Levant paint industry and market marred by armed conflict and civil turmoil

The paint markets of the Levant – Syria, Lebanon, Israel and Palestine (now recognised by the UN as a state, even though it has no unified governance) – are all reeling from ongoing conflict and economic instability. The more developed and export-orientated markets of Lebanon and Israel are however releasing new innovative paint products.

The war between Israel and Hamas in Gaza and military conflict on the Israeli-Lebanese border between Israel and Hezbollah since October 2023, has had a wider impact than on the Israeli, Palestinian and Lebanese paint markets, impacting the wider region’s economies. The World Bank has revised downwards its growth outlook for the Middle East and North Africa in 2024 from 3.5% to 2.8%, noting the conflict’s effects of “increased uncertainty on business and consumer confidence, a decline in tourism receipts, capital outflows, and tighter financial conditions.” Israel’s GDP growth dropped from 6.8% in 2022 to 2% last year, the West Bank and Gaza dropped from 4.1% to -5.5% in 2023, Lebanon’s GDP went from -0.6% in 2022 to -0.2% in 2023, while Syria had growth of 2.1% in 2021 (the latest figure available), according to the World Bank.

Israel

The paint market in Israel had been growing over the past several years amid a construction boom but war is expected to disrupt growth. While it has strong paint manufacturing companies, Israeli paint imports had been projected to reach around 614,000 kilograms by 2026, up from 574,000 kilograms in 2021, according to figures from Lyon, France-based market research group ReportLinker. Exports of Israel-made had been set to reach 25,090 kilograms by 2026, up from 19,860 kilograms in 2021. Source

Following the Hamas-led attacks on Israel on October 7, paint sales have been impacted by the ongoing conflict in Gaza, which has caused construction projects to slump. “New projects are very slow due to a worker shortage as most of the building construction was done by Palestinians labour. Now the border is closed with little to no Palestinian workers, forcing construction companies to find alternative solutions,” said Noam Yehoud, industrial coatings technical manager at Israel-based paint manufacturer the Nirlat Group.

Plans to build 62,000 new homes are “on the shelf,” according to Israel’s Central Bureau of Statistics, while construction activity has slowed by around 30% since the conflict began, according to Israeli press reports.

“Right now, the commercial environment is not favourable for new projects to start due to war instability, high interest rates, low labour availability and high costs. There will be a gap with lower market size over the next few years,” said Yehoud.

The Israeli paint and coating sector is dominated by two main players, Nirlat and Tambour, and four medium-sized players Epolac, Denber, Decoline and LSM Industrial Technologies.

Nirlat’s manufacturing facility at Kibbutz Nir-Oz, just two kilometres from the Gaza border, was completely destroyed on October 7, except for one production line: “The solvent production line was miraculously unharmed,” said Yehoud. The company has had to source paints from alternative suppliers for its retail sales and contract commitments, and built a new coating line facility in Beersheva, further inland in the Negev region. It is also rebuilding the Nir-Oz facility. A recent trend in the Israeli market has been rising demand for water-based paints, including water-based paint for metal, such as Nirlat’s DTM+, said Yehoud. The company has also developed a paint with Israel-based Nanosono, a new Israeli materials tech company, that kills pathogens, the AQUANIR ACTIVE SHIELD, for use in medical facilities. “After a year of testing with Hilel Yaffe Medical Centre, they now use it as their main paint for creating safer and cleaner hospital surfaces, lowering the risk of cross contamination from wall contact,” he said.

The company also developed ARMOR1, a coating for steel structures in submerged and buried environments with high corrosion resistance.

Palestine

The war on the Gaza Strip has devastated the enclave, with over 40,000 killed, a million people without homes and 75% of the 2.3 million population displaced, according to the UN. An estimated 370,000 housing units have been damaged, and 79,000 destroyed, according to the UN Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), while the economy of Gaza contracted by 81% in the last quarter of 2023. Paint manufacturing facilities in the Gaza Strip have been destroyed, said a West Bank paint manufacturer company executive who requested anonymity, while demand for paint has flat-lined due to the conflict.

The UN has estimated that the reconstruction of Gaza will require USD40-50 billion and could take until 2040 to rebuild just destroyed residences. Once the conflict is over, there is expected to be strong demand for paint due to reconstruction, said the manufacturer: “It will be a real boom for the paint market as we are talking about rebuilding the whole of Gaza, with thousands of homes, buildings, schools and hospitals,” he said.

