“Evolving Coatings Industry, Emerging Technology-A look ahead…A glimpse at the past!” Presented by David A. Hurwitz

Zintro Webinar Series – Chemical Industry Insights & Innovation Session 1

Chemical Industry Insights & Innovation Series – Session 1

Presented by David A. Hurwitz

Presenter’s Note:
The coatings industry continues to evolve. To the outsider, much might look the same as it did just a decade or two ago. To the insider, industry restructuring and globalization have changed its footprint, regulations have impacted formulations, product stewardship is adding new business challenges, and technology has evolved such that products are actually different in some meaningful ways from the Clean Air Act became law in the United States over 40 years ago. This look at how things have changed but also at how some things have remained the same, provides one observer’s view of the paints and coatings industry, key participants, and the drivers that continue to shape the industry and inspire continued innovation.

About David A. Hurwitz:
David has worked for over twenty years in chemical industry consulting. addressing specialty chemicals, polymers, advanced materials, fine chemical and many downstream industries. He received a B.S. degree in chemical engineering from Cornell University, an M.S. degree in Chemical Engineering from Washington University in St. Louis, and an M.B.A. from the University of Chicago. David is active in the Société de Chemie Industrielle – American Section, the American Institute of Chemical Engineers and the American Chemical Society.

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Transcript:

Stuart: Hi. I’m Stuart Lewtan, founder and CEO, Zintro. For those of you not familiar with Zintro, Zintro is a global online marketplace that helps to connect companies with highly specialized consultants and other expertise providers for projects that range from one hour phone consults to multi-month on-site engagements. I would like to thank the over 200 people who signed up for the webinar today and this is the first installment of our new webinar series covering the highly relevant topic, Chemical Industry Insights and Innovations. It’s with great pleasure I introduce Zintro expert, David Hurwitz. David has worked for over 20 years in the chemical industry consulting, addressing specialty chemicals, polymers, advanced materials, fine chemical, and many downstream industries. He received a BS degree in Chemical Engineering from Cornell University and MS in Chemical Engineering from Washington University in St. Louis and an MBA from the University of Chicago. David is active in the Société de Chimie Industrielle, American Institute of Chemical Engineers and the American Chemical Society. David has also indicated that he’s open to field in questions during the presentation, during his prepared remarks so please feel free to ask him by entering them into the webinar panel. And also David will reserve some time after his prepared remarks for additional Q&A. So without further adieu I’d like to turn it over to our presenter, David Hurwitz.

David: Thank you, Stuart. And welcome attendees. I’m delighted to have this opportunity to speak with you, share my thoughts about an industry that I’ve had connection to for at least 40 years if not longer. And over that time had watched it as an insider evolve, adapt emerging technologies and grow significantly. And at the same time in some ways and maybe to outsiders it looks like the industry might not have actually changed that much. There’re still people running factories, buying raw materials, mixing them together, putting them into various packaging or bulk shipping containers and sending them to the customers for use. That appearance of the industry hasn’t changed much but a lot of what is going on inside the industry has actually changed and I’ll share some of those thoughts with you. In addition, I want to take a little bit of a glimpse over time backwards and forwards and I do that through not only some content but also looking at the way the trade press has talked about the industry, describes the industry, communicates about the industry and we’ll look at some quotations. Some of which are relatively new in the last three or four years and some which are 10 to 20 years old, and the challenges to figure out which of the old ones and which of the new ones because they do change. They don’t change any when there is much as one might expect.

My vantage point comes from a background Stuart said in chemical engineering and I later worked as a resin chemist and a plant engineer and then was involved in sales and business development, and market management around coatings and also coating raw materials. And for the last 20 plus years have worked as a consultant broadly across specialty and fine chemicals, and raw materials, and the formulated systems that are made from those including coatings, adhesives and inks — a variety of specialty materials all built around strategy and execution and M&A support in the activities. So let’s take a look quickly at several of these quotations and the real question here is if you read these and take a minute just to read them, which of these are actually old and which of these are new? All out efforts to please customers with higher value paints that offer greater efficiencies, environmental advantages, and imaginative features. Or, the greatest challenge is providing environmentally sustainable products that achieve the correct balance of properties and performance. Or, innovation is the driving force behind success and growth in this industry including new raw materials, new cross-linkers, lower application temperatures for powder coatings.

