Water-Borne Coatings Market

Market Overview

The global water-borne coatings market size was valued at USD 82 billion in 2021. It is estimated to reach an expected value of USD 123 billion by 2030, growing at a CAGR of 5.2% during the forecast period (2022-2030). Water-borne coatings are surface coatings that use water as a solvent, which is dispersed with resin to create a coating. This coating is an environment-friendly coating solution.

The resins are dispersed in water, which makes them eco-friendly and easy to apply. Water-borne coatings contain up to 80% water as a solvent along with some quantity of glycol ethers. They comprise very few VOCs, which is why they are widely used in many industries such as architectural, automotive, industrial, wood, and other industries. Water-borne coating provides high gloss, high protection from corrosion, good pigmentation, excellent flow and leveling properties, excellent resistance to heat and abrasion, and low toxicity and flammability.

Market Dynamics

Market Driving Factors

Impact of Environmental Regulations Boosting the Demand for VOC-Free Coatings

Paint and coating businesses were forced to provide better products due to rising customer awareness and stringent government regulations. The previous firm practices of the producers relied on dangerous chemicals for people and the environment. Environmentally conscious paints have greatly benefited from protests supporting anti-pollution strategies and strict government regulations promoting green, ethically produced goods. To get back to the basics, consumers are looking for products that are as natural and airy as possible. The movement against formaldehyde, ammonia, and heavy metals like lead and arsenic is spreading.

Manufacturers are developing new and innovative technology to manufacture paints and coatings. Water-borne paint and coating products contain water as a solvent to dissolve resins, making these coatings eco-friendly and easy to apply. Mostly, water-borne coatings contain 80% water with small quantities of other solvents, such as glycol ethers. These coatings are environment-friendly as US and European regulations mandate water-borne coatings to have a VOC content of fewer than 3.50 pounds per gallon of water. Today, vendors are offering eco-conscious paints. They are also upping the quality of their paints to match that of regular, more toxic paints. Zero-VOC to low VOC and natural paints made from natural compounds such as water, tree resins, oil, plant oil, oils, chalk, clay, milk casein, bees' wax, and natural dyes have become a new fascination. Hence, the factors mentioned above drive the segment growth.

Growing Demand from Construction Industry

The  construction sector is experiencing new advancements and market trends around the globe. This expansion is greatly influenced by technological progress and considerable modifications implemented across the board in the industry, from design to installation. Even if construction projects are getting more complicated, strict regulations governing worker security, cutting-edge equipment use, energy efficiency requirement, and increased productivity are some of the main issues. The real estate and residential sectors, backed mainly by low borrowing rates and increased disposable income, can experience more robust growth. During the projected period, the expansion of paint and coating products is anticipated to be fueled by the expanding population, increasing demand for public construction projects, and increasing foreign investment in the construction industry. This, in turn, is increasing demand for water-borne coatings worldwide.

Market Restraining Factors

High Cost of Raw Materials

Raw materials are the most critical factor for the production of every branch in the manufacturing industry. The raw materials used in water-borne coatings can be classified into four chemical constituents: resins, pigments, solvents, and additives. One of the significant challenges the coatings market faces is the cost of raw materials. With a growing interest in water-borne coating products, there are difficulties in achieving high performance, which requires specialty additives, pigments, fillers, and more expansive modifiers. The high price of raw materials is a constant nuisance for paint and coating manufacturers.

Key Market Opportunities

Rising Home Improvement Activities

The millennial generation is buying new homes and engaging in home improvement projects per modern trends. Millennials are carrying out modifications in their newly built houses as per suitability, such as making a deck, remodeling a basement, building an addition, remodeling a bathroom, installing drywall, and renovating the garage. After renovation, coatings are required on the improved surface, so consumers prefer to have eco-friendly coatings. Thus, the demand for water-borne coatings is increasing due to their low VOC content.

The aging generation is also a factor driving the market for water-borne coatings. Older people prefer staying in the same house instead of moving to a new one. Hence, renovation and remodeling activities are prevalent, which, in turn, is driving the market for paints and coatings. Younger millennials prefer to live at home or rent before purchasing their first home. The inventory of entry-level homes is low, which has delayed homeownership in more youthful generations but driven the volume in maintenance. However, millennials will be the largest generation to enter the housing market in the coming years, affecting home improvement and paint categories. Hence, home improvement activities are considered a significant spending sector among millennials, providing lucrative market opportunities for water-borne coatings.

Regional Analysis

By region, the global water-borne coatings market is segmented into North America, Europe, Asia Pacific, and LAMEA

Asia pacific acrylic accounted for the largest market share and is estimated to grow at a CAGR of 5.6% during the forecast period. The growth of the water-borne coatings market in the APAC region is driven by foreign investments and a prevailing manufacturing sector due to low labor costs and easily accessible raw materials. In addition, the growing middle-class population and rising standard of living in the region will increase the demand for architectural coatings, driving the market for water-borne coatings. Apart from this, environmental, health and safety issues drive the market for water-borne coatings. Government investments in infrastructure and industrial sectors in India and China will boost the regional architectural coatings market, thus causing the demand for water-borne coatings. The need for high-quality infrastructure in emerging economies such as India and China has been driving the growth of the water-borne coatings market in recent years. Foreign direct investments in emerging countries such as India will enhance the market growth. Rapid urbanization has contributed to the development of construction, industrial, and commercial sectors. All these factors are driving the growth of the water-borne coatings market in the APAC region. Renovation houses and repainting homes during the festival season in India also aid the water-borne coatings market.

