Conference Report:

Lessons for a Stronger Industry44th ECCA General Meeti ng

The economic crisis of 2008 and 2009 has naturally infl uenced the coil coati ng market. As in many other markets the loss was on average about 20 %. Now the market is slowly recovering but the situati on remains fragile. Considering this situati on the parti cipants of the 44th

ECCA General Meeti ng in Lisbon discussed prospects of the coil coati ng market and ideas to become a stronger industry.

Energy policy and the developments on the energy market have a great infl uence on the coil coati ng business independent of the present economical crisis. The focus of EU legislati on today is more on energy than on the climate, Folker Franz from Business Europe said at the 44th

ECCA General Meeti ng in Lisbon. The EU Emission Trading Scheme, which aff ects the steel and aluminium industry strongly, was at the centre of the EU climate and energy package in 2008. But major decisions on its future shape are sti ll pending. It is expected that the price for CO2 will raise Further EU policy measures on energy effi ciency, energy infrastructure and technologies like renewable energy sources or carbon capture and storage are expected over the next months and years.

Positi ve economic forecastAdditi onally to this challenge the industry struggles with the outcome of the economical decline. But the situati on is improving. In her economic forecast Stéphanie Riso from the department of Economic and Monetary Aff airs of the European Commission expects a rising GDP in the EU from - 4.2% in 2009 to 1.0 % in 2010 and 1,7 % in 2012 (real annual % change). With a lag, unemployment rate will decline in 2011 and employment will grow again aft er 2 years of negati ve growth.As a result of the crisis the Steel Industry and its stakeholders have been obliged to reconsider the Industrial model with bold resoluti ons to make capacity highly fl exible. Anti cipati on and speed of decisions has become the rule to put the cost under control. André Coustenoble, General Manager - Marketi ng & Commercial Controlling of ArcelorMitt al Flat Carbon Europe, showed some trends in the steel industry. “This new landscape off ers lots of opportuniti es to the Coil Coati ng products due to the drasti c limitati on of credit all along the Industrial supply chain”, he said. Furthermore, the pressure that Politi cs puts on environmental issues to boost the Economy opens doors to innovati ve soluti ons that Organic Coati ng could deliver.The advantages of prepainted metal are, according to Coustenoble, that the producti on can be increased without additi onal fi xed cost on post-painti ng lines, working capital can be reduced and paint shops exteriorized.

Capacity in line with market demandAndré van den Bossche, Sr. Advisor Iron and Steel, sees a severe impact at the steel industry by globalizati on. “There is a rebased Globalism from steel making to raw materials with an important shift in the profi t pools”, he said. The profi t pool will increase by average GDP growth of 4% for miners as for steel players and most of the costs will be passed through to the market. Further Consolidati on as a result of this rebased globalism will enable steel players to award investments to coil coati ng equipments and a bett er adjustment of supply and demand during the cycle. But investments in new pre-painti ng lines representi ng a substanti al capacity increase are now taken only reluctantly.

Prepainted steel is undergoing a consolidati on process where capacity increases will be evaluated in the new paradigm of changing profi t pools. The installed prepainti ng capacity in South East Asia of 10.5 Mt (38% of total prepainti ng capacity) in a growing market should not be a threat. It is in line with the market demand for the coming years. On the Aluminium side main fl at rolled products growth areas are South America, Asia and Middle East/North Africa, Emilio Braghi, General Manager Painted Products Europe from Novelis Italia reported at the conference. Asia will account for a majority of the growth in the next fi ve years but signifi cant growth as well is expected in current core markets given large market size like Europe and USA. The building market in Europe is showing signs of recovery in the renovati on market. For Braghi, the answers to emerge from the economic recession are portf olio opti mizati on eff orts to sustain the leadership, improvement of overall cost positi on by manufacturing excellence, purchasing opti mizati on and the reducti on of overhead costs. On the product side new special surfaces like marble imitati on, copper, stainless steel and innovati ve functi onal coati ngs (anti -bacteria, cool colours, self-cleaning) will come to the market.

Crisis uncovers economic weaknessSimilar to the Chinese market the Russian market developed with constant growth in recent years. The world economic crises aff ected Russia deeper than most of other developed and emerging economies and uncovered basic weaknesses like high dependence on oil price, insuffi ciency of internal growth drivers and technological gaps said Semen Belyakov, Managing Director BASF Vostok.. Some of the reasons are low diversifi cati on, technological backwardness and non-competi ti veness, dependency on raw material prices, low domesti c demand and a weak fi nancial system. The fi rst months of 2010 indicate certain improvements of the economic situati on, but the answers to these criti cal issues are sti ll to be found.In the background of the crisis the coil coati ng branch demonstrated relati ve stability even though the constructi on industry, which is practi cally a sole customer market for coil coated products in Russia, dropped down by 16%. The crisis infl uenced mostly small producers. The three major

The coil coati ng market is slowly recovering from the economic crisisPhoto: Euramax Coated Products

players – NMLK, MMK and Severstal –could keep the output on the level of 2008, and MMK even increased the producti on aft er the launch of additi onal equipment. The development in the fi rst half of the year also gives good reason to believe that the situati on will remain sustainable also in 2010 with a further midterm growth perspecti ve.