If you had to guess, where do you think these quotations came from? The relatively distant past or more recent? And really think about it. In fact the first quote and the last quote are actually more than 10 years and I believe both of them are actually close to 20 years old while the middle quote — the second quote — is actually about three years old. And yet the flavor of these comments in my opinion don’t really change a lot and we’ll see in a few other examples how time really doesn’t seem to be moving for the trade press or at least the language they use, the Lexicon around the industry. So let’s take a look. To me as an insider much has changed. There’s significant industry restructuring, consolidation and globalization and the footprint of the industry is quite different than it used to be. Regulations continue to evolve and impact both the coating chemistry and the formulation technology. The product stewardship issues that have more recently emerged and sustainability goals are adding both challenges as well as opportunities for formulators as well as raw material suppliers. And finally, the technology has evolved in such a way that the products we are making today are different in meaningful ways from the products the industry made 15, 20 years ago and often are providing far better performance than in the “good old days.”

Those who have been around a while might remember seeing cars driving down the road and the sunlight had basically scorched the paint into a complete disaster, alligator faded, chipped, peeling, and today that’s a much less common occurrence and the paints are quite different today than they were when that was happening maybe 30 years ago. The evolution is multi-faceted. It’s significant volume and value growth. It’s changed in the geographic scope. Particularly with the emergency of rapidly developing economies and so the nature of the industry is changed geographically while also finding regional characteristics which mean that the industry has to operate in multiple regions and may have to operate differently with customized products in some of those regions. There’s been a lot of restructuring and a lot of concentration that’s taken place and I’ll say more about that in a moment. Again the regulatory environment continues to evolve and even in places like China, there’s more interest and concern about the products that they are using. All of that leads to demands on chemistry, demands on product forms, and even demands around application technology.

Where, for example, on the auto industry again they’re actually putting on electrodeposition, primer and then base coats or tie coats baking them once instead of twice and then putting on the top coat. And the technical objective is to do all the applications of the various coating layers in sequence and only bake the coating one time. Anyone on the line that either operates in the paint industry or is technical savvy would understand that that’s a very, very significant challenge but is being pursued because of the benefits, the economic benefits, the environmental benefits, energy consumption and so on for the industry. The industry has grown. For example in 1990, the global business was valued at about $35 billion and was as high as $91 billion in 2007. With the economic crisis it retreated a bit but with the recovery and expansion around the world, we now have an industry which is roughly in the order of $105 billion, three times the size on just over 20 years ago. On the volume side, we can use China as an example. Their use of coatings has grown from about two million tons to about 12 million tons since 2001. That’s a 6X increase and they have passed the U.S. as the largest single country market. So that’s a huge change, significant addition to the global business.

The consolidation of the industry has been seen really in what I would describe as a dumbbell industry structure today. Very significant concentration at the top and many, many small players at the bottom, very little in the middle. At the top end you’ve got the changes that we’ve seen over the last 30 plus years is that the largest player in the industry was $1.3 billion in about 1982, and today AkzoNobel is about $13 billion. So over those 30 years, there’s been significant concentration at the top. In fact the top 10 players represent about 53 to 55% of industry sales and the top 25 are about 70% of industry sales. And the number 25 player is only in the range of $100 million to $150 million so the size of these companies is falling off quite rapidly. In the U.S., we’ve seen the number of players drop from over 1100 30 years ago to an estimate of less than 500 today. Similar trends happen in the E.U. and at the same time in the rapidly developing economies, many small players have emerged and one estimate of the industry size is it could be 15,000 people making paint on a global basis. With restructuring and consolidation continuing, with the exception that the Sherwin-Williams Comex deal has apparently fallen apart and we’ll see what happens with that as we go forward.

