<p><em>Steve Houston knows a thing or two about both the technical aspects of the powder coating industry and the rapidly changing business dynamics shaping trends in the segment. As the newly minted executive director of the </em><a href="http://www.powdercoating.org/"><em>Powder Coating Institute</em></a><em>, he has critical access to not only manufacturer and supplier members but also coaters and finishers serving the industry. Houston, a 28-year veteran of the powder coating sector, has also developed keen insights through the variety of leadership positions he has held with some of the industry’s most prominent names, Nordson Corp. and DuPont among them. Over the years he has also chaired multiple PCI committees and twice served as its president.</em></p> <p><em><strong>MF:</strong></em> What are some of the major concerns you’re hearing regarding the state of the organic finishing industry? (e.g., raw materials/energy costs, outsourcing, economic conditions, etc.)</p> <p><strong>Houston:</strong> In the beginning—and for the first few decades—powder saw the majority of its growth through conversions from alternative technologies. In recent years the majority of this much more mature powder coating marketplace finds its growth from the economy and upgrades and/or equipment offering efficiency improvements such as quicker color change. The fact is all of the items you have mentioned have and will continue to affect the powder coatings marketplace. Raw material increases are negatively impacting the powder producers’ bottom line and forcing a pass through to the end users, of course, driving up the cost of this coating solution. And we continue to see production of industrial products moving offshore to low-labor countries such as China, India, and even Mexico. Those are the main factors that have stymied the growth of powder coatings in recent years.</p> <p><em><strong>MF:</strong></em> Based on feedback you’re hearing from members, how is the powder coating manufacturing community dealing with some of those challenges?</p> <p><strong>Houston:</strong> Powder has been undervalued for a long, long time. The raw material increases that have blindsided us for the last few years have forced powder producers to look at ways to get the true value of powder coating into the marketplace. Raw materials prices are going up due, in part, to the ever-rising energy costs. Every vendor [serving] this marketplace has had to pass through increases to offset this cost escalation. It has been a negative impact from one point of view, but on the other side it’s been an important part of how we identify the true value of the offering that powder brings in comparison to alternative technologies.</p> <p><em><strong>MF:</strong></em> The finishing industry is clearly becoming increasingly global in scope. This is evidenced by: a) the growing presence of North American suppliers in overseas markets; and b) emerging industrial markets in other countries (namely China, India, and parts of Europe). Looking at these dynamics, do you foresee an even higher number of international supply partnerships and product/technology information sharing?</p> <p><strong>Houston:</strong> I think we will see more of all of the above. We are truly a global economy, and that’s not just finishing or powder coating but business in general. What you have to do in order to succeed in this marketplace is leverage that potential. When most people think about “a global organization” we think of large international companies [making] billions of dollars annually. Well, today there are many international organizations that are what we might call “small” businesses that have found ways to leverage their support, products, and services to effectively distribute and/or deliver those products and services all over the world. That just proves intellect and good product can be sold in this competitive international marketplace.</p> <p>What I think will prove out in the future is that we have to find ways to take those good ideas from all over the world and bring those to the domestic market in which we participate. This is true with associations as well. PCI is finding that powder consumption in the Americas represents only about 20% of all powder coating consumed worldwide. China, in particular, represents almost 40% of all the powder consumed in the world; we should be there. At the same time, PCI is pretty much considered a domestic association. Our mission over the next few years is to branch out and build chapters all over the world. PCI has a great history of promoting the use of powder coatings and exceptional products to educate the marketplace. As an association, we want to branch out and support our members—international companies as well—with the support we’ve been able to provide domestically over the last 27 years.</p> <p><em><strong>MF:</strong></em> Are there plans in place currently to pursue these international partnerships?</p> <p><strong>Houston:</strong> We have plans in place; I recently rolled out a five-year plan, part of which calls for the creation of chapters outside the U.S. This includes doing feasibility studies in China, Japan, Latin America, Europe, and the Middle East.