China waterborne wood coating market

1

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Market Assessment of Waterborne

Wood Coating for WBCP

November, 2015

Presented by Ariel Jiang

& Conor Eliot

2

Table of Contents

I. Project Introduction

II. Market Analysis of Wooden Furniture

III. Market Analysis of Wood Coating

IV. Market Analysis of Waterborne Wood Coating

3

Project Introduction Project Introduction

This China Waterborne Wood Coating Market Report (“report”) is published by Waterborne

China Platform (WBCP) and analyzed by GCiS, a third party research organization . The copyright

in this report belongs to WBCP.

WBCP: established in July 2009, is a non-profit organization initiated by coating raw material

suppliers, paint manufacturers, equipment suppliers, and CNOOC Changzhou Paint & Coating

Industry Research Institute. Serving as a country-wide forum and reliable source of industry

information, WBCP is committed to accelerate the transition from solvent borne to waterborne

products in the coatings, graphic arts market by industry-wide efforts.

GCiS China Strategic Research: established in 1997, is an international market research

organization. Serving for international and domestic notable companies on B2B market research

and strategic consultancy, which focuses on: Chemicals, Construction, Medical, Energy, etc.

Headquartered in Beijing, with offices in Shanghai & Wuhan, services mainly covering:

Comprehensive Market Assessments, Channel Assessment, Competitor Research, Voice of

Customer, M&A, etc.

4

Project Requirements & Research

Methodology

Findings in this report source from:

- Background Research is based on secondary research and expert interviews.

- Primary Data is obtained from a large number of telephone interviews.

- Quantitative Data is used for analyzing and calculating market figures, which have been cross-checked with the

figures obtained from every market participant.

- Qualitative Data is used for analyzing industrial trends and market determinants, info obtained from interviewee’s

opinions and secondary research.

Project Introduction

This project mainly studies wood coating, waterborne wood coating and wood furniture,

Wooden Furniture: Analyze the market size (2012-2014) of wooden furniture, and predict the market size for

2015-2019. Wooden furniture includes American Style, Antique (Non-Western), Cabinets, Children’s, Hotel,

Contracted, Office, Outdoor (including Outdoor Wood House), and Wood Doors.

Wood Coating: Analyze the wood coating market size (2012-2014), and predict the market size for 2015-2019.

Wood coating categories includes Waterborne, Ultra Violet based, Polyurethane, Nitro, Acid Curing, Unsaturated

Polyester, and other.

Waterborne Wood Coating: Analyze waterborne wood coating market size (2012-2014), and predict the market

size for 2015-2019. Waterborne wood coating categories includes Waterborne Polyurethane, Waterborne Acrylic,

Waterborne Polyurethane Acrylate, Waterborne 2k-Polyurethane, Waterborne Ultra Violet based, and others.

Base year: 2014.

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Table of Contents





6

The value of wooden furniture produced in 2014 is about RMB 570 Bn. Minimalist

has the highest production value among all wooden furniture types: 38%.

Following by wood doors which accounts for 17.2% and American Style which

account for 16.9% .

Market Size (2014)

Source: GCiS, China Furniture Association, China Furniture Annual

Type

Production

Value

Production

Output

(Bn RMB) ( Mn pieces)

Minimalist 218 182.4

*Wood Doors 98 47.1

American Style 96 38.2

Antique (Non-Western) 57 10.0

Cabinets 28 11.2

Children’s 22 12.4

Office 20 6.3

Hotel 13 2.8

Outdoor (exc. Outdoor

Wood House)0.3 0.2

Sub-total 552.3 310.6

**Outdoor Wood House 16.4 3.7

Total 568.7 -

Wooden Furniture Production Value and

Production Output by Furniture type (2014)

Wooden Furniture Production Value (%) (2014)

Wooden Furniture

Note: *Wood Doors: Units given in sets.

**Outdoor Wood House: Units given in m².

38.3%

17.2%

16.9%

10.0%

4.9%3.9% 3.5%

2.9%2.3%

0.1%

Production Value

Minimalist Wood DoorsAmerican StyleAntique (Non-Western)CabinetsChildren’sOfficeOutdoor Wood HouseHotelOutdoor

7

The wooden furniture industry has been greatly affected by the upstream raw material

market, downstream market demand, consumers’ preferences and regulatory force.

Market Drivers and Challenges

Source: GCiS

Increased Urbanization:

Increased urbanization and citizens’ disposable income has

boosted demand for wooden furniture in 3rd and 4th tier

cities.

Rise of Custom Furniture:

Custom furniture can more effectively use up spaces than

finished furniture, make it a rational choice in terms of

space saving. It can also better meet individualized needs

of consumers, while increasingly sophisticated technology

and a transparent pricing system has helped drive growth

of the custom furniture market in recent years.