A group of companies, Akzo, PPG, Sherwin-Williams, Axalta which is the former DuPont paint and Valspar and RPM are major players globally and also in North America. While other companies, BASF, Kansai, Jotun and Nippon paint are large global players but have a small position in North America. All of the other players, whether it’s 5000 or 15,000 make up between $45 billion and $50 billion of revenue. While the top group is themselves over $50 billion. The industry has been driven by and continues to be driven by a number of major external factors. Today, we’re experiencing the internationalization of markets and the economic development of those rapidly developing economies, expanding the markets significantly but also requiring that the leaders need to be international in scope. At the same time, the market place is looking for improved performance. They’re looking for ways to achieve world class manufacturing, efficiency, lower cost, reduced maintenance, those sorts of things. We’re seeing evolution, innovation in materials. Always focused on dealing with regulations, improving performance of products, addressing the cost and margin squeeze that the industry experiences between large raw materials suppliers on one side and the Home Depots and Wal-Marts and automotive companies on the other.

And that’s led not only to technical innovation but also business innovation. So there are examples of companies actually outsourcing their painting to other people. PPG from time to time has actually gone in and operated the paint lines inside an assembly plant. Innovation in the business model as well as innovation in the laboratory are all aspects of what this industry has become to be about. Shifting gears a little bit and looking then at the U.S. paint industry, shifting from the global to the U.S., sort of the recorded history of the U.S. paint industry dates back to the early 1700’s, if you take a walk on the freedom trail in Boston you can actually see the Boston stone. This stone was actually used with the tray that it fits in to grind pigments 300 years ago. And it’s an artifact, the industry that still exists and we still have to grind pigments to make them into paint. So the task is the same although the methodology has changed. An interesting thing about the U.S. industry is that in 1982 it was still only valued at about $3 billion. Grew very rapidly I think largely because of higher quality, higher technology materials as well as growth of use and evolution of products.

I can remember having a purchasing agent say, “I pay $7 a gallon for paint and you just introduced me to this high solids paint and now you’re trying to charge me $15. Well, I don’t pay $15 for my paint.” The problem is he was actually buying more than twice as much stuff. He could coat twice as much area with the $15 paint than he could with the $7 but he didn’t understand that. The industry grew through 2005, 2006, 2007 time frame to about 23 billion. We had the down turn in 2009 and the industry now has recovered to very close to that $23 billion level and hopefully will continue now to increase in value and volume going forward. But we’ll see at the end if there are some real issues about whether that will happen. So let’s take a look again at how the industry has looked at the industry, has described the industry, are these quotes the way things are today, more modern? Or are they the way things were? And again if you look at this, pressured by a combination of environmental, consumer and regulatory concerns, increasing low VOC content is a challenge. Focusing on new technologies and innovations, trying to be more efficient. Coating manufacturers are developing products that meet these needs and with higher solids contents and there are similar trends in Europe. Or rather than drag the suspense out, these are all actually within the last three or four years.

But as you may have noticed from the first set of questions, there’s still many common things that have existed now since really the industry had to start meeting the needs of the Clean Air Act in the early ’70s. And that’s driven a lot of what’s happened in the industry. So these are all newer, more recent quotes. And they suggest when you look through them and understand the underlying needs of the industry, that this is an industry that is focused on cost but also on quality and also on properties. I don’t think anybody cares how much they pay for their car but if the paint finish didn’t last they would be upset. The notion of painting your house and being able to wait 20 years to paint it again versus having to paint it every five years. You will pay $25 a gallon for a paint when you used to think that a $10 or $15 a gallon of paint was expensive. All of those things are coming together for the industry both at the formulator level and at the user level so the companies are trying to deliver better aesthetics, customized style, better durability, better weathering, features like self cleaning and self repairing, biologic resistance from mildew and mold and so on, anti-filing and marine coatings. And this category of products that I described as ‘I am free.’ I am free of VOCs, I’m free of hazard air pollutants, I’m free of heavy metals.

That ‘I am free’ theme has really gotten hold with consumers and in some cases industrial uses of products and the challenge has been met to a large degree by paint formulators. But the need to keep moving the needle and innovation will continue on these spaces. In addition, we’ve seen the emergence of the sustainability driver, so people looking for lower energy whether it’s impure or material use, the use of renewable raw materials. So green products, green chemistry is important, and LEED compliance particularly in the building and construction industry is a major issue. And we’ve had paint companies say we buy our resins from the plant that’s closest to us, the manufacturer who’s closest to us because we get credits for less mileage in our LEED point scores and that helps us win job supplying paints to large projects. The response has to come for the most part from the R&D organization. So R&D groups are focused on continuous VOC improvements, particularly low VOC emulsion systems, so paints used to require a coalescing solvent. There are many products in the market today that do not but it’s also about handling, in manufacturing, and in storage, the application characteristics and efficiency of use of the final film properties and always that cost-performance balance.