</p> <p><em><strong>MF:</strong></em> Increasingly, we are hearing anecdotal evidence of traditional electroplating operations adding paint and powder coating services to their repertoire. In fact, many finishers report that—through this diversification—paint/powder coating services are growing proportionately faster relative to the overall ratio of plating to powder coating. Based on what you’re seeing at the finisher level, do you see this ratio moving more quickly toward organic finishing services?</p> <p><strong>Houston:</strong> The finishers that are narrowly focused are being bypassed by innovators that are more diverse in terms of what they can offer the market. Smart businesspeople are just looking at the supply chain of everything their customers need to give them a good, high-quality finished product and vertically integrating their capabilities and competencies. What I’m seeing is a transition from what used to be exclusively powder custom coaters to “finishers” putting in plating and e-coat lines to help build a more rounded product portfolio. Likewise, just as many platers are putting in [coating] lines. In addition, finishers are also offering assembly services, JIT delivery, managing customer’s inventory, silk screening, high-performance coatings, functional coatings, and much, much more. The winners continue to be innovative in a dynamic market.</p> <p><em><strong>MF:</strong></em> From a technological standpoint, what are some of the powder coating advancements you see on the horizon?</p> <p><strong>Houston:</strong> Today, if the world economy sneezes the powder market catches a cold. We have to take powder to a new level, removing it from its dependency on economic growth. I think there is a huge marketplace where powders can be used, and this growth will be driven by technology. For example: powder on wood; powder on medium-density fiberboard; powder on plastics; powder on very large parts; powder in applications where quick color change is needed for small runs. Those technologies are here today and will continue to evolve in the immediate horizon for powder coatings. Beyond that, we’re going to have to really look at powder coating and more high-performance products—powder coating for AAMA specifications, especially 2605. There are powder coatings that meet all AAMA specifications today, but I fully anticipate new technologies to drive powder performance beyond those specifications. We’re going to see higher corrosion-resistant powder coatings and more super-durable coatings with increased UV protection. These are the kinds of developments that will help grow powder coatings into new markets as well as concrete themselves into established markets.</p> <p><em><strong>MF:</strong></em> Speaking of advancements, what role will increasingly stringent environmental standards play in the development of future powder coating products and delivery/recovery systems?</p> <p><strong>Houston:</strong> When we talk about recovery systems, the ultimate recovery system would be to not need a recovery system at all. That means having a gun that produces 100% first-pass transfer efficiency. Equipment manufacturers are not there yet, but I know that they continue to find ways to optimize first-pass transfer efficiency to minimize what you’re recovering to maximize the cost per square foot of a powder-coated product. Realistically, 100% transfer efficiency might never happen, but the closer we get to it the more efficient and cost-effective powder will become. In the last few years we have seen significant improvements in transfer efficiency and recovery advancements that have led to extremely quick color changes. But it is not just the equipment manufacturer that needs to focus on innovation here; the powder manufacturers themselves play a significant role in transfer efficiency and the more cooperative these groups can be together the faster these technologies will be available to the consumer.</p> <p><em><strong>MF:</strong></em> Finally, what’s your outlook regarding the short- and long-term market growth for powder coatings? Is PCI privy to any recent market studies forecasting growth for the paint or powder coating sector that you can share? (Some conservative estimates we’ve seen put the global powder coatings market growth at approximately 5–6% annually for the next few years.)</p> <p><strong>Houston:</strong> In my opinion, the 5–6% growth projections over the short-to-medium term makes a lot of sense. Obviously, in some of the emerging parts of the world, we’ll see in excess of double-digit growth. We’ve been seeing some good growth in parts of Eastern Europe, Asia-Pacific, South America. What will happen to help drive that number up in some of the more mature marketplaces will be technology. The question is, when will it come? The more emphasis powder manufacturers, raw materials suppliers, and equipment manufacturers, and virtually all vendors to the powder coating market put toward innovation and new technology, the quicker that growth curve will increase. Over the long term, I fully expect that we’ll get back to larger growth patterns—8% or more, perhaps. As the world continues to look at hazardous disposal and hazardous products that are used in building, construction, and industrial markets, there’s no better lean, green technology than powder coating. Not only do we have the “push” to try to get powder into markets that we don’t see it in today, we also have the “pull” from the market with an environmental conscience. That really is the perfect combination for an increase in growth.</p>