Stricter regulations to change supply and demand of the coatings landscape in the country, notes Frost & Sullivan’s Chemicals Practice Dubai, United Arab Emirates-Sunday 24 June 2018 [ AETOS Wire ] Mass and industrial production of coating products in Iran dates back to the 1940s and started with a nominal capacity of less than 20 million litres per annum in the decorative sector only. The industry has significantly developed and diversified in terms of capacity and product portfolio over the last couple of decades. At present, the coatings segment in Iran is facing an over-capacity situation with imports accounting for minor share in supply. Inappropriate go-to-market strategies, traditional management, lack of liquidity, obsolete formulation and inefficient sales channels are key restraints that hold back a positive growth in this industry. Consequently, the government is actively looking to attract international players to take a role to not only overcome the current challenges but also increase the share of coating exports from the country, from less than 2% currently to over 5% within the next 5 years. In such a scenario, joint ventures and contract manufacturing practices are expected to provide substantial opportunity for global manufacturers. “With the lifting of UN sanctions, the country witnessed a rise in demand due to increase in oil revenue inflow into construction projects. However, lack of liquidity, traditional management and inefficient production methodology hindered players from meeting the demand. To overcome challenges and boost local production, the government is offering companies the opportunity for JVs, licensed production and mergers with international players as a way forward”, said Frost & Sullivan Senior Consultant Ali Mirmohammad. “Also the government strongly aims to increase duties to make imported products more cost competitive but will offer initiatives such as tax exemptions and other benefits to international players as counter measures”. For further information on this analysis, please click here. Capacity utilisation in Iran’s coatings industry is less than 50% due to insufficient domestic demand and significant weakness in export strategies. Although the country can manufacture relatively high quality solvent-borne products at competitive costs especially in decorative sector, the total size of the export is less than USD 100 million. There is potential for local manufacturers to gain market share in neighbouring countries including Afghanistan, Iraq, Pakistan, Qatar and some CIS countries with an opportunity potential of close to USD 900 million. Apart from this, Iran’s per capita consumption of coatings is expected to grow and get closer to countries like the Kingdom of Saudi Arabia (KSA) and Turkey within the next decade. Replication of European style “Do it yourself (DIY)” strategies along with establishment of dedicated DIY stores which are typically attached to commercial spaces like malls etc., beside branding and portfolio diversification containing zero-VOC product variants calls for huge benefits for global players to leverage their managerial and technological leadership in Iran. Establishment of paints and coatings technology incubators to support R&D and new technologies for manufacturers will also be supported by the government through subsidised loans, long term tax exemptions and other related benefits. Coming down to the fact that the country benefits from potential flow of USD 300+ billion free private liquidity besides recent increase in international reserves (by USD 13.3 billion reported by IMF) and recession removal policies by the government, the general outlook for the industry is bright. Decorative, protective, wood and powder products are expected to grow between 2018 and 2022. As leading sub-sectors in 2017, decorative coatings market was estimated at USD 520 million, followed by protective coating valued at about USD 310 million expected to grow at CAGR 4% and 6% respectively. Powder coating is going to become the third largest market as a result of rise in automotive, home appliances and metal fabrication production. In 2017, the market was valued at about USD 80 million, expected to grow at CAGR 6% in the next 5 years. Furniture industry in Iran is improving, the wood coating market is thereby positively affected as the market increased to over USD 45 million in 2017, and is expected to grow at CAGR 4% between 2018 and 2022. If you are interested in gaining more information on Iran’s coatings market and speaking with our experts, please email me at achandhoke@frost.com. About Frost & Sullivan For over five decades, Frost & Sullivan has become world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success. Contact us: Start the discussion. Contacts Anita Chandhoke Corporate Communications - MEA P: +91 80 67028020 E: achandhoke@frost.com http://ww2.frost.com Twitter: @Frost_Sullivan & @Frost_MENASA Facebook: http://www.facebook.com/frostandsullivan LinkedIn: https://www.linkedin.com/showcase/frost-&-sullivan-%E2%80%93-middle-east-north-africa-south-asia/ Permalink : http://aetoswire.com/news/regulations-moving-towards-greener-products-and-localisation-will-bring-in-market-consolidation-and-opportunities-for-growth-in-iran/en