And those objectives are being met with greener chemistries, with multi-functional ingredients. With new ingredients, it might reduce the use of TiO2 and still gets acceptable or desired hiding from your product. They’re helping to meet VOC and ozone goals and safety objectives around hazardous air pollutants or toxic ingredients. And the industry is doing this both with new binders or resins. The things that hold the other ingredients together and actually hold the paint on to the surface of whatever is being painted. But also in additives that bring new properties. And finally there are a lot of examples of people working in the “broad range of nanotechnology” again to try to improve performance. One of the applications there being coatings with properties that really shed water, reduce or improve the ability to clean graffiti and properties like that. Another way to think about this industry particularly if you’re an insider is that each of these coating technologies is sort of arrayed along the traditional curve and so solvent-based architectural coatings are probably the most mature products actually in decline and many solvent-based industrial coatings, OEM solvent-based products are also in somewhat of a decline, although in the rapidly developing economies, many of these products which are lower cost are being used.

But the point I’d like to make here is that for the participant in the industry, innovation allows you the opportunity in powder coatings, in water-based emulsion products, in urethane dispersions, even in special purpose coatings like for building maintenance, industrial construction, marine, aerospace, things like that, the notion of innovating new technology which then pushes the space back down the maturity curve and that opens up a new range of opportunities for growth as the new products displace the old products. So the innovator can actually achieve higher than industry growth if they are successful at innovating their product and moving it up the value chain as a result. So another way of looking at the needs and challenges of the industry, what going forward is the sort of the innovation challenge for those people actually using the paint, they want paints that have desirable characteristics, that are compliant, that enable them in whatever industry they’re operating in to be able to differentiate their products by delivering new items with color and styling, appearance options.

They like lower operational cost reduced maintenance. They want greater painting efficiency and energy use and they like that these products are easier to work with and have less OSHA risk in operation. And there are some people who would like to be able to position themselves as using green products because of the benefit that that has from a market communication standpoint. Their customers or their users of products want the end product to be a better quality, longer-lasting, lowering cost if possible but have properties of interesting gloss and color options and more corrosion resistant, better weathering, those sorts of things. The end user is often aware of and interested in the notion of the “I am free” products, so they’d like to say our products are made with products that are safe or do not have things like chromate pigments or other heavy metal pigments which we’ve seen a problem within some things like toys coming out of China. Where there were products used in those paints that were on the toy products that were actually hazardous. So there’s a lot of compatibilities, a lot of fit, a lot of overlap, but there are differences between the person applying the paint and the person using the product that the paint went on.

Whether that’s a house or a car or a dishwasher or a boat, these things are generally applied. So we’ve seen historically already a range of innovations that should be mentioned. The emergence of [break in audio 00:26:24] polymers that have enabled the replacement of solvent-based products in very demanding applications. Solvent free, one component and two component polymers that enable the use in applications that at one time could only be satisfied with solvent based materials. We’ve seen improved product performance from a group of additives called polymeric dispersants. We’ve seen other additives, spacers and opacifiers that improved hiding. We’re seeing more use of color concentrates. Think of this as the products that color your paint to your desire in the color in the Home Depot or Lowe’s or Ace Hardware, wherever you happen to go is not just about DIY paints, about ‘do it yourself’ paints. It is also increasingly about ways to improve the efficiency of making even industrial coatings in the factory. And doing the pigment dispersion and building color concentrates moving that into specialist organizations. We certainly have come up with VOC free additives because even if you made a VOC free emulsion paint and then you put additives in it, it brings solvents with it, you may in fact have a product that’s out of compliance. New rheology modifiers to improve the way paints apply and their stability, the way they flow and level and give you the appearance that you want.

