The following premiered in SOCMA's Specialty Insights, edition 4, Spring 2021
By David Wawer
Executive Director, Color Pigments Manufacturers Association
As someone very wise once said, elections have consequences, some of them good and some of them bad.
The 2020 U.S. elections will lead to interesting dynamics between various industry sectors and governments. What can be predicted for the next few quarters is uncertainty across North American business markets for color pigments. At the same time, short-term disruptive global factors will influence the North American markets.
The specialty chemical batch process industry, which includes the color pigments industry value chain,
experienced significant merger and acquisition activity in 2020. Recovering global and regional economies will most likely accelerate that trend into 2021-2022. The color pigments manufacturing sector will continue to experience structural changes and challenges in terms of the overall number of companies and facilities, including dispersions and preparations companies, consolidation of downstream customer industries, and significant changes in consumer trends and practices.
During 2020, the elimination of in-person events, such as industry trade shows and business conferences, presented national trade associations with new opportunities to fill the voids of economic, business, and consumer trends information. CPMA, for example, initiated its Industry Town Hall webinar series featuring CEOs of national trade associations representing key markets for the color pigments industry, providing critical data points about market trends for plastics, coatings, adhesives and sealants, printing inks, cleaning products, and household consumer products. With the reluctance by trade associations to relaunch in-person events in the first half of 2021, CPMA will continue its virtual forums, expanding upon its Industry Town Hall webinars and include a focus on critical color pigments markets such as packaging (10 sectors), automotive, plastics, cosmetics and personal care products, agriculture, and building and construction (residential and commercial).
Color Pigment Trends
A particular industry value chain trend continuing to accelerate is the consolidation of key color pigments markets. Noted industry publications such as Coatings World, Ink World and HAPPI (Rodman Publishing) carried stories throughout 2020 about industry mergers, acquisitions, and divestitures. For example, Akzo Nobel and PPG continued to acquire smaller regional competitors in the coatings space, Sun Chemical and Flint group purchased smaller specialty inks producers, and color pigments manufacturers such as Ferro Corporation and Clariant divested or sold business assets/facilities. DIC/Sun Chemical also proceeded forward with its acquisition of BASF Colors & Effects, and chemical distributors in the pigments value chain continued to merge and consolidate. Flush with investor cash, venture capital firms have signaled that 2021 will be a very robust year in the M&A field in North America, as well as globally.
As we look forward into 2021, changing customer and consumer trends will facilitate opportunities for color pigments companies across the globe to consider strategic business partnerships in mergers, acquisitions, and toll manufacturing. CPMA will highlight this and other pivotal trends through its 2021 Industry Town Hall webinar series, as well as continue to serve as a critical resource and advocate for the color pigments value chain, assisting companies to navigate through complex regulatory and legal questions and due diligence to best facilitate strategic business acquisitions.
Trade and Commerce
In a very short time, the political world of 2021 has produced dynamic changes into key government agencies, affecting relationships and policies that impact color pigments industry companies. A Biden-led federal government has already created effects on United States-Mexico-Canada (USMCA) trade and business partners with Executive Orders in January. Trade and commerce between the U.S., Mexico, and Canada are critical frameworks for economic growth across the Americas. Based on preliminary analysis, the North American supply chain interdependence with the color pigments industry value chain could face significant regulatory disruptions in 2021.
The imposition of strong tariffs on Chinese government-controlled industries, along with adoption of the USMCA trade agreement, launched a structural shift in global supply chains for raw materials and finished goods during the past four years. These factors specifically benefited the color pigments industry value chain and its North American customers. It also contributed to resurgence in North American-based color pigments manufacturing. All of this positive economic growth could be at risk over the next several years.
Another key factor in the economic resurgence of the North American color pigments industry has been the relatively low cost of energy for manufacturing facilities. The strong energy partnership between the U.S., Canada, and Mexico is a key factor. There has been significant expansion of cost-effective and consistent energy supply, which proved to be critical for manufacturing success and business market growth in North America. That very reliable energy resource dynamic could face disruptive political and
regulatory challenges from Biden appointees, as evidenced by early actions. CPMA is monitoring political appointments in 2021, including research on policy and affiliation backgrounds through its regulatory and legal resources and national trade association coalitions in Washington, D.C. During the coming year, CPMA may determine that successful outcomes for the association’s strategic plan require expanding national-state-local government political relationships for the color pigments industry value chain that incorporate member company engagement with elected officials who represent companies’ facilities, sales and marketing offices, and key industry customers.
Poised for Growth
As it has done so for over 95 years, and particularly since adoption of the 2018-2023 Strategic Plan for business and advocacy leadership, CPMA will continue to evolve and adapt to changing business and regulatory environments to increase the membership value proposition and expand the association’s role as the industry’s leading public policy voice. Change has been a very common theme for the color pigments industry during the past three decades. However, the industry has continued to grow strategically by adopting business models that meet downstream customer expectations and requirements. In its capacity as industry leader, CPMA will continue to advocate for the adoption of commonsense and pragmatic laws and regulations at federal, state, and local levels to support economic growth for the color pigments industry in North America.
For more information about CPMA, contact Executive Director David Wawer at email@example.com.
Return to News