Constructi on industrySince the constructi on industry is the biggest sector the development in this fi eld is of great importance. “The fi rst reacti on to the crisis in many countries was to increase the investment in construction. However, growing government budget diffi culti es are putti ng a strong pressure on the executi on of many projects”, economist Barbara Marti ns from EuroConstruct reported. The Housing Sector is facing overproducti on and strong increase in real estate prices. Low populati on growth in most countries, ti ght credit conditi ons and high unemployment are undermining private investor’s confi dence. In the Non-residenti al sector more capacity than needed is installed. In this market we see most of the work on retrofi tti ng for energy effi ciency. The civil engineering market is not infl uenced too much by the crisis, but tax revenues, fi nancial costs of projects and high public debt prevent new projects. All these facts together with a fragile economic recovery are limiti ng the demand for both housing and non residenti al buildings. But the latest Euroconstruct fi gures from last November, so Marti ns said, point to a mild growth in 2011 aft er a strong decrease in constructi on output for 2010.

Automoti ve marketIn the automoti ve market we can see similar developments to the steel and aluminum market as Professor Jon King, Director at Corus Automoti ve Engineering showed in his report. The European automoti ve market has been on a roller-coaster ride over the last three years, from a peak in 2007 through a steep fall off in 2008 and 2009, with no immediate prospects for recovery and a slow return to pre-recession levels by 2014. Government scrappage schemes have miti gated the worst eff ects, by sti mulati ng demand, mainly at the low end of the market.The eff ects on the vehicle manufacturers and their supply chains have been severe. New model programs have been curtailed and technology developments have been cut back to focus on legislati ve requirements. Capacity will be taken out of the market. Besides this, pressure from new entrants like China and India is high. Additi onally the car manufacturers

have to deal with pressure from legislati on to reduce CO2 both in factory emissions and in cars. Although there are many blockers to the fully pre-painted car, King sees opportuniti es for prepainted metal, for example to help in reducing CO2 factory emissions or improved pre-prime/pre-paint material. There is a demand for thin, sti ff outer panels and organic coati ngs could provide sti ff ness to a thin panel. Also organic coati ngs could serve as a sandwich sheet enabler or stabilizer for thin wall structural members.

Appliance marketIn the appliance market the crisis has switched leading positi ons. While producti on in Germany and Italy stagnates and is not expected to recover ti ll 2015, producti on conti nues to increase in Poland and Turkey. By 2015 producti on of domesti c appliances in Poland will double and in Turkey it will reach more than 150 % of the present German producti on.Sustainability is the greatest challenge in the appliance market, according to Giovanni Alban from Electrolux. In the appliance industry the focus is on materials and textures. Today’s kitchen is a place for socializing, interacti ng, entertaining and cooking. Kitchen layouts are based on a central working island combined with tall wall units. There is also a shift from a completely minimalisti c design to soft er aestheti cs. When it comes to colors there is an abundance of whites, off -whites, brown/grays and dark brown tones. But you can also fi nd some vivid primary colors like red and mid-tones like turquoise, dark acid yellow, fuchsia and violet.From the coil coaters Alban expects fl exibility. Small batches should be produced on very short lead ti me. Coil Coater should be able to develop niche products like glass steel, piano black, soft touch or stainless steel imitations in quick turnaround and they should offer a competitive portfolio and work together with the customer on cost reduction programs.

R&D: Backbone of performanceStrategic long-term research and development is one of the backbones in the improvement of the economic performance of a company. However, increasing pressure to obtain results faster leads to ever shorter-term projects, which aim at incremental improvements of process performance

or renewal of the product portf olio. “This is detrimental in the long term, as only breakthrough innovati ons are usually able to maintain the profi tability in the long term”, Arto Ranta-Eskola, Research Director at Ruukki said. Only in excepti onal cases can sustainable competi ti ve advantage be based on special advantages such as cheap raw materials or labour, low energy or transportati on costs, etc. So it is important to have a project portf olio management system that predicts the potenti al profi tability of the current product development portf olio.

The constructi on market is expected to grow again in 2011 aft er a strong decrease in 2010 (Norwich Bus Stati on, UK)Photo: Kalzip Ltd.