I mentioned the wet on wet auto painting and then new things. We do have foldable tia [SP] coatings that generate electricity. We have thermal-reflective coatings that are going on roofs to reduce the energy load in the building. And there certainly are examples of self-cleaning and self-healing polymers that are emerging from the laboratory. So the innovation space is one that I think is really very critical to the health and the success of the industry and one that is in demand by the market place and so those two things comes together. I think that’s one plus one equals three for all people involved. If we step back a little bit and look at the U.S. industry and how its performance will develop going forward, a little bit of forward thinking here, a lot of it’s going to depend on the pace and where we actually see recovery in our economy and this is continuing. Will we actually get the OEM, the industrial remanufacturing, the relocating of production of durable goods to North America? What will happen or how will regulations continue to evolve and requiring things like product stewardship. I can tell you in Canada, this has become a really important issue and paint retailers, for example, are equally involved now in being able to help consumers to recycle their products and not have them go into the environment.

Stuart: Hey, David. Sorry for interrupting but we do have a bunch of questions lined up and I thought maybe we could answer one now and then we can space them out as the presentation goes. We have one question from Mariano about the Nokia company and he said since very recently they had began to dabble in the texture of your touch screen. Will the same way be for painting? Will we have a connectivity to achieve this? I don’t know if this is an area that you have a lot of experience but that was one question that came in.

David: Okay. So I think the short answer is that there’s a lot of interest in the aesthetics and feel of coatings. And there are sort of suede-like coatings that already have been applied for a long time in interior applications in the automotive industry. They almost feel like they are leather or suede so that’s an aesthetic, that’s a physical feel. I’m not aware of specifics that would be sort of analogous to the touch screen except that I would have to imagine that as we get even more electronics and our control screens go from dials to readouts and so on in cars and other places or even on your appliances that the notion of smart panels may in fact drive things like that. But it’s a hypothesis and maybe it is happening, I’m just not aware of it. So the industry dynamics that I was talking about, this globalization, consolidation is coming as a result of 30 years of very intense competition. We call it competitive intensity. The industry and the profitability of the industry has many, many factors that impacted from raw material supply to the end users to just the regulatory cost, the ease of entry, the availability of technology in the space. So the dynamics of the industry are leading us to more consolidation and more globalization in order to capture the growth that exists in these emerging markets.

And a key issue for the success of a paint company is the ability to manage all of the inputs that impact his margin which largely gets squeezed by all of these outside factors. And he or she is going to have to respond through both chemistry and compliant and green technologies in the products but also in understanding the way the products are used in helping customers or industrial users to simplify or reduce the cost of these products in use. So with that as background, what’s my outlook for at least the U.S. industry if not the global industry? And there are some different sort of scenarios of how things will evolve. The industry in some way has already migrated to commodity products and specialty products and that may in fact continue to increase with more products being purchased on price as opposed to performance. But at the same time we see the demands of better durability, reduced maintenance, better corrosion resistance, better longevity and all of those sorts of things actually driving some product categories more towards specialties. There will be a group of users who will pay more for the better performance and will end up continuing to see products in both categories.

Right now we’re in this fits and starts slow recovery in the U.S. It appears that we’re growing faster in some areas and not, then we seem to fall back. I think that that whole space is still one that’s uncertain. Hopefully it’ll get stronger. Some of the implications of the natural gas liquids and the improving cost position of the U.S. chemical industry may actually help drive some manufacturing back here and hopefully that will improve both housing starts as well as industrial production. Another possibility we have to take into account is that the manufacturing doesn’t move back here and continues to grow outside the U.S. particularly in Asia and the U.S. share of the global market continues to get smaller and smaller down to 20% range today and potentially less. Within that we might see rather than a start and stop economy for us, we might see some steady development, that’s another possibility and I think more people are looking in that space, in that scenario, the steady development scenario at least through about 2020, again driven by the cost position of the U.S. industry. And finally, there will be segments where a new product evolution will lead to some renewal and rebirth and we might see some growth associated with that above industry averages for specific sectors.

All of these right now in my opinion in some way are observed in the marketplace and they haven’t really sorted themselves out. Although I think that innovation driving some renewal, steady development in some of the market segments and specialty products are all things that I am observing examples of. So let’s take one last look at the trade press and how they describe the industry. Are these quotes the way things were? Or, are they the way things are today? So again, rising raw material cost and inability to pass increases on to customers. The impact of the slowing economy, especially housing and automotive markets. They’ve trickled down to raw material sales. And increasingly restrictive legislation has brought about a sharp reduction in use of solvents and an increase in waterborne formulations. So are these old? Are these new? In fact all of these are at least 10 and in some case 20 years old. So if you think back about what I’ve talked about, you think about the earlier quotes, it’s almost as if you could take an article from one era or the other, put it into the old magazine or the new magazine and it would read, it would fit. It would be compatible with many of the issues that people are dealing with today. So the industry has a long history.

