CPCA Corner: Canadian Coatings Market Update – Fall 2020
Canadian Coatings Market Update – Fall 2020
Shortly after the start of the economic lockdowns in April a CPCA Affiliate Member, Orr & Boss, provided CPCA with a forecast on the Canadian coatings market for 2020 and its recovery into 2021. Given the economic volatility caused by the pandemic Orr & Boss recently updated their outlook. In general, the new forecast is slightly more optimistic for the Canadian paint and coatings market than at the outset of the pandemic, driven by the strong architectural DIY sector. Residential construction activity returned to pre-COVID levels igniting new contract painter business and as homeowners began to allow contractors in their homes further increasing paint sales. As a result, paint manufacturing activity is recovering faster than expected.
Overall, total volume and value is expected to be down about 3% for the year, before rebounding next year to the tune of 3.5% for volume and 6.1% for value. However, the market is quite volatile and these numbers obscure some of the realities experienced by specific sectors. The largest segment, architectural coatings, had a good year, up 4.3% in volume and 7.1% in value. With homeowners staying home and spending less time traveling, eating in restaurants, or at other entertainment options, many have focused on upgrading their homes.
Other non-architectural industrial coatings segments have not been as strong. The Auto-OEM market is down significantly as it is closely tied to the number of new automotive builds in Canada, which are down 43% through June of this year. The auto-refinish market is similarly down, as it correlates directly with the number of auto accidents, which have decreased because of reduced traffic and congestion with many working from home. In fact, major Canadian cities have traffic congestion levels 32% below September 2019 values. Other industrial coatings segments such as powder coatings are largely driven by manufacturing activity. Canadian manufacturing activity is slowly returning to pre-pandemic levels but as of August it is still below last year’s levels. Orr & Boss forecasts that manufacturing activity will continue its upward trajectory in the coming months and by year-end will be above last year’s level.
Overall, it has been a difficult year for many in the coatings sector, especially those companies supplying the non-architectural and industrial coatings markets. Industry leaders are hopeful that the worst is behind them as the initial shock of the recession and its associated operational changes have faded. Also, there continue to be growing opportunities in various coatings markets such as antimicrobial and anti-viral coatings. Assuming further lockdowns do not significantly affect manufacturing recovery, the sector as a whole should continue trending upward into Q4 of 2020 and materialize into some growth, however modest, in 2021.
Canadian Environmental Protection Act (CEPA)
CPCA contributed to the Industry Coordinating Group’s (ICG) formal submission to the federal Government on industry’s real concerns with the prospect of CEPA reform and the continued functioning of chemical assessment under the CMP during the COVID-19 pandemic. ICG is comprised of more than 20 associations representing companies in the chemical industry. In July 2020 the federal Government assured ICG that work on CEPA reform and renewal of the Chemicals Management Plan (CMP) is continuing. There have been a number of legislative timelines pushed back in Canada and throughout the world due to the pandemic. Hence, government reached out to industry to determine if any of these changes affected industry’s views on possible CEPA reform or CMP renewal. CPCA supports the wider chemical industry position that the flexibility of CEPA allows more effective chemical assessment under the current legislation, especially if accompanied by appropriate policy innovations. The ability to evolve and set new targets is already built-in to the chemical assessment process in Canada with the focus on risk assessment, which has made the CMP among the best in the world for assessment. Industry urged Government to focus on completing the work already committed to under the CMP process and any proposed changes should be consistent with the many efforts made to date both for chemical assessment and risk management. Industry encourages the federal Government to explore new directions, which can easily be accommodated without any changes to the CEPA statute.
Government Seeks to Add Plastics and Microplastics to List of Toxic Substances
Earlier this year the federal Government published a Draft Science Assessment of Plastic Pollution that recommended taking action in accordance with the precautionary principle, to reduce macroplastics and microplastics that end up in the environment. The impetus behind this initiative remains the Liberal Government’s comprehensive agenda to achieve zero plastic waste and eliminate plastic pollution by 2030. Voluntary and non-regulatory measures alone were determined to be insufficient and regulatory measures would require an amendment to the Act, CEPA. The Proposed Order to amend the Act has now been published with the recommendation of adding “plastic manufactured items” as a broad CEPA-Toxic category to Schedule 1. This is an action that enables Ministers to propose risk assessment and risk management measures for chemicals in commerce. However, ‘plastic manufactured items’ is, by far, a much too broad an approach for consideration under Schedule 1, which generally includes ‘chemicals’ used in a wide range of products, not ‘manufactured’ items. For the coatings sector the main concern remains microplastics on which further scientific research is needed, as admitted by the Government’s Order. During the summer many industry associations – including CPCA – joined in efforts urging against this particular action and for Government to adopt more appropriate strategies to address plastic waste pollution. If not, industry pointed out the huge detrimental trade impact this would have on numerous industries, potentially leading to bans or use restrictions that would hurt Canadian businesses and cause regulatory misalignment with our largest trading partner. Industry proposed a pan-Canadian provincial approach, which includes full consultation for these regulations as many parts of the world are still grappling with the current public health emergency where single-use plastics currently play a critical role in preventing further spread to vulnerable populations.
Chemicals Assessment of Coatings Chemicals Continues
Several substances and groups of substances have been assessed under Phase 3 of the CMP, which resumed publications this summer after being temporarily halted at the outset of the pandemic. The operational burdens placed on many stakeholders by the pandemic mean that Government initially prioritized assessments with non-toxic conclusions. Among the chemical groups with implications for the coatings sector, and of greatest impact, was the Final Screening Assessment (FSAR) for the Epoxides and Glycidyl Ethers Group. None of the substances in this group were found to be toxic but Significant New Activity provisions were proposed for three of those implicated in paint and coatings due to several new uses for the substance in the coatings sector. The final screening assessment report for the Poly(amines) group contained six substances implicated in CASE products, none of which met the toxicity criteria under CEPA. The preliminary Draft Screening Assessment for the Aromatic Amines group concluded that dimethylaniline, which is used in coatings, meets the toxicity criteria and a risk management scope was published to reduce skin and inhalation exposure to this substance from automotive adhesives and sealants. The other substances in the group are not proposed to be toxic, although new activity provisions will be considered for two of them in the future if used in different quantities or circumstances than previously reported by industry. Draft screening assessments for the following groups containing CASE-implicated substances were also published and found to not meet the toxicity criteria, with no follow-up activities planned at this time: Silver and its compounds, Thallium and its compounds, TMSS, Alkanolamines and Fatty Alkanolamides. This is a welcomed outcome for the coatings industry in Canada.
Performance Evaluation Reports Reveals Industry in Compliance
Several performance measurement evaluation reports for chemical substances and groups found to be toxic under CEPA have recently been published as part of the federal government’s strategy to measure the effectiveness of risk management instruments and to help inform the public of possible residual risks. Each evaluation compares the current state of a toxic substance with its state before risk management tools were implemented and determines whether objectives were met, or if further action is required. The recent publications refer to Bisphenol A, Isoprene, Lead, 2-Butanone Oxime (MEKO), Mercury, Poly-brominated Diphenyl Ethers (PDBEs), and Pigment Red 3. With the exception of the report on MEKO, all other performance measurement evaluation reports for health and environmental concerns concluded that the risk management objectives were being successfully met with no further regulatory actions required. Regarding the MEKO report, CPCA has been engaged with Health Canada officials to obtain changes to the wording and tone of the public online report to further recognize industry’s compliance efforts and reformulation challenges due to a lack of viable alternatives.