The Coatings World Is Having a Throwback Moment

AkzoNobel has found some coins down the back of the sofa.

At a time of severe supply-chain disruption across the chemical industry, the Dutch company has had a closer look at its legacy plants supplying some of the resin it needs to make industrial coatings and Dulux household paint and discovered some untapped potential.

By “connecting a few pipes” here, and adding some unloading stations and packaging facilities there, in-house resin production could be lifted to 55% of its total requirement, up from 40% currently, according to Michael Friede, chief commercial officer at Performance Coatings. The move will also help AkzoNobel’s push to slash carbon emissions, he added.

The Dutch company joins its two closest rivals, PPG Industries and Sherwin-Williams, in looking to make more of its own resin. It’s a bit of a throwback given the prevailing mantra in coatings has for some time now been one of exiting commodities to become a pure-play lean machine. But the need for secure supply chains and lower emissions is leading to a rethink, in this one area at least.

“The plan is to sweat the assets a bit more. By optimising logistic networks and not shipping so much stuff around the globe, you make a big step forward in reducing your CO2 footprint.”

Michael Friede, AkzoNobel Executive Committee Member and Chief Commercial Officer – Performance Coatings

Rather than 1 or 2 shifts a day, AkzoNobel’s resin plants will operate 24-7, pushing the utilisation rate to a more respectable 75% from 60% today. The overall result could be an EU15-20 million earnings boost by 2023.

How times change.

AkzoNobel sold the bulk of its resins business in 2005 to Nuplex of New Zealand but it had to hang on to 23 plants that it felt were way too integrated to divest. The assets that were sold bounced from one owner to another via various M&A deals, and the resin business that stayed within AkzoNobel “lost a bit of its mojo” as the company went on to sell its entire 10 billion-euro chemical division and introduced a multi-year profit improvement program focused on the core coatings part. Thanks to the change in supply chain dynamics, and to some extent ESG, those 23 facilities are having their day in the sun.

Friede joined AkzoNobel in July following a 20-year stint with the materials business of Bayer, now independent and called Covestro. His final role there was overseeing the coating-resins division. The irony that just months after switching company he was on the phone to his former employer to say AkzoNobel won’t be buying so much product isn’t lost on him.

But Friede, in an interview, made light of the task. Old boundary lines between customer and supplier are somewhat being redrawn in this far corner of the chemical industry. The emerging buzzwords in coating-resins are “co-producing” and “asset shares.” An arrangement involving inter-regional swaps means capital can be allocated more efficiently, so it could work equally in a supplier’s favour if it needed to turn to AkzoNobel’s resin sites for extra capacity, Friede said.

And the Dutch paintmaker is only making more of the commodity resin it uses in-house, not the value-added, higher-technology specialty additives it will still need to rely on external suppliers for.

Fewer miles from plant to paint pot has environmental advantages. AkzoNobel has committed to a 50% reduction in carbon emissions by 2030. This at a time when it was hit by some 325 million euros in raw-material inflation in the fourth quarter alone as chemical companies had to fight for raw-material supplies, marine containers, space on ships, and truck drivers.

Like AkzoNobel, Covestro wants to halve direct and indirect emissions of GHGs per metric ton of products by fiscal 2025 (using 2005 as a base year).

“The idea is not to do this against partners,” Friede said. “Our external partners are not so worried that it creates a huge disruption in the market. That’s not what we try to do here. But it does help us to secure supply and help us to bring down costs.”

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