consumers
• The used-car market has been declining over the years due to intense competition in terms of price points from new
cars
• GST implementation in 2015 and decline in used car market has negatively impacted the demand for refinish coatings
CAGR ~
2.8%
Automotive refinish
Confidential 22
Ranked as the 10th largest exporter of furniture in the world, Malaysia exports around 80% of its production
Malaysia furniture export value
• Malaysia has always been known for its wood based furniture, owing to its natural resources. The government has set
an annual growth target of 6.5% for wood based furniture, estimated to reach up to RM53 billion by year 2020.
• In recent years, the growth has shifted from producing general products towards designing its own, and this has been
key in propelling Malaysia onto the international arena. Popular with overseas buyers of the middle to high category,
foreign buyers look to Malaysia for manufacturers who can meet their high production demand
• The government also plays an important role in nurturing the industry. Providing Pioneer Status for tax exemption and
Investment Tax Allowance, the pro-business environment makes doing business easier and faster
• Slowdown in furniture production is expected due to the slowdown in the domestic and export furniture demands.
Increasing competitive pricing from neighbouring countries, such as Indonesia and China, for finished furniture would
hinder growth of wood coatings in Malaysia
Malaysia main Importers
1650
1700
1750
1800
1850
1900
1950
2000
2050
2010 2011 2012 2013 2014
US
D m
illi
on
USA 31%
Japan 10%
Singapore 9%
Australia 5%
United Kingdom
5%
Canada 4%
UAE 4%
Others 32%
Furniture
Confidential 23
The electronics industry is focused on deepening and strengthening the three major ecosystems of semiconductors, solar and LED technologies
Source: MITI, MARTRADE
Industry Production Index (base year 2010) Investment and Exports
The electrical and electronics (E&E) industry is a key driver of Malaysia's industrial development and contributes
significantly to GDP growth, export earnings, investment and employment
Malaysia is a key player in the fast expanding E&E market, its major export destinations include China, US, Singapore,
Hong Kong and Japan
The E&E industry is targeted under the National Key Economic Areas (NKEA) to gear the nation towards high-income
economy by focusing on high-value and high-growth manufacturing activities
The growth of semiconductor will continue to spearhead the growth of the E&E industry in Malaysia and has benefited
from the global demand in the usage of mobile devices (smartphones, tablets), storage devices (cloud computing, data
centres), optoelectronics (photonics, fibre optics, LEDs) and embedded technology (integrated circuits, PCBs, LEDs)
0
20
40
60
80
100
120
140
160
2010 2011 2012 2013 2014
Ind
us
try P
rod
uc
tio
n I
nd
ex
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
73.5
74.0
74.5
75.0
75.5
76.0
76.5
77.0
77.5
78.0
2010 2011 2012 2013 2014
Inv
es
tme
nt
(US
D b
illio
n)
Ex
po
rts
(U
SD
bil
lio
n)
Exports Total Investments
Electronics
Coatings Market Snapshot
Coatings market situation
Malaysia’s coating market is dominated by decorative, protective and automotive
OEM segments
Malaysia Coatings Market: Top Three Key Segments
25
Source: Frost & Sullivan
Malaysian Coatings Market
Decorative Coatings
~ 53-55%
Protective Coatings
~ 12-15%
Automotive-OEM Coatings
~ 7-8%
driven by growing
urbanization - expected to
be ~ 78% by 2020
1
2
3
• Driven by growing population and
construction of new residential and
commercial projects
• Expected to be the key growth
segment over next 3-5 years
• Investments in developing
transport infrastructure - such as
roads and railways as well as energy
& utilities infrastructure such as
refineries and petrochemical
complexes drives the protective
coatings segment
• Growth will come from product
innovation that can help OEMs
increase their productivity
• E.g. Axalta’s wet-on-wet 2 tone
process for Ford, BASF’s Integrated
Process II
Coatings Market
NOTE: % mentioned above indicate approximate share of coating segment in overall market as of 2015
Environmental Implications: Green agenda and regulations are key as companies
strive to comply with lower volatile organic chemical (VOC) requirements via
technology innovations
Programs / Regulations
Registration, Evaluation,
Authorization and Restrictions of
Chemicals (REACH)
International Maritime Organization
(IMO)
Regional Environmentally Sustainable
Cities in ASEAN Program (RESCP)
Other Local Country Policies and
Standards (Singapore’s Green
Labelling Scheme)
Source: Singapore Environment Council; Frost & Sullivan
26
• Increasingly, companies are looking at water-based coatings as a replacement for solvent-based coatings; especially in
the decorative coatings segment
• Consumers in Malaysia and Thailand are showing increasing inclination towards eco-friendly coatings due to increased
environmental awareness
Particulars
• Chemicals can be used in coatings only if they are registered • Aims to restrict the production of solvent-based coatings
• Regulations are focused on environment protection • Encourages coatings with higher solid content and abrasion-resistant
characteristics, reduction in CO2 emissions and fuel consumption, and
limiting VOC emissions
• Focuses on environmental management in urban areas ~ clean air and emissions from stationary and mobile sources
• Addresses the effects of a product on the environment and fixes limits for compliance
Total Coatings Market: Environmental Regulations, SE Asia
Paint Manufacturers in Malaysia and overall South East Asia are increasingly looking
towards green and sustainable coatings to replace their high VOC counterparts
27
Source: Frost & Sullivan
Low-VOC, water-based coatings are the most popular sustainable coatings option among
manufacturers
However, manufacturers are facing challenges in achieving an optimum balance for water-based coatings, in terms of film
formation, hardness, and block resistance
Renewable raw materials are the second-most popular option
Manufacturers are always looking for less-expensive alternatives to produce paints
A popular renewable raw material among manufacturers is unsaturated vegetable oil due to its flexibility and availability
100% solid coatings, which mainly include powder coatings and UV/EB (ultra-violet/electron
beam) curable coatings, are the third most popular option
These require low storage space than solvent and water based coatings
Other options include anti-viral paints with the health and wellness theme. And anti-reflective paints with cooling agents to ensure energy efficient homes
Coatings Market
Conclusion
Key takeaways for coating manufacturers – Malaysia and other SE Asia
29
Source: Frost & Sullivan
Conclusions and way forward
Product technology
related
Product portfolio
diversification
Geographic
expansion Channel related
• Driving shifts in technology from solvent borne to water borne/ solvent less, will be crucial for market development and differentiation in long term
• E.g. Concrete flooring, wood & metal construction
• Leading coating
manufacturers are
leveraging their
brand to capture
business
adjacencies, by
entering into related
areas
• E.g. waterproofing
chemicals, other
façade products
• Market leaders are expanding their geographic footprint to tap into booming markets, outside Malaysia
• E.g. Vietnam, Philippines
• Manufacturers with strong presence in project sales channel are expected to benefit with growth in infrastructure segment
• For other players, building capabilities in this channel will be crucial
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