Clearly there are people who’ve been making coating and adhesives type materials for several thousand years. But the outlook is really about, in my opinion, innovation. We have continued evolution, slow evolution in some cases of traditional paint technology, to deliver better cost, quality and safety. But at the same time, we have some new innovations such as the wet on wet painting that the automotive industry is seeking and opportunities in the emerging markets of electronics, solar panels, batteries, medical products, devices, the lighting industry, and the whole range of things related to LEED. Certification for energy efficient, environmental efficient buildings, so your energy efficiency, sustainability, people inventing smart coatings, coatings that change color with the application of electric field in glass products. Coatings that are much more durable, extending the time between repainting of ships for example while still maintaining very good, very low fouling levels and therefore good energy efficiency, good fuel consumption, and operating costs.

So there’s a whole range of things like that that we’ve seen in the industry. We continue to observe and if I look at the kinds of products that came out of the recent American Coatings show, it’s a range of new additives, new polymers, new emulsions, new painting technologies, new pigment technologies all geared to meeting these needs that we’ve talked about in this particular presentation. So with that, I’d say I think we have an evolving industry. There’s a lot of emerging technology. I hope you have appreciated my thoughts about the look ahead and also the glimpse that I took at the past. Thank you for attending this Zintro webinar and on behalf of my entire organization, I want to thank you for attending. If you’d like to talk more about your own situation whether it has to do with business or technology, strategy, whether it’s about globalization and market entry services, sustainability, or innovation and R&D effectiveness, those are all areas in which Edica-Garnett Partners serves the specialty chemicals and materials industry. Thank you.

Stuart: Great job, David. I have a couple of questions I’d like to serve up to you. And the first one maybe one where the person may have to get directly in touch with you. Let me read it and you could see if you can give a quick response to them. Perhaps the person could reach out directly to you. But this is from John and his question is, I’m interested in learning more about fusion-bonded epoxies, layered polyolefins and oil field on-shore and off-shore applications, where can I get more market data on this sector?

David: Okay. The second one was the multi-layered…

Stuart: I’m sorry. That was the layered polyolefins.

David: First, I will say that I’ve noted on I think LinkedIn discussion group, there’s been questions about the multi-layered polyolefins and while I have some thoughts about that, it’s not an area of strong expertise but I would only see it as a part of the coatings industry if these materials were then somehow applied to a substrate for a particular purpose as opposed to being used as film products on their own. Now there is use of films applied to metal substrates in a small portion of the food can industry. It’s the technology that came out of Japan. It has been used for quite some time now although with a very small piece of the food and beverage can market. And in the west, in the U.S. and Europe, the biggest application is canned salmon because of the aggressiveness of canned salmon materials. Fusion-bonded epoxies are products that from my experience tend to go to things like pipe coatings and other protective coating applications. Certainly the epoxy supplier base continues to develop new raw materials but if I’m understanding the question correctly, he’s talking about epoxy powder coatings which are applied and form their final film and develop their properties through the heating process where there may not be a chemical reaction taking place in that final product. So there are thermoplastic powder coatings and then most powdered coatings are thermoset so they chemically react. So I want to know a little bit more about which of the epoxy products he’s talking about.

Stuart: Okay. I would suggest that he reach directly out to you at the contact information on your last slide. Mohammed has a question. This is speaking that innovation, is there a threat of potential new entrance that could replace traditional painting?

