Chemicals

UK Coatings industry faces significant challenges

UK Coatings industry faces significant challenges as result of the new Free Trade Agreement with the EU

A recent survey of British Coatings Federation (BCF) members demonstrates how Brexit has impacted negatively on the coatings sector in the form of new customs red-tape and higher costs since 1st January.  The survey reported higher shipping costs, increased costs of imported raw materials, and new administration costs to complete customs paperwork, with 30% of companies estimating increases in total operating costs of 3-10%.

As a result, significant risks to the competitiveness of BCF members’ UK production and exports, despite the industry investing in preparing for Brexit (86%) and being experienced exporters beyond the EU (75% of companies).

The new Free Trade Agreement (FTA) will have a significant negative impact on the UK exports of paints, coatings and printing inks.

Key findings:

  • Two thirds of companies fear losing EU export customers due to the additional cost and complexity of doing business
  • Seven out of ten say their opportunities to trade with the EU will decrease
  • Only 10% see opportunities from new trade deals with the rest of the world

On a more positive note, a quarter of companies thought the FTA might mean more chances to increase trade within the UK.

BCF members also fear the new trading relationship will have a significant impact on the UK manufacturing of paints, coatings and printing inks. 82% of respondents have UK manufacturing, 35% were UK SMEs and 60% foreign owned business.

Key findings:

  • 50% believe the new FTA will reduce the competitiveness of their UK factories compared to EU competitors
  • 25% were concerned there was a risk their company would reduce UK production and move it to the EU
  • Three quarters of those same companies (18.5% of total respondents) believed there was a risk their company could stop operations in the UK altogether
  • Seven out of ten believe the UK diverging from EU REACH in future will reduce their competitiveness
  • Almost 60% are worried about future effects of UK REACH on raw material prices and potential lack of availability of chemical substances

Commenting on the survey results, Tom Bowtell, CEO of the British Coatings Federation, said:

“BCF members have been encountering serious practical issues since 1st January. The survey results demonstrate the extent of the difficulties our members are having to deal with at the moment and also helps quantify the likely future impact of these changes on the industry.

“While some of the reported delays and disruptions at the borders will hopefully prove to be teething problems, it is clear that added complexity of customs procedures and associated costs are here to stay. There is also a worry that medium term issues – likely to be posed by the new UK chemicals regulations regimes, like UK REACH – will only exacerbate the situation.

“We therefore need the UK Government to act in two ways. Firstly, it needs to do more to support all businesses coming to terms with the new customs and borders procedures. More resources are needed to iron out problems with IT systems and other processes, as well as to communicate what is needed to both UK and EU companies, through training and marketing campaigns. Secondly, it needs to amend the UK REACH legislation to further mitigate against some of the extra costs and impacts on raw material availability that will inevitably arise based on its current plans. Failure to do so will lead to our members – and other businesses in similar sectors – reaching the higher end of their additional cost estimates and, ultimately, see many reducing or relocating manufacturing in the UK as we become a less competitive country to do business in.”

BASF 2,4,7,9-Tetramethyl-5-decindiol aka TMDD

BASF 2,4,7,9-Tetramethyl-5-decindiol aka TMDD – A versatile diol for water-borne formulations

TMDD is an acetylenic diol that performs as a speciality wetting agent and defoamer in a broad range of water-based coatings, inks and adhesives applications.

 

TMDD can enhance the dynamic wetting performance of coatings on numerous substrates improving their appearance by minimizing surface defects.  TMDD is also used in applications like water-borne coatings and inks to improve pigment dispersing and spray performance as well as de-foaming.


BASF TMDD is also available dissolved in ethylene, propylene and butyl glycol for easier handling. Visit our website to learn more or contact Chris Morgan
Head of Sales Coatings, Plastics and Inks BTC UK, Christopher.morgan@btc-europe.com

Blagden to Supply Novares Hydrocarbon Resins

Blagden Specialty Chemicals Ltd has been appointed the exclusive UK and Irish distributor for the Novares range of hydrocarbon resins from Rain Carbon Company (formerly known as Rütgers) from 1st January 2021. “The Novares range of hydrocarbon resins is a valuable addition to the high-performance products we already offer,” said Blagden CEO Graham Turton. “They will be available for prompt distribution from UKbased warehouses in the new year.”

Novares resins are based on petrochemical feedstock and offer diverse properties which help to produce safe and high-quality products for industries including coatings, plastics, rubber and adhesives as well as for road construction and printing inks. The resins are produced by Rain Carbon Inc, a global leader in the production of raw materials.

