Paint and Coatings Industry Overview

The major change that has taken place in the coatings industry during the last twenty years has been the adoption of new coating technologies. Until the early 1970s, most of the coatings were conventional low-solids, solvent-based formulations; waterborne (latex) paints, used in architectural applications, accounted for 30–35% of the total. In the late 1970s, however, impending government regulations on air pollution control focusing on industrial coating operations stimulated the development of low-solvent and solvent less coatings that could reduce the emission of volatile organic compound (VOCs). Energy conservation and rising solvent costs were also contributing factors. These new coating technologies include waterborne (thermosetting emulsion, colloidal dispersion, water-soluble) coatings, high-solids coatings, two-component systems, powder coatings and radiation-curable coatings.

The following pie chart shows world production of paints and coatings:

The paints and coatings industry in the United States, Western Europe and Japan is mature and generally correlates with the health of the economy, especially housing and construction and transportation. Overall demand from 2011 to 2016 will increase at average annual rates of 1–2% in the United States and 1.5–2.5% in Western Europe. In Japan, however, consumption of paints and coatings will experience relatively slow growth during this period (0.3%) as a result of no growth in major markets such as automotive OEM, machinery and appliances.

In the emergent countries of the world, coatings are growing at a much faster rate. The best prospects for growth are in Asia Pacific (8–10% growth per year in the near future), Eastern Europe (6%) and Latin America (6%). Growth of coatings in China is expected to continue at 8–10% per year, and in India and Indonesia at 5–10%. Growth in value terms will be even higher as a result of the production of relatively higher-valued coatings. Most of the major multinational paint producers, including PPG, Akzo Nobel, Kansai Paint, Nippon Paint, BASF, DuPont, Chugoku Marine Paint, Valspar, Sherwin-Williams and Hempel, have production in China. The multinational producers should gain even more presence in the developing world as living standards increase and per capita consumption of coatings rises.

Through the next five years, air pollution regulations will continue to be a driving force behind the adoption of new coating technologies. Despite the relatively slow growth in demand anticipated for coatings overall, waterborne and high-solids coatings, powders, UV curable and two-component systems appear to have good growth prospects.

 

New Times Energy enters EOR business in Petro-China's Liaohe oilfield

New Times Energy Corporation Limited (“New Times Energy” or “the Company”, together with its subsidiaries, the “Group”, HKSE stock code: 166) is pleased to announce that it has entered into a Memorandum of Understanding (the “MOU”) on December 24, 2012, to acquire 10% of the entire issued share capital of Rich Joint Group Limited (“Rich Joint”) at a total consideration of approximately HK$142 million.

SynPetro Engineering Technology Company Limited (“SynPetro”) is a wholly owned subsidiary of Rich Joint and owns various self-developed specialized equipments focused on EOR (Enhanced Oil Recovery) Operations. Its core business focuses on providing EOR technologies for wells with low production performance and to sell extracted oil at contract price to Liaohe Oilfield. SynPetro has currently obtained related service contracts from Liaohe Oilfield.

Liaohe Oilfield, a state-owned enterprise, is engaged in the exploitation, development and sales of oil and gas. It is the seventh largest oil field in China and its current annual crude oil production amounts to over 10 million tonnes, while natural gas production amounts to 1.7 billion cubic meters. With decades of history in the exploitation business, Liaohe Oilfield currently focuses on the development of new wells, therefore various shut-in wells exist due to low production efficiency. With its advanced technology in enhancing oil extraction, in addition to its effort and trial for more than two years, SynPetro has successfully entered into service contracts with Liaohe Oilfield and expects to accelerate production in the near future. In addition, SynPetro has committed to a two-year profit guarantee, which will provide steady income streams to the Group in the next two years.

The total consideration will be settled by cash and issue of convertible bond. Among which, HK$20 million will be paid by cash, while the remaining HK$122 million will be settled by the issue of convertible bond. In addition, according to the MOU, the Vendor is ensured to a profit guarantee which the audited consolidated profit before taxation and extraordinary items of Rich Joint for each of two years ending December 31, 2013, and December 31, 2014, will not be less than RMB125 million.

Commenting on the MOU, Mr. Stewart Cheng, Chairman and Executive Director of New Times Energy, said, “The engagement in EOR upstream business has marked a significant development for New Times Energy in 2012. This acquisition illustrates that privately owned enterprises also have the opportunities to participate in energy exploitation business led by state-owned enterprises. With such technologies to enhance oil extraction, New Times Energy has officially entered into the EOR upstream oil business in China. The Group will effectively utilize SynPetro’s well-built R&D Team, actively seek for alternative technologies applicable to the oilfield, and will promote and apply related technologies to other oilfield projects. New Times Energy believes that the EOR business will bring definite income to the Group next year and will gradually become one of the Group’s major income sources.”