Innovati ons are important for overcoming the crisis(UN Studio agora theater Lelystad, NL)Photo: Lars Courage

Innovati on is importantThe economic crisis hit the coil coati ng suppliers in 2009 fast and hard. “For survival fast and strong response on the cost level and measures to secure the fi nancial liquidity are acti on points of live and die”, Wolfgang Kranig, Group Manger Coati ng director of BASF Coati ngs GmbH said. Even if the situati on has improved now it remains fragile. Managing the crisis, the main point on the short term was to secure liquidity. At the same ti me, midterm processes and portf olio have to be checked, strategy to be implemented and uninterrupted supply to be secured. Consequent order process and stock monitoring and quick reacti on to the changing business climate and fast response are required. For overcoming the crisis innovati ons are important, Kranig said, like primer with Pretreatment Function, tailor made topcoats, easy and fast standardizati on of colour matching or special pigments for “cool colors”.

Possibiliti es of Coil-Coati ngsThe challenge for the coil coaters on the technical side were pronounced by architect Lars Courage, Architect from Courage Architecten. “The technical evoluti on of colored coated steel now brings more opportuniti es and possibiliti es in architecture than ever thought of. “ Metallic facades, flipflop facades, UV resistant blackness, a wider range of color, the architect wants more possibiliti es than what most of the suppliers can off er. Courage wished a discussion with coil coaters about the feasibility of diffi cult colors in respect of sustainable and environmental aspects. The contact with architects can help the coil coati ng industry to develop new products which fulfill the demands of modern architecture, demanded Paul van der Vijgh, Marketi ng and Communicati on Manager at Euramax Coated Products. He talked about the largest pre-coated aluminum roof in the world with more than 200.000 m² roof structure. It is the roof of the Ferrari World in Abu Dhabi which is made of 1.300 Mt of aluminum. The main lesson learned is that coil coater and their customer should communicate directly with the architects to off er more service to the market and gain more knowledge .

There is a mutual interest for direct communication with architects to directly show colour and design opportuniti es in pre-coated metal. According to van der Vijgh close co-operati on between roof and façade

cladding companies and coil coaters leads to better, more beautiful buildings that, in the end, is the best adverti sing for the industry. “Pre-coated metal is a concept or image not a cladding material!”Jonathan Clemens, Managing director at Kalzip Ltd emphasized the advantages of coil coated material for the constructi on of industrial and private buildings. Kalzip systems enable innovati ve, long-lasti ng, high performance and low maintenance building envelope soluti ons using aluminum profi led sheets and other metal fi nishes. Benefi ts of painted aluminium are the outstanding corrosion resistance, sophisticated design potenti al and low surface refl ecti on. It blends harmoniously with surroundings. Trends here include a wide range of colours for innovati ve design concepts and environmental considerati ons.

Ecodesign studyThe ecological component of a product becomes more and more important in the future. “Implementi ng ecodesign represents good business sense and practi ce” according to Franck O’Connor, director of Ecodesign Center. He showed the results of a study commissioned by ECCA to assess the percepti on among European product designers on the use of pre-painted metals in product development. There is a lack of consistency regarding percepti on of the att ributes of pre-painted metals and strong emphasis on applicati on and client as driver in specifi cati on. Cost is always a key issue, but the study stated also an unwillingness to “sell” pre-painted metals to clients. There is a need for verifi able and independent data on environmental performance, and a confl ict between an ‘innovati ve approach’ and perceived manufacturing limitati ons. Franck O’Connor recommended to address the knowledge gap by information diffusion, networks, training, grants, R&D finance, pilot projects or life cycle inventories. More visible case studies could establish trust while to get the message across,. social networking is essenti al.

Performance of roofsTo improve the knowledge about the performance of prepainted metal roofs Chris Kendrick, Senior Lecturer in Department of Architecture at Oxford Brookes University, compared the performance of warehouses using fl at membrane roofs, as commonly used in mainland Europe, with portal frame designs using low pitch metal clad roofs. The warehouses are modeled using dynamic thermal simulati on soft ware for several locati ons across Europe. The main difference between the roof types is the percentage of roofl ighti ng possible at economic cost. Metal clad roofs make provision of roofl ights much easier and cheaper. Kendrick came to the result, that pitched pre-painted metal roofs could be more widely used in Europe to save CO2 emissions from industrial buildings. Pitched roofs enable better daylighting and less use of artificial light. A slight increase in heati ng energy is off set by the reducti on in lighti ng and in all cases CO2 emissions are reduced. The opti mal roofl ight area must be found for each locati on. (AJA)

The roof of the Ferrari World in Abu Dhabi is the largest pre-coated aluminum roof in the world with more than 200.000 m² roof structurePhoto: Euramax Coated Products