Blagden has a long-established reputation as a leading supplier across UK and Irish industrial markets, representing some of the largest and most innovative manufacturers. It takes over distribution from Gelpke & Bate who, after a long association with Rain Carbon, will close their office by December 31st 2020.

“We will soon be expanding the range with the introduction of hydrogenated versions of hydrocarbon resins,” Graham added. “This pure series of resins offer a water-white quality, low odour and colour, thermal stability and excellent compatibility where required.”

To find out more about these products or to discuss specific needs within the following industries, please contact:

Coatings: Michael Austin on 01959 560804 (maustin@blagden.co.uk)

Plastics: Ian Corke on 01959 560809 (icorke@blagden.co.uk)

Industrial Applications: Greg White on 01959 560817 (gwhite@blagden.co.uk)

Printing Inks: Philip Randall on 01959 560857 (prandall@blagden.co.uk)

What a Difference a Year (Hopefully) Makes

Most people on the planet were glad to see the back of 2020. The authors of the Anglo-Saxon Chronicle might have glossed over the sheer awfulness with something like ‘2020 was a terrible year,’ and left it at that. Tempted as I might be to do the same, it is worth noting again just how resilient BCF members have been over the past twelve months.

Resilience firstly in reacting to Covid: keeping production going; keeping staff employed and adapting work practices to keep them safe; and playing their part in helping make products used in the response to the virus and by taking a lead in their communities. However, while the overall picture was not as bad as for other industries, we know some members were hit harder than others – decorative paint sales continue to soar as lockdown Britain’s enforced love affair with DIY carries on into the third, and hopefully last ever national lockdown, whilst industrial paints and printing inks suffer as other industries reeled under the economic contraction, not least aerospace and automotive.

But also, secondly, resilience in preparing for the UK’s new trading relationship with the EU, against a backdrop of delay to decisions and uncertainty of outcome. We know from participation in our various Brexit webinars, in our committee meetings, and from regular communications with members just how much time and resource has been put into making sure the coatings industry is ready to deal with all the new rules and regulations.

Both of those issues – Covid and Brexit – will continue to hamper business well into 2021. Despite the rolling out of vaccines across the country, it seems likely we will be in some form of lockdown until Easter, and maybe continue to have restrictions in place for even longer. Bailouts from government will help mitigate the worst effects to the economy but members operating in the industrial and printing ink sectors will be likely still feeling negative effects for some time.

Likewise, although the UK has left the EU and the transition period has ended, Brexit will still be a 2021 issue. There will no doubt be a period of teething problems to overcome as industry adapts to the new rules and regulations, not least at the ports and in dealing with customs in the short-term, and in the medium term through dealing with chemicals regulations both in the UK and as a ‘third country’ exporting to the EU. Once things settle down, and we can plan ahead with a little more certainty, companies will have to evaluate the impact of those rules on their business. At the same time, there will be continued FTA negotiations with the USA, Australia and New Zealand, as well as other countries we have recently signed continuity agreements with.  We have to look for and benefit from trading and regulatory opportunities from leaving the EU, otherwise it will only have been a damage limitation exercise.

2021 is likely to also be a year focused heavily on the environment. The UK presidency of the UN Climate Change Conference – COP26 – delayed from last year, will take place in Glasgow in November. The Government will want to place itself as a world-leader in all things green ahead of that and we can expect a raft of announcements and legislation on environmental policies. The introduction of a carbon tax of some kind is almost a certainty and this is something we at BCF will keep a close eye on – along with other business organisations. We all want to play our part in improving the environment, and a key area where BCF hopes it can add value is helping to solve the challenge of how to improve the environmental impact on leftover decorative paint, 98% of which is landfilled or incinerated. We have a vision to radically improve this, through our voluntary PaintCare initiative.  However, with business hurting from Covid and Brexit, and already having to cope with new green taxes like that on plastic packaging, we need to make sure solutions are proportionate for the times.

Here at BCF we will continue to provide many events and resources online although we hope – as I am sure everyone else does – that we might be able to see each other in person again, at least in the Autumn. Our lobbying efforts will be heavily focused on the UK’s transition from the EU, not least around seeking amendments to UK REACH to reduce the anticipated costs to business of the new scheme. As always, we are here to provide regulatory support to BCF members, and to generally promote the industry within Government, Parliament and the wider public.