Growth of Furniture exports to emerging markets:

Under the China-ASEAN certificate of origin and related

policy implications, China's exports to the Middle East,

ASEAN, wooden furniture and other countries in Latin

America have had double-digit growth.

Changes in Consumer Preference:

More consumers now prefer wooden furniture’s texture

than other types of furniture, so there is higher demand for

wooden furniture in both the 2nd hand and first time buyers’

market.

Rise of Raw Material and Labor Costs:

The Chinese government’s ban on logging in Northeastern forests

and western countries’ restriction on wood imports has increased the

price of wood and decreased Chinese wood exports. Rising labor

costs in China have cause a number of wood furniture manufacturers

to shift operations to Vietnam and other Southeast Asian countries.

Real Estate Market Slow Down:

The real estate market is growing slower due to the government’s

macroscopic readjustment. As a result, furniture, as a related

purchase of housing, also grows slower with the real estate market.

VOC Sewage Charge: Regional VOC Sewage Charges will soon

be implemented, which will affect the production cost of wooden

furniture because it is levied on furniture suppliers that coat products.

Consumption Tax:

The government is going to levy consumption tax on non-eco friendly

wood coating products, which will increase their price. As an

upstream market for wooden furniture, the wood coating consumption

tax increase on October, 2015, will indirectly affect the development

of the wooden furniture market.

Slowdown in key export markets :

Export markets, such as the US and EU as well as other major

regions have introduced restrictions and regulations targeting

Chinese wooden furniture companies. Competitiveness have also by

influenced by inflation of the Chinese Yuan.

Wooden Furniture

Market Drivers Market Challenges

8

Based on GCiS predictions, wooden furniture will have a production value of RMB

640-730 Bn by 2019 with a five year CAGR of 2.3% in a conservative estimate and 5.1%

in an optimistic scenario.

Forecasts

Production Value

(RMB Bn)2012 2013 2014 2015-E 2016-E 2017-E 2018-E 2019-E 2014-2019 CAGR

Conservative464 521 570

581 596 612 623 638 2.3%

Optimistic 596 629 664 695 732 5.1%

Wooden Furniture 2012-2019 Production Value and CAGR

Source: GCiS, 2014 China Furniture Annual, China Furniture Association

Wooden Furniture

Wooden Furniture2012-2019 Production Value by Type

2012 2013 2014 2015 E 2016 E 2017 E 2018 E 2019 E 0

100

200

300

400

500

600

700

Pro

du

cti

on

Valu

e (

Bn

RM

B)

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

11.0%

11.5%

12.0%

170198

218 224 229 235 240 246

94

9498 101 105 109 112 11677

90

96102

104105 106

107

45

52

5759

6061

6364

22

25

2829

2930

3131

17

20

2222

2223

2324

16

19

2021

2122

2223

14

15

1617

1717

1818

10

7

136

810

78

0.2

0.3

0.30.3

0.30.3

0.30.3

OutdoorHotelOutdoor Wood HouseOffice

Children’sCabinetsAntique (Non-Western)American Style

Wood DoorsMinimalist

Conservative

2012 2013 2014 2015 E 2016 E 2017 E 2018 E 2019 E 0

100

200

300

400

500

600

700

Pro

du

cti

on

Valu

e (

Bn

RM

B)

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

11.0%

11.5%

12.0%

170198

218 231 244 258 273 288

94

9498

104110

117124

132

77

90

96100

102103

105106

45

52

57

6165

70

74

79

22

25

28

30

32

34

36

39

17

20

22

23

25

27

28

30

16

19

20

21

22

22

23

23

14

15

16

18

19

21

22

24

10

7

13

7

10

13

9

9

0.2

0.3

0.3

0.3

0.3

0.4

0.4

0.4

OutdoorHotelOutdoor Wood HouseOffice

Children’sCabinetsAntique (Non-Western)American Style

Wood DoorsMinimalist

Optimistic

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Table of Contents





10

In 2014, wood coating sales revenue was RMB 29.3 Bn, with a sales volume of 1.4 Mn tons. The

average price is about RMB 20.5/Kg. UV and WB prices are relatively high. PU has the highest

sales revenue and sales volume, accounting for roughly 60% of revenue and volume. WB

accounts for roughly 5% of the market.

Market Size (2014)

Source: GCiS, National Bureau of Statistics, Coatings World, Tuyingtiaxia

Magazine

*Other includes Nano wood coating, wax oil, etc.

** based on interviews and background information, domestic import and

export of wood coating alone is very low, probably less than 1%.

