Market report: Iraq’s coatings market benefits from construction boom

Heba Hashem reports for PPCJ on how Iraq’s construction drive is boosting the demand for paint and coatings but the industry is in need of a national standard

Iraq’s paint and coating sector is benefitting from a surge in construction as the country rebuilds its infrastructure, resumes stalled projects and embarks on newbuild and expansion projects.  

The country is experiencing its most politically stable period since 2003 and amidst this transformation, construction is booming. In particular, a lack of affordable housing, with a deficit estimated at more than three million units, has led the government to approve several mega residential projects [1].  

These are being offered on an investment basis to local and foreign developers and include five new cities in the Baghdad, Karbala, Al-Anbar, Babylon and Nineveh governorates, the Iraqi News Agency reported last June (2023) [2]. All five cities will include universities, commercial centres, schools and healthcare facilities, presenting opportunities for paints and coatings suppliers.  

Two Chinese firms have already broken ground on the first residential city – Al Jawahiri in Baghdad – a US$2bn project that will see the construction of 30,000 housing units.  

The Dhi Qar governorate in southern Iraq is also hosting a handful of new projects, including a residential city, a medical city and a planned Nasiriyah International Airport, with construction teams breaking ground in 2022, expected to be completed by mid-2025, redeveloping an old military airport. 

“When construction is booming, it is also good times for the coatings industry. Homeowners and investors are ready to upgrade, which means that the demand for paint is increasing, and we expect this trend to continue,” Karsten Pedersen, co-owner of Blue Gates, the exclusive distributor in Iraq for Danish coatings company Hempel Group, told PPCJ. 

Based in Erbil, the thriving capital of the autonomous Kurdistan Region, Blue Gates’ annual sales of Hempel lines in Iraq grew by almost 70% in 2023 after securing several projects and expanding to more locations. 

“We benefitted a lot from the ongoing investments in the energy sector. We won a couple of large projects at the Basra Refinery, the Wasit Power plant, and other major energy projects across the country,” said Pedersen. 

Housing projects also contributed to robust growth, he said. “With Iraq’s young and growing population, there is a big demand from houses and apartments, as well as schools and hospitals.” 

Considering the sophisticated taste of Iraqis and their preference for bright colours and special effects, Blue Gates has just entered into an agreement with an international supplier of special effect paints, said Pedersen. 

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Construction boom

Iraq’s construction boom, which started after the country’s defeat of Islamic State insurgents in 2017, is not only driving sales of paints and coatings but also creating a demand for higher quality products. 

“Major asset owners as well as construction companies and private consumers are demanding higher quality and longer lasting paint systems,” said Pedersen. Moreover, adherence to internationally recognised paints and coatings specifications and International Organization for Standardization (ISO) standards is taken seriously in Iraq and paying more for superior quality is generally accepted, he added. 

That said, sub-standard paints with inferior quality are still being used in some jobs: “Iraq could benefit from a national standard with minimum requirements for durability and spreading rate,” noted Pedersen. 

Like Blue Gates, Riyadh, Saudi Arabia-based Jazeera Paints has also expanded in Iraq, opening six new showrooms in the last two years, most recently in Erbil in June 2023. Today, the company, whose production capacity has grown to 400,000t/yr, has 11 outlets in Iraq [3]. 

According to India-based market research company Mordor Intelligence, the Iraqi paints and coatings market is estimated to have grown from US$224.29M in 2022 to US$229.35M in 2023, registering a growth rate of 2.26% in this period. 

By 2028, the paint and coatings market in Iraq is expected to reach US$273.32M, registering a compound annual growth rate of 3.57%, Panchadara Manish Chandra, lead analyst for chemicals and materials at Mordor Intelligence, told PPCJ. 

“Residential construction is propelling the growth of paints and coatings sales in Iraq, especially architectural coatings. Industrial construction is another sector registering high growth in the country, boosting demand for protective coatings for oil and gas and related sectors,” said Chandra. On the other hand, the slow growth of commercial construction is restraining the growth of decorative coatings in the Iraqi market, he said. 

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Oil and gas influences

Northern Iraq currently dominates the industrial coatings market, accounting for almost 56% of total demand mainly due to oil fields and refineries in the region, according to Mordor Intelligence. 

Despite being the second-largest oil producer in the Organisation of the Petroleum Exporting Countries (OPEC), Iraq still faces energy security challenges, and the government has been forced to import electricity from neighbouring countries such as Iran, Kuwait and Saudi Arabia. 

With rising domestic energy consumption and a shortfall of at least 11-13 gigawatts of production capacity, the country is developing several projects to enhance its energy self-sufficiency. Notably, in July 2023, Iraq signed a US$27bn long-delayed deal with France’s Total to build four oil, gas and renewables projects. 

Such investments in the oil and gas sector have boosted sales of protective coatings, making them the fastest growing segment in Iraq, with more than 4.2% growth over the last year, followed by decorative coatings, Venkata Reddy, Senior Research Analyst for chemicals and materials at Mordor Intelligence, told PPCJ. 

“Epoxy and acrylic-based coatings are leading the growth in coatings type by resin, supported by high growth in the protective and architectural segments in Iraq,” said Reddy. 

“Additionally, solventborne coatings have dominated the market with close to 48% share, followed by waterborne with around 42% share. Powder and other coating technologies are estimated to occupy less than 10% of the overall paints and coatings market in Iraq,” he said. 

Since a new government was appointed in October 2022 (following a long political crisis after contested elections in 2021), Iraq has worked on tackling the most pressing challenges facing the country, including endemic corruption and poor public service delivery.  

As the country’s quest for stability continues, difficulties with arbitrary application of regulations, irregular and high tax liabilities, among other issues, remain common complaints for companies operating in the country, according to the US Department of State’s 2023 Investment Climate Statement for Iraq. 

Despite these challenges, Iraq’s market offers immense potential for exporters. Statistics from Eurostat, the statistical office of the European Union (EU), show that Iraq’s imports of paints and coatings from the EU has significantly increased over the last year. 

Specifically, exports of tanning and dyeing extracts, tannins and their derivatives, dyes, pigments and paints and varnishes from the EU to Iraq grew to 3.69M kg in the first 10 months of 2023, compared to 3.08M kg in 2022 – an increase of 20%. 

While import procedures and regulatory changes continue to cause disturbances, the business climate is constantly evolving, aiding the paint and coating sector: “Generally, Iraqis are open for business and the country is welcoming of foreign investors and entrepreneurs,” concluded Pedersen.