Raw Material Price Increases Continue to Batter Ink Industry
For the past three years, the price of crude oil has been a tremendous headache for the ink industry and its suppliers. Back in 2003, $35 per barrel of crude oil seemed like a nightmare scenario. Since then, oil has steadily risen in price, topping $70 per barrel today, and there is no reason to believe that demand will taper off and the price will come down.
With the higher price of crude oil comes much higher costs for feedstocks, the key building blocks for many of the major ingredients in ink. The higher energy costs also translate into higher manufacturing and transportation costs.
If crude oil was the only concern for the ink industry and its suppliers, it would be bad enough. However, as the Raw Material Report shows beginning on page 23, there are many more problems besetting the ink industry.
To name two examples, the price of gum rosin, a key ingredient in heatset and sheetfed inks, has doubled in the past year to as high as $1,200 per metric ton. The price of copper, critical for phthalocyanine pigments, has risen more than five times since 2004, from $1,600 to $8,200 per metric ton. Prices continue to soar for feedstocks, resins, solvents, carbon black, flushed colors and other key ingredients.
There are also legitimate concerns about shortages of key raw materials. There are signs that consolidation will continue to occur in certain segments, and that some companies will pull out of unprofitable product lines. Increased demand for ingredients in areas outside of ink – such as organo clays for oil drilling – are creating further price and supply pressures.
As a result of these increases, ink manufacturers have passed price increases on to their customers. After its initial reluctance to raise prices, ink manufacturers looked for ways to cut costs, but there is no escaping the fact that without price increases, there would be unacceptably low margins, or more likely, unprofitable situations.
The future is undoubtedly going to be challenging. To succeed, ink manufacturers must think creatively and work with their suppliers and customers to develop the best possible approaches. Gone are the days when prices can be held artificially tight; there are plenty of other businesses that can use these raw materials. Prices are what they are, and ink companies must continue to seek price adjustments from their customers in order to survive.