• National Bureau of Statistics: in 2014, the sales volume of wood coating was 16.48 Mn tons.

• Coatings World: In 2013, industrial coating’s sales volume was 13.03 Mn tons. Wood coating accounted for 11% of industrial coating in terms of sales volume.

• Tuyingtianxia Magazine: In 2013, the wood coating market size was RMB 36 Bn.

• Interviews: In 2014, wood coating accounted for 8.7% of industrial coating’s sales volume. Average wood coating price was RMB 20.5 RMB/ Kg.

Wood Coating Market Size by Type - 2014Wood Coating Sales Revenue by Type (%) -2014

Type Sales Revenue

(Mn RMB)

Sales Volume

(000 Ton)

Mean Price

(RMB/Kg)

PU 17,517 901 15-25

UV 4,378 141 15-45

NC 3,922 225 11-18

WB 1,474 49 16-40

UPE 1,304 78 12-18

AC 327 21 8-15

Other * 387 19 15-25

Total** 29,311 1,433 20.5

Wood Coating

59.8%

14.9%

13.4%

5.0%

4.4%

1.1%1.3%

Sales Revenue (Mn RMB)

62.8%9.8%

15.7%

3.4%

5.4%

1.5%

1.32%

Sales Volume (000 Tons)

PU UVNC WB UPE AC Other

11

The development of the wood coating market is mainly influenced by policy and

regulation, technology development and downstream industries. Consumption tax and

VOC sewage charges will accelerate the transformation and upgrading of the industry.


Market Drivers Market Challenges

Old Building Renovation：

As consumers lifestyle demand increase, demand

for old house renovation will drive growth of wood

coatings used in home decoration industry.

Increase in indoor environment requirements:

In recent years, China has issued a series of

policies that strive to improve environmental and

safety requirements relating to interior decoration

and indoor furniture. This will likely drive demand

for more environmentally friendly products.

Technology Development:

Wood coating product performance is being

continuously raised. Eco-friendly oil wood coatings

will soon be available for purchase. Under the

current policy framework oil wood coating will be

used less, but the demand for eco-friendly oil wood

coatings, such as UV, PU and non-solvent UPE,

will grow.

Slower Growth in the Home Decoration,

Wood Floor and Real Estate Market:

Home decoration and wood floor will see slower

growth compared to before. The decline of the

housing market has had a negative impact on the

demand for home decorations and furniture, as

well as wood coating.

Consumption Tax:

The government is going to levy a 4%

consumption tax on coating suppliers, which will

increase the cost of wood coatings.

VOC Sewage Charge:

The government is going to levy VOC sewage

charges on coating downstream industries, which

will increase the cost of using wood coatings.

Wood Coating

12

Wood coating will have a market size of RMB 35-39 Bn by 2019 by sales revenue.

Conservatively, revenue CAGR for 2014-2019 is predicted to be 3.4%, and optimistically 5.6%.

Forecasts

Source: GCiS ， 2012，2013，2014 China Paint and Coating Industry Annual.Note: The ratio of each downstream industry in 2012 and 2013 is based on the ratios for 2014.

Sales Revenue (Bn

RMB)2012 2013 2014 2015-E 2016-E 2017-E 2018-E 2019-E

2014-2019

CAGR

Conservative24.4 25.7 29.3

30.1 31.0 32.1 33.3 34.7 3.4%

Optimistic 30.7 32.3 34.1 36.2 38.5 5.6%

Wood Coating Sales Revenue (2012-2019) and CAGR

Wood Coating

Wood Coating Sales Revenue (2012-2019) and CAGR

15.1 15.918.1 18.7 19.4 20.2 21.0 22.0

3.5 3.7

4.2 4.4 4.6 4.8 5.15.4

2.52.6

3.0 2.9 2.82.8

2.82.9

2.22.3

2.6 2.6 2.62.6

2.62.7

1.31.3

1.5 1.5 1.61.6

1.61.7

20122013

2014

2015 E

2016 E

2017 E

2018 E

2019 E

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Sale

s R

even

ue (

Bn

RM

B)

Wooden FurnitureWood Doors

Wood FloorHome Decoration

Other

15.1 15.918.1 19.1 20.4 21.7 23.2 24.9

3.5 3.7

4.24.5

4.85.2

5.66.0

2.52.6

3.02.9

2.92.9

3.03.1

2.22.3

2.62.6

2.72.7

2.82.8

1.31.3

1.51.5

1.61.6

1.61.7

20122013

2014

2015 E

2016 E

2017 E

2018 E

2019 E

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Sale

s R

even

ue (

Bn

RM

B)

Wooden FurnitureWood Doors

Wood FloorHome Decoration

Other

Conservative Optimistic

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14

Market Size (2014)

WB sales revenue in 2014 was almost RMB 1.47 Bn, with a sales volume of 48,900

tons. The average price was 30 RMB/Kg. WB acrylic and WB PU have lower than

average prices, but they had the two highest sales revenues: 57% and 23%

respectively.

