The Importance of Responding
To Accelerating Price Pressures
In June, I had the opportunity to attend drupa 2008, which I will cover in detail in the upcoming August issue. There were many new products to see throughout the printing chain, including among printing ink manufacturers.
However, one thing that was clearly noticeable was the sense among ink company executives that financial pressures are inevitably leading to further price increases.
This, of course, is not new information; ink companies have reluctantly been increasing prices in the wake of higher raw material and operational costs. However, what is new is the incredibly large increases that are on their way. Crude oil prices are running as high as $140 a barrel, double last year’s prices, and are leading to huge increases in the costs of feedstocks. On the pigment side, China’s decisions to eliminate the VAT refund and to close environmentally troublesome pigment and intermediate plants is causing a spike in pigment costs.
That is leading to extraordinary price increases up and down the supply chain. In a notable example, Dow Chemical is issuing a new 25 percent price increase, on top of a 20 percent increase announced in May, as well as fuel surcharges. It is certain that Dow’s fellow suppliers will be following suit. These increases are going to heavily impact ink manufacturers.
The recent global price increase announcement by Sun Chemical Performance Pigments struck me as notable. There have been plenty of announcements of higher pigment prices in recent months; however, Sun Chemical’s increases range from 10 percent to 30 percent, a major rise.
In response, ink companies have little choice but to raise their own prices. In a recent announcement, Sun Chemical increased prices by 12 percent for publication inks effective July 1, 2008.
Flint Group announced two sets of price increases. The North America Publication Inks Division announced price increases for all publication inks, effective June 1, ranging from 10 to 12 percent, and followed by a surcharge of 10 cents per pound for heatset and news inks on July 1. Flint Group then followed with a price increase for printing inks of as much as 20 percent effective July 1 for Europe.
Sun Chemical and Flint Group are not alone in announcing price increases, and knowing the difficult state of their customers in the printing industry, it is not an easy decision. Still, the simple reality is that ink companies have two choices: Raise prices or lose money. Given those two options, the choice seems fairly clear.