Raw Material Price Increases Pile on Pressure

Sharp price increases for epoxy resins and supply bottlenecks are now adding to the difficulties of paint and coatings manufacturers in the UK and across Europe, and further compounding the already existing pressures caused by the Covid-19 pandemic and resulting disruption. On top of this some manufacturers are also reporting additional friction being caused by the new trading conditions the UK has with the EU where 60% of the UK industry’s raw materials are sourced.

Epoxy resin prices have risen sharply since the latter part of 2020 while polyester resin prices are also well up. In particular, recent data from the German Paint and Printing Inks Association show very significant increases for epoxy resins – an important binding agent for many paints and coatings – of as much as 60% in recent months. UK paint manufacturers are also seeing sharp increases and with some suppliers to the industry now also resorting to monthly price increases.

Strong demand from certain markets is driving up prices while an unexpectedly rapid V shaped recovery in China is also fuelling demand for these essential raw materials. In addition, the situation is being compounded by a current global shortage of containers which has led to a sharp rise in transport costs from Asia to Europe thus further restricting supplies to Europe.

Similar problems are affecting the market for polyester resins with factory closures in Singapore and Sweden as well an explosion at a factory in China adding to the difficulties. This in turn has resulted in suppliers diverting product to their local markets rather than Europe, further pushing up prices. There are also problems with bisphenol-A with stocks being diverted to polycarbonates. Neopentyl glycol and methanol are also both reported to be in short supply with road haulier problems creating delays in some cases and with higher shipping costs likely as we go into 2021.

This complex mix of higher demand, capacity and supply problems together with restricted availability of transport resources is increasing uncertainty in the market and driving up raw material prices sharply. On top of this, the coatings industry in the UK is faced with additional non-tariff costs related to the new UK customs arrangements with the EU for both raw material imports, as well as exports and imports of finished paints, coatings and printing inks.

British Coatings Federation welcomes FTA

British Coatings Federation welcomes FTA but calls for more significant changes to UK REACH

The British Coatings Federation has welcomed the news of a Free Trade Agreement (FTA) between the UK and EU. Despite the lateness of the decision, an FTA will mean, among other things, that BCF members will be able to benefit from tariff-free trade with the EU in future. This at least will ensure the coatings and printing inks sectors across Europe will not now be hit by new tariff costs of an estimated £100 million.

However, while there is talk of a Chemicals Annexe being included in the deal, it is not yet clear this will include the key data-sharing clauses the UK wanted. If this has not been agreed today, we hope that data-sharing might still be able to be negotiated as an ‘add-on’ at some point in 2021.

The 1st January 2021 sees the introduction of the UK’s new independent chemicals regulations. UK REACH is a direct copy of the original, EU REACH, a piece of legislation widely regarded as being one of the most – if not the most – burdensome in the world. If data-sharing has not been agreed as part of the FTA, UK REACH will now require the registration with full data dossiers of all chemical substances being used in the country to be put into a new database. This process is going to cost the chemicals industry an estimated £1 billion plus, a figure not disputed by the UK Government. It is also likely to mean some substances will not be registered in the new UK database at all for reasons of cost, leaving many UK manufacturers in a position where they have to make do without, change their formulations, or take on the registration costs themselves.

In addition, UK-based companies wanting to export to the EU will not only have to comply with UK REACH but continue to adhere to EU REACH rules too. This will become more complicated if the UK and EU chemicals regimes start to diverge in future.

Commenting on the deal, Tow Bowtell, CEO of the BCF, said:

“We welcome the fact a Free Trade Agreement has been concluded. Businesses are going to be hit significantly by Brexit and at least this FTA means some additional costs, such as tariffs, are now going to be avoided.

However, the FTA agreed appears extremely ‘thin’ and basic. The reality is this is a ‘hard’ Brexit, with significant extra costs and burdens placed on UK industry as a result. BCF members and businesses across the country will still have to deal with new customs and borders controls, as well as delays to goods and raw materials caused by those additional procedures. This will make UK companies less competitive, having to spend more time and money dealing with bureaucracy that has not been there for decades.

In particular, we have serious concerns about the way UK REACH will duplicate the onerous EU REACH, despite the UK chemicals market being only 1/10th the size of the EU. It seems as though the FTA negotiations failed to secure a data-sharing agreement on chemicals. If that is indeed the case, we either need to see further negotiations in 2021 to try and reach that agreement as an ‘add-on’ or Defra will need to urgently review how UK REACH is going to work. Proceeding as currently planned will cost businesses – including downstream users like those in the coatings, printing inks and wallcoverings sectors – over a billion pounds with absolutely zero added benefits. We will continue, as a matter of priority, to make this case for change into 2021.”