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Benign raw material prices save the day for paint makers

Demand for decorative paints is tepid (and for automotive paints’ scenario is still worse) but paint manufacturers are relaxed and are in no hurry to increase the price to maintain their margin. Benign crude oil prices have made their life easy as 60% of their raw materials are crude oil derivatives. Softening input prices have given much needed breather for the paint manufacturers who otherwise would have been struggling to protect their bottomline in the eye of slowdown real estate sector.

As compared to the first half of previous financial year when crude oil price’s upward journey seemed to be unstoppable, the price is now relatively quieter despite there being some provocations in Middle East. Crude oil at $60/ barrel is manageable for the paint manufacturers who have seen it crossing triple figure decisively in the past.  Lower GST too has helped their cause. On the other hand, some paint manufacturers have taken daring step of reducing the price by small margin. For example, Asian Paints recently announced a minor cut of 0.4% in prices. Similarly, Berger Paints has passed on some benefits of soft raw material prices to consumers by way of nominal price cuts.

In 2018 crude oil price was volatile and in turn prices of most of the raw materials too swung in tandem with crude oil price. Another factor affecting the raw material price is the rupee value vis-à-vis major international currencies, especially USD. Rupee depreciation which happened last year (2018) till September pushed up the prices of paint industry’s raw materials. Since then, that is, from October onwards, fortunately for paint manufacturers crude oil price is off its peak while rupee value has relatively remained stable against USD.

However, Titanium dioxide (TiO2), another key raw material for manufacturing paints, recorded 13% year on year average price increase in the fourth quarter of last financial year. And there are no indications that these prices will role back to previous year’s level in the near future.

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