The price increases faced by the industry are getting worse in almost every sector, but the most shocking of all that I have come across is the hikes in raw materials prices experienced by ink manufacturers.
The European Packaging Ink
Association (EuPIA) reports an enormous 400% increase in the price of gum rosin, which is used in printing ink manufacture, over a period of just 18 months. Other raw materials are likely to follow close behind, especially resins and pigments, which are causing major problems through the supply chain with respect to lead times and prices, says the EuPIA (which is a sector of CEPE aisbl).
Gum rosin is an extreme example of what is happening. The cost of this renewable raw material remains volatile and the trend is still upwards. The availability of the material is tight, due to the poor harvests in China, which are well below average. The same is true for nitrocellulose binders, which are based on the key ingredients of cotton. Again, cotton prices have been increasing sharply due to crop failures in Pakistan, caused by flooding and generally lower yields in other parts of the world.
Organic pigments for the printing ink industry are sourced from China and India, where a surge in domestic demand has put limits on the material available for export. Commodities like titanium dioxide and carbon blacks are also very tight, as a consequence of plant closures and significant increases in demand for these materials. Printing ink manufacturers report a daily struggle to secure supplies and price increases for organic pigments in the region of 10% to 15% in 2010, with further rises expected this year.
“The global availability of raw materials for printing inks continues to be of major concern to our member companies,” says Martin Kanert, Executive Manager of EuPIA. “There is little or no clear outlook as to how long the shortages and product allocations are likely to last.”
Following the economic downturn in 2008, many of the commodity suppliers reduced operating capacity, laid off personnel and moth-balled or even went as far as permanently shutting plants down. Inventories were reduced dramatically in 2009 and with the resurgence in demand starting late 2009, and continuing through 2010, many industries were not in the best position to adequately supply their customers.
“The supply of pigments has been knocked by mounting environmental challenges and increasing intermediate costs. “Recently, China and India have both announced more stringent environmental rules for the production of pigments,” says Mr Kanert. “On top of this, the energy saving programme in China has affected many pigment and pigment intermediate suppliers. In the end, we have to face the situation where ink manufacturers only have minimal control over the cost and supply of the raw materials they need to manufacture their products.”
In some industries, new technical developments work against a smooth and trouble-free raw material supply pipeline. Mineral based oils and several solvents are under considerable pressure due to production optimisation and a drive by the refineries for higher margins. These basic chemicals are capacity filler products for the major crude oil
companies and were traditionally sold off at low margins. Many of the older refineries that produced them have now been closed down. “And the modern refineries don’t tend to produce these low volume specials for our printing ink industry,” says Mr Kanert.
As a consequence of these market and supply developments, all raw material costs for the printing ink industry are, without exception, under extreme pressure. Most significant increases are to be found with the resins, of between 10% and 400%, followed by pigments with 10% to 40% increases.
Maureen Byrne,
Editor
Maureen Byrne
