The Latin American Ink Market
Printing ink manufacturers enjoyed growth in Latin America in 2008, as the region was able to better withstand the global recession.
By David Savastano
Photo courtesy of Color Resolutions International.
The impact of the global recession has affected Latin America to a lesser extent, although the ink indutry still enjoyed overall growth in the region. Greg Lawson, vice president, sales for Sun Chemical, said that growth of volume was mixed in Latin America, depending on product categories.
“Packaging ink markets had slight growth and publication inks were flat, while both news and commercial sheetfed inks were down,” Mr. Lawson said. “Reduced volume at the end of 2008 and the first quarter 2009 has created challenges for both ink manufactures and their print customers. The local currency devaluation in Brazil and Mexico has created even greater challenges, since most raw materials are dollarized.”
Mexico and Central America
The Mexican ink industry is unique, as it is a mix of domestic manufacturers (Sanchez SA de CV), longstanding multinationals (notably Sun Chemical) and some U.S. companies that have formed a presence in the nation as a result of NAFTA and packaging business migrating to the region (Color Resolutions International and Siegwerk, among others). In terms of GDP, Mexco enjoyed slight overall growth of approximately 2 percent in 2008, although 2009’s results remain fairly uncertain.
Sanchez SA de CV is the leading printing ink manufacturer in the region, and in 2007, extended its reach by acquiring Prodaplag SA and its sister company, Barnimex SA. Managing director Ernesto Sanchez noted that 2008 was a challenging year for printers and ink suppliers in Mexico and Central America, although the U.S. recession did not have as heavy an impact in the region.
“It is clear to me that there is a delay in the crisis in our region,” Mr. Sanchez said. “I would say that until October the countries seemed far from the crisis already going on in the U.S., and were experiencing a very decent year. Also, countries with less connected economies to the U.S. seemed to be doing better. Nevertheless, in October most of the countries suffered important devaluation of their currencies against the U.S. dollar, and the economy of the region started to slow down. The balance for 2008 was a small growth in ink sales for the Mexican and Central America market.”
George Sickinger, president and CEO, Color Resolutions International (CRI), also noted the impact of currency devaluations on the region.
“The Latin American market has enjoyed significant growth for several years. However, the last four months of 2008 saw a dramatic change/effect caused by the currency devaluations and the economic crisis,” said Mr. Sickinger. “This impact has slowed the growth trend.”
“As the downturn continued during the beginning of the present year, printers in the editorial market seemed to feel the crisis more severely, while printers and converters in the packaging market are holding better,” Mr. Sanchez noted. “Alongside the slowdown in volumes, customer have suffered shortages in their cash flow, making it more difficult for the ink supplier to support the sales and keep the chain of distribution healthy.”
“The greatest impact has been with companies that are dependent on the automotive industry, electronic domestic goods and international imports of raw materials,” noted Mario Arellano, director of Mexican operations for CRI. “Automotive assembly plants have a huge ripple effect on many support industries throughout Latin America that directly affect the printing industry. Numerous print plants have reduced staff, cut work schedules and looked for ways to reduce fixed costs just for survival.
“The maquiladora industry has also suffered as the consumer goods market in international trade has slowed,” Mr. Arellano added. “Printers and converters that import raw materials have been unable to continue imports due to currency devaluations against the U.S. dollar. Imported paper products have been replaced with national recycled paper, which created pressure on ink manufacturers to adjust to the substrate deficiencies, without adding costs.”
Mr. Arellano said that the noticeable trends in the packaging industry are related to recycled paper and bigger and better graphics on packaging.
“The Latin market has always demanded lots of color on packaging but a change for modernistic graphic designs with lots of color is forcing converters to seek new technology in pre-press designs and print materials,” Mr. Arellano said. “This opens opportