Coatings for ACE: A fertile field
The agricultural, construction and earthmoving equipment segment (ACE) accounts for some 1.5 % of global paints and coatings volume. As this is a niche market, reliable figures are difficult to obtain. Market research company PRA World estimates the market volume at about 621,000 tonnes.
Dietmar Jost of Rembrandtin shares this view, putting the market volume at 625,000 tonnes. “We estimate the global market to be worth EUR 2.6 billion. This corresponds to an average price per kilogram of around EUR 4.20,” he says. According to Jost, the agricultural machinery accounts for roughly one third of volume and value. On that basis, agricultural machinery makes up just less than 230,000 tonnes, equivalent to EUR 950 million. Construction equipment, then, comes in at 396,000 tonnes or EUR 1.65 billion. Andreas Hoyer of Akzo Nobel believes that the market volume is larger but the value is smaller.
“The size of the ACE market naturally depends on how you it, given that, for example, the “construction” sub-segment is viewed in different ways. We believe the market to be around 680,000 tonnes and worth EUR 2.2 billion,” says Hoyer, whose latest market research dates from late 2017. For Christian Vogel of Beckers Group, on the other hand, the volume is lower: “We consider the average price to be somewhat higher. We estimate the market size at 550,000 tonnes or worth EUR 2.5 billion. These figures are for wet and powder coating systems.” Although the figures cited by these three companies vary, they all fall within the same range.
Agricultural equipment segment to keep growing in upcoming years
The agriculture segment experienced a slight uptick in market growth up to 2012. Jost contends there was then a recession from 2012 to 2015. “Since 2015, we have seen a return to slight growth in this segment. Over the next five to ten years, we expect growth of 2 to 3 % in Europe”. Hoyer has a similar view. He too considers the growth of around 3 % in agricultural equipment to be stable and sustainable. “We are witnessing growth mainly in North America, Russia and some regions of Africa. But in Europe and Asia, the market is stagnating,” he adds.
The big 6 manufacturers in the agricultural equipment sector are Agco, Argo Tractors, Claas, CNH Industrial, John Deere and Same Deutz-Fahr. An estimated EUR 100 billion is spent on agricultural engineering every year. In 2010, the figure was EUR 80 billion, but by 2013 and 2014, it had already passed the EUR 100 billion mark. Since 2015, though, there has been a slight decline. North America and Western Europe are the key regions in the area of global agricultural engineering production. Production in the traditional growth regions of South America or the emerging markets of China, India and Turkey is mainly geared towards their domestic markets – for the moment. In some cases, however, exports are rising increasing substantially, mostly due to demand from developing and emerging economies. Up until 2014, the EU led the field (at EUR 28.3 billion), closely followed by the USA (EUR 22.6 billion). China ranked third at EUR 16.5 billion.
Agricultural vs. construction machinery: demands vary among customers
Customer requirements concerning agricultural machinery have risen in recent years. “Appearance is becoming increasingly important. The specifications on the degree of gloss are already on a par with OEM specifications. Buyers of agricultural machinery attach great importance to good looks and therefore demand high-quality systems,” explains Jost. And they want multilayer coatings – Jost believes that customers are still sceptical about one-coat finishes. For construction equipment, for example, the opposite is true, he says. “Functionality is paramount there. These customers are mostly large companies and the trend leans in favour of one-coat finishes. Costs almost certainly are a factor here,” he adds. Hoyer, too, has identified this trend: “Higher demands on topcoat quality are now standard. A finish close to an automotive OEM is increasingly being seen as the benchmark. Thin-coat paints and cost-efficient systems are in demand.” The corollary of this is greater demands imposed on technical service.
Vogel also sees manufacturers of agricultural and construction equipment upping their demands: “Exceptional anticorrosion protection and gloss resistance in extreme weather conditions are key.” He believes that these are no longer unique selling points, but rather essentials. Sustainability is gaining traction as well. Hoyer, too, sees sustainability as a major issue. “Cost savings and extracting greater efficiency from existing resources – doing more with less – are becoming increasingly important. There is no longer any demand for solvent-borne systems,” he says. Jost also considers shorter process times and greater efficiency to be major factors in the market.
The big 6 in the construction machinery segment are Caterpillar, Hitachi, Komatsu, Liebherr, Terex and Volvo. Hoyer sees continuous growth, mainly in Europe and Asia, and increasingly from the Middle East. The USA is declining, he observes. “In the earthmoving segment, we anticipate moderate growth or stagnation in saturated markets. In Asia – mostly China and the Middle East – we expect growth of 1 to 2 %.”
Different trends in the market
Future machine concepts will be based on two different approaches: large manned machines and small autonomous devices. Both offer advantages and disadvantages. Advantages of manned machines are:
- Familiar technology, continuously developed, proven, and integrated into mechanisation
- Very high output per machine and operator
- Increasingly heavier machines and pressure exerted on soils
- Need for well trained and highly motivated operators
- Requires fields that can accommodate the machine sizes
Advantages of autonomous devices are:
- Highly versatile use in different field sizes
- Low weights and low pressure exerted on soils
- Not dependent on a driver – works 24 hours a day
- Completely new technology
- Needs new operating strategies
- Safety problem still to be resolved
Besides the topics of urbanisation and mini-equipment vs. large machines mentioned earlier, other trends can be seen in the ACE market, such as robotics, artificial intelligence and the buzz phrases Big Data and Internet of Things.
“The challenge lies in meeting the trends with innovative systems,” says Hoyer. But makers of ACE coatings will also be impacted by the ongoing consolidation in the market for agricultural and construction equipment. “There is a growing need for a global presence to appease global companies and their subcontractors,” stresses Hoyer. Jost, too, sees industry consolidation and the evolution into an increasingly global industry.
At present, paint systems for different components are not necessarily supplied from a single source. “However, manufacturers want, for example, that wet and powder coatings be coordinated with each other and the best solution then would be to have local representation.” Jost believes that this development in the market will open up new business areas as well. “I can definitely imagine that cooperation among coatings manufacturers will intensify. This will enable us to supply customers with coordinated systems, as required,” he says. “There are already successful examples of this on the market,” he notes, adding that “the successful companies in this segment are definitely open to such concepts.”
By Damir Gagro