Paint makers to add internal resin capacity

The paint company AkzoNobel plans to make more of its own resin supply by expanding capacity within its network of factories. In doing so, the firm joins other coatings makers that plan to reintegrate raw material production after a spate of shortages in 2021.

Though AkzoNobel isn’t disclosing the size of the investments it plans, it expects the move to boost profits by $17 million–$23 million annually by 2023. The company also says moving more resin production in-house will reduce its greenhouse gas emissions, which it aims to cut in half by 2030.

Sherwin-Williams insourced some resin capacity in September when it purchased the water-based resin maker Specialty Polymers, which had been a contract manufacturer for Sherwin-Williams. The CEO of PPG Industries, Michael McGarry, similarly said in a January earnings call that the firm is diversifying its raw material supplier base and also building in-house capacity. “We’ll be higher in internally sourced resins in 2022 and 2023 than we are today,” he said.

Raw materials for paint makers have been strained in recent months, in part because extreme weather in 2021 sidelined petrochemical production on the US Gulf Coast. Both PPG and Sherwin-Williams, the largest US paint makers, cited shortages of raw materials and labor as stumbling blocks when reporting their fourth-quarter 2021 financial results.

“Our full year and fourth quarter were marked by industry-wide supply chain disruptions, unprecedented cost inflation and ongoing challenges related to the pandemic,” Sherwin-Williams CEO John G. Morikis wrote.

The largest category of coatings resins are aqueous suspensions of various polymers that provide bulk and surface adhesion. Because of their high water content, coatings resins are usually made locally, says Dan Murad, CEO of the consulting firm ChemQuest. By purchasing monomers that ship more economically, AkzoNobel and other firms make their supply chains more flexible and resilient. The trade-off, Murad says, is that resin manufacture can be a distraction from their core business of making finished coatings.

AkzoNobel and its peer companies are cycling back toward in-house resin production, Murad says, though they’ve always had some internal capacity. Beyond the drama in 2021, he says, consolidation of resin supply has slowed innovation, and coatings makers see an opportunity to have their own chemists come up with improved resins that they can use exclusively.