Europe is the second largest region. It is estimated to reach an expected value of USD 35 million by 2030 at a CAGR of 5.2%. The major economies of Europe are Germany, Italy, France, and the UK. The water-borne coatings market in the region is expected to witness high growth post-2021, as construction activities resume after the impact of COVID-19. The demand for water-borne coatings will rise in the area due to stringent government regulations. The European government has limited VOC emissions due to using organic solvents in architectural coatings and vehicle refinishing products. Henceforth, the region's demand for water-borne coatings is rising because water-borne coatings contain zero to low VOCs.

North America is the third largest region. The water-borne coatings market in the region is driven by architectural, automotive, wood, packaging, and industrial sectors such as oil & gas and marine. In North America, the automobile sector is essential and is undergoing significant changes. One of the major trends in the North American automotive industry is the growth of the infrastructure for electric vehicles. Additionally, autos made up the most significant portion of exports in recent years. In actuality, automakers have exported more than $692 billion over the last five years, almost $50 billion more than the next largest exporter, the aerospace industry. Due to NAFTA regulations, US-based auto manufacturers have recently been compelled to adopt North American tools to strengthen their supply chain. The new agreement mandates that automakers make at least 75% of their components in the US, Canada, or Mexico. Innovations in the auto manufacturing industry drive the region's demand for water-borne coatings.

Segmental Analysis

The global water-borne coatings market is segmented by resin types, end-user, and regions.

On the Basis of Resin Types

By resin types, the global water-borne coatings market is segmented into epoxy, polyester, acrylic, polyurethane, alkyd, and others. Acrylic segment accounted for the largest market share and is estimated to grow at a CAGR of 5.9% during the forecast period. The demand for acrylic resins is expected to increase during the forecast period from architectural and industrial segments, as they provide good weather resistance, resistance to hydrolysis, and gloss and color retention in exterior applications.

Polyester resins are the second-most-common resins used in water-borne coatings. Polyester resins are thermoset polymers generally transparent and of high density and possess excellent strength and water resistance, used in end-user industries such as textile and packaging. Most polyester resins used in the coating industry have low molecular weight and are amorphous, linear, branched, and crosslinked to form valuable films. Polyester coatings are used in construction, automotive, and aerospace industries due to their mechanical properties, including impact, UV, and chemical resistance in water-borne, high solid, low VOC, and powder coatings.

The epoxy segment is the third largest. During the forecast period, the demand for water-borne epoxy coatings will rise from the industrial and automotive sectors. Epoxy resins are used in high-performance aerospace, race cars, and marine applications. Epoxy coatings provide excellent strength, weight reduction, durability, and chemical resistance. Such properties drive the segment growth.

On the Basis of End-User

By end-user, the global water-borne coatings market is segmented into architectural, automotive, industrial, wood, packaging, and others. The architectural segment accounted for the largest market share and is estimated to grow at a CAGR of 6.2% during the forecast period. The largest market for water-borne coatings is anticipated in the architectural industry because more homes and businesses are being built in every location. The demand for water-borne coatings is expected to increase due to rising environmental consciousness and stricter governmental regulations. The market for water-borne coatings is being driven by the expansion of the building and construction sector as a result of urbanization, as well as increased per capita income and demand for architectural projects.

Residential construction and new government-sponsored housing initiatives are growing in the APAC area. In the construction sector, rising disposable incomes are motivating people to spend on renovating or remodeling their houses. Hence, the demand for water-borne coatings in the residential sector is expected to increase. Architectural water-borne coatings, apart from decorative applications, also possess protective features. Therefore, the demand for architectural water-borne coatings is expected to rise in industrial end-users such as the oil & gas sector and manufacturing plants, among others.

Automotive is the second largest segment. The demand for water-borne coating products in the automotive sector is rising due to their ability to protect vehicles against acid rain, weather, and UV radiation. In addition, the demand is expected to go up in APAC due to increasing regional production activities. The other factor includes a growing middle-class income, translating to these coatings' ever-increasing affordability.

The wood segment is the third largest. The market for water-borne wood coatings is growing due to urbanization in emerging economies across the Asia Pacific, Latin America, and European regions. Rising urbanization and growing populations have driven residential, commercial, and industrial infrastructure, thus positively impacting the demand for wooden products. In addition, the production of wooden artifacts and decorative items is also triggering more demand for water-borne wood coatings.

Recent Developments

• July 2022 - AkzoNobel will expand its performance coatings range after striking an agreement to buy the wheel liquid coatings business of Lankwitzer Lackfabrik GmbH. Before the end of 2022, completion, subject to regulatory permissions, is anticipated.
• August 2022 - PPG (NYSE: PPG) announced PPG INNOVEL® PRO. This enhanced internal spray coating uses no bisphenol-A (BPA) or bisphenol starting substances and provides more robust application properties for the infinitely recyclable aluminum beverage can.
• July 2022 - An innovative service that combines paint supply and livery design will be made available to airline customers by PPG (NYSE: PPG) in collaboration with UK airline brand and design consultancy Aero brand. Customers will be able to collaborate closely with designers at PPG LIVERY LABSM aircraft coatings and design facilities in Burbank, California, and Shildon, United Kingdom, to produce bespoke paint colors and provide direct input on the design of their livery.