Note 1: Other includes WB polyester, WB NC, WB alkyd and WB AC, etc.

Note 2: Based on interview information and background research, China’s

imports and exports accounts for a very small proportion

Source: GCiS Source: GCiS

WB Sales Revenue, Volume and Mean Price by Type

• Tuyingtianxia Magazine: The market size of WB in 2013 was

about RMB 1.5 Bn.

• China Wood Coating Association: The production volume of

WB in 2013 was about 60,000 tons, with sales revenue close to

RMB 2 Bn.

Waterborne Wood Coating

WB Sales Revenue, Volume by Type (%)

56.9%

22.9%

14.7%

4.6%1.0%

Sales Revenue

69.3%

20.2%

6.7%3.1%0.6%

Sales Volume

WB AcrylicWB PUWB 2k-PUWB UVOther

Product

Sales

Revenue

（RMB Mn）

Sales

Volume

(000 Tons)

Mean Price

(RMB/Kg)

WB Acrylic 838 33.9 20-25

WB PU 337 9.9 30-35

WB 2k-PU 216 3.3 50-70

WB UV 68 1.5 40-50

Other 15 0.3 40-50

Total 1,474 48.9 16-40

15

WB development is influenced by the following factors; VOC sewage charge,

consumption tax, technological progress and the policy enforcement.


Market Drivers Market Challenges Technological Development:

• Increasing competition in downstream industries forces suppliers to invest

in eco-friendly products such as WB to increase their competitiveness.

Thus, it promotes the technological development of WB.

• As WB products performance improves, the number of WB applications

will also increase. Thus, more downstream industries will choose WB.

Lower Price:

WB price is trending downwards because of technological progress, which

will promote the production and consumption of WB.

VOC Sewage Charge:

The government will levy a VOC sewage charge on wood coating

downstream industries, but WB has almost no VOC emissions. This will

raise the cost of using oil wood coatings, and lower the cost of WB coatings.

This will force some wood furniture manufacturers to choose WB, thereby

increasing WB market growth.

Consumption Tax:

The 4% consumption tax will be levied during production, processing and

importing of products with VOC higher than 420g/L. Again, this will force

some wood coating suppliers or customers to choose WB.

Other:

• Increase of environmental awareness from consumers.

• The central and regional governments subsidize environmentally friendly

suppliers.

High Up-front Cost:

The renovation of equipment, high investment

cost and long term testing and configuration

will reduce WB adoption.

SMEs slow to upgrade production lines:

Coating market dominated by SMEs, of which

upgrading production lines require more push,

primarily because they have limited funding

and technical resources to upgrade to

waterborne coating production lines.

Other:

• Export and housing markets will see declines

in demand.

• Home decoration and wood floor markets are

growing slower or even declining.

• Geographical limitation: The temperature is

too low in the North during winter to apply or

store WB products. This is an obstacle for WB

development in the North.

• Environmental policies are more difficult to

monitor in small cities.


16

Forecasts

Source: GCiS

WB Forecast 2012-2019 Sales Revenue

In the probable scenario forecast, sales revenue is about RMB 3.3 Bn in 2019, sales

volume is 112,000 tons and the five year CAGR is 18.1%. Sales price will decrease with

some fluctuations over the next five years.

CAGR Min Probable Max

Sales Revenue CAGR 8.8% 17.3% 35.4%

Sales Volume CAGR 9.2% 18.1% 35.9%

Five Year CAGRs of WB Wood Coating

Source: GCiS


WB Forecast 2012-2019 Sales Volume

2012 2013 2014 2015-E 2016-E 2017-E 2018-E 2019-E0

1

2

3

4

5

6

7

Sale

s R

even

ue (

Bn

RM

B)

0.91.1

1.5 1.6 1.71.9

2.12.3

0.91.1

1.51.7

2.0

2.4

2.8

3.3

0.91.1

1.5

2.0

2.7

3.6

4.9

6.7

Conservative Probable Optimistic

2939

49 53 5863

6976

2939

4957

6880

95

112

2939

49

65

88

121

165

225

2012 2013 2014 2015-E 2016-E 2017-E 2018-E 2019-E0

50

100

150

200

250

Sale

s V

olu

me (

000 T

on

s)

Conservative Probable Optimistic

Marketing

China waterborne wood coating market