Paint sales in the West Bank have also declined since October, said an East Jerusalem-based manufacturer that also wanted anonymity: “Palestinians are not thinking about luxuries like paint. Let’s be realistic, there is no demand right now. When the war is over the market will start flourishing again, as people will start to feel secure enough to renovate their homes,” he said.

Lebanon

Lebanon’s economy is still reeling from its 2019 financial crisis, which has caused the Lebanese pound to depreciate by over 90% to the US dollar. The paint sector has, however, seen a partial rebound.

“We had a drop in sales in 2020, but each year since then has been better. We are still a bit lower than 2019 levels, and this year, probably around eight percent up on 2023, which was a 15 to 16 percent increase on 2022,” said Chaker Saab, chairman of Tinol Paints International Company, in Beirut.

Saab said the market has become split between Lebanese who still have purchasing power, and the majority of the population that does not. “Our products, which are premium, are still in demand,” he said. Smaller and medium-sized paint companies have struggled to import raw materials due to the shortage of foreign currency. “It has become more difficult to have stocks of coatings and paints,” said Saab.

Demand is being driven by foreign donors that are financing the development of governmental projects. Multinationals such as Lebanese-owned France-based shipping company CMA-CCM and US-based drinks producer PepsiCo are also building new facilities in Lebanon, requiring local coatings purchases. “Many manufacturing companies are either building new factories or expanding, and they mostly use epoxy floor coatings, so there’s demand for that,” said Saab.

Tinol is developing new products to export, such as a special solution for floors at the Coatings Research Group Inc, a Tinol co-funded lab in Ohio, USA. “It is a solution that goes into concrete and crystallises it to make it denser and as a sealant, then you put on a coating,” said Saab. Tinol is also working on industrial coatings and has developed a special coating to be applied to lime plaster on old stonework. While the Tinol brand accounts for 90% of total sales, the company has in 2021 also introduced a sub-brand, Torginol, to export to Africa and Cyprus.

Syria

The Syrian paint market is still struggling with the aftermath of the 2011 uprising and 14 years of subsequent civil war, with reconstruction impacted by the weak economy, a devalued Syrian pound, US and European Union sanctions, and ongoing instability.

“The paint market is not in good shape. We are facing a lot of problems. Some of these problems are related to the domestic situation like the very low income of people, and others are external like the US sanctions,” said a Damascus-based paint manufacturer, who also requested anonymity.

The conflict has had a devastating impact on the economy and physical infrastructure, estimated at USD226 billion by the UN. GDP dropped by 54% from 2010 to 2021, while other data indicates a 84% contraction in economic activity from 2010 to 2023, according to the World Bank. The Syrian pound (SYP) has declined by over 270-fold against the US dollar since 2011, reaching SYP13,069/USD1 in 2024 compared to SYP47 in 2011. The currency depreciation has caused high inflation and impacted access to foreign currency to buy imports.

The dire situation, with 16.7 million people in need of humanitarian assistance – a 9% increase from 2023 – according to the UN has dampened production as well as demand for decorative paints, while reconstruction efforts have yet to take off. “Demand in general is lower than supply. We produce more paints than we sell, which sometimes pushes us to reduce our production until we reach a kind of equilibrium,” said the Damascene manufacturer.

Low-income levels have led to a spike in sales of cheap, unregulated paint, said a Syrian paint dealer that requested anonymity: “The decline in paint production is due to a significant increase in product prices with a decrease in the purchasing power of citizens, and the spread of many types of commercial paints that violate standard specifications,” he told PPCJ. The manufacturer estimated the cost of painting an 80 to 90 square metres apartment at SYP3 million (USD229) for materials, while a painter typically charges SYP5,000-6,000 (USD0.38-USD0.45) per metre. The World Bank has said that the average annual GDP per head in Syria in 2021 was just USD421, down from USD2,971 in 2021.

The owner of a paint showroom in Damascus said sales of decorative paints fluctuate throughout the year, tending to spike in the summer months as Syrians prepare for winter. He noted low demand for high-quality paints, and “acceptable demand” for lower-quality coatings. For Syrians unable to afford low-cost paint, lime was being used instead, he added.

International paint companies do not have a presence in the country, while Lebanese paint companies do not export to its neighbour, said the manufacturer. While demand for decorative paint is muted, the sector is being kept afloat by government tenders for reconstruction projects, which includes infrastructure as well as public buildings and housing. “Sometimes we have really big tenders from the government, but it is not like prior to 2011, when demand for paint was strong from both the public and private sectors,” said the Damascus manufacturer.

By Paul Cochrane