David: It’s one of those $64,000 questions and fooling with mother nature. The paint industry has a lot of interests and on the industrial side they want to be able to apply water-based coatings without having to clean and pre-treat the metal. Mother nature doesn’t actually sort of support that notion. It’s really a very, very difficult task. There has been discussions by 3M in particular for over 15 years about applying a colored film to the outside of a car instead of painting the car. And all the products then you eliminate all the solvents and the baking ovens and all sorts of things. It’s a concept, not a reality. There are, however, in mold coatings that are either liquids that are sprayed into a plastic mold or a film that’s inserted into the mold and it actually creates a decorative surface on plastic parts and that’s a commercial example. To simplify the answer, if you look at anything in the world that you bought, if it can’t be made with a pigmented plastic and get sufficient durability, everything that’s made in an industrial sense all the way through many durable consumer products go out the door of the factory with a coating on it. So people are trying to eliminate that but it is difficult. People will try. They will say, transfer films, transfer coatings, build a DeLorean out of a stainless steel body. But I dare you to do that with what, 40 or 50 million vehicles in the world. It’s cost prohibited. People will work on that but it will be a challenge.

Stuart: Okay. I have a question from David. Speaking of solvents, he asks, when they say solvent-free is it really zero percent solvent or sometimes do we consider 5% or less is solvent-free?

David: I believe that with label claims, the products are supposed to be able to be applied in film form and that they do not in general contain any quantity of solvent. Now having said that this has been a continuum as the industry, let’s take house paints, have taken the products from solvent-based to water-based with 3 or 4% coalescing solvent or plasticizer type materials and then you put in solvent-based colorants and you actually had VOCs that were going off into the room. Today, the original VOC or solvent-free house paints actually did have some solvent in it because when you color them you are putting it back in. Where they hadn’t completely eliminated co-solvents or plasticizers which weren’t actually termed solvents in the traditional sense. But today the best products are, I believe, actually solvent-free. If you go to the industrial side and look at solvent-less liquid coatings, urethanes and epoxy products that the manufacturer has not added any solvent to, the applicator may still do that in the field because of temperature conditions, application conditions, or just the fact that he always did it that way. And so in use it may not be solvent-free but when the manufacturer made it it’s supposed to be.

Stuart: Okay, David. We have a bunch more questions. I’m going to limit it just to two quick responses and then people can feel free to contact you at the information on your slide. We have Andreas asks about, what about applications in the food sector. I’m going to paraphrase this. Is there any food grade paint?

David: Everything that’s on the inside of a food or beverage can is food grade coatings. You can’t put food into the metal can without coating the inside. So that’s actually very old technology. If you’re talking about things like a food processing plant or a kitchen, there are paints that are made with products that are grass, generally regarded as safe, historically used, and all of the hazardous materials have been taken out. And those are the paints that are used in food manufacturing plants, restaurants, food handling warehouses, breweries, wineries, all sorts of places like that. So yes, there are paints that are approved, an FDA approval for food contact. And the FDA approval is direct food contact and indirect food contact. So the coating that’s on the outside of a package which may come in contact with your food has a different approval level than the stuff that’s on the inside.

Stuart: Okay, thank you. And last question is from Frank. He asks about carbon fiber coating. Are there any new materials and new technology on that and specifically I don’t know if this is a separate question or related to the same question about ship coating.

David: So I’m not sure exactly what he is talking about in terms of carbon fiber coatings. Whether he’s looking for coatings that go on the carbon fiber as coatings are applied to optical fiber. Otherwise you couldn’t handle them. So I don’t know if that’s the case or if you’re talking about coatings for carbon fiber composite components. So if he wants to contact me we could explore that. The painting of whether it’s small boats, yachts, or large craft, whether they are container ships or cruise ships, there’s a lot of work going on there because they have still largely been solvent-based products because of the nature of what you’re trying to do and the performance you need. But there is interest in water-based products. They’re getting better and I mentioned the whole coatings where they have to have resistance to fouling or growth of barnacles and other things that slow the ship down and impact energy consumption and speed. In some of the new coatings that can go for five years, sometimes more without going to dried off or repaint it.

Stuart: We did have another question about EMI shielding and the market size related to that. I’ll make sure that that person can get in touch with you. And I would like to, first of all, say that I found the presentation to be absolutely fascinating. I think the position between the new and old quotes really is very telling and also I was just absolutely amazed by the growth of the market in China and how quickly it’s worth U.S. market. On behalf of Zintro and our 140,000 members, thank you so much for sharing your insights. And to our listeners, please feel free to contact David. You can contact him directly at his firm with the information provided or you can contact him through Zintro at Z-I-N-T-R-O.com. We would be glad to forward any request to him as well. This closes today’s presentation. I wish all of you a very nice day.

David: Thank you, everybody.