US PPG expects most product inflation to subside in H2 2021, after Q1 rise

HOUSTON (ICIS)–During the company’s Q1 2021 earnings conference call on 16 April, PPG Industries Chairman and CEO Michael McGarry discussed higher raw material costs impacting product lines of the paints and coatings industry.

In stark contrast to last year, petrochemical costs have increased at the start of this year, as markets rallied amid declining coronavirus cases and an increasingly successful rollout of the Pfizer and Moderna coronavirus vaccines.

McGarry said before the start of Q1, PPG had expected raw material prices to rise. However, an unexpected weather event worsened the situation.

Winter storm Uri, which brought rare freezing temperatures in Texas, impacted production along the US Gulf Coast in mid-February, reducing output of petrochemicals and leading to additional tightness and higher costs of upstream products for PPG and other paints and coatings companies.

Since the rise in inputs was more significant than in previous cycles, McGarry believed there were fewer price discrepancies among suppliers.

When answering a question from a research analyst about elevated input costs, McGarry mentioned butyl acetate (butac), methyl methacrylate (MMA), vinyl acetate monomer (VAM), epoxy resins, and isocyanates among the tightest petrochemicals in terms of availability. Due to the tightness, prices for each had also risen.

Due to higher raw material costs, McGarry said PPG’s selling prices were up by 1.7% in Q1.

However, McGarry said he expected raw material costs to decline by H2. When asked by a research analyst during the call, he said he believed availability of material would soon improve with production coming back online and that most upstream prices had peaked.

For Q2, McGarry expressed optimism for the passage of an infrastructure bill leading to increase demand for his company’s products, especially if investments are made in new or modified bridges and roads.

However, some supply concerns for end users remain, particularly in the automotive industry, where semi-conductor and plastics shortages could hamper production.

PPG Industries is a global paints and coatings supplier based in Pittsburgh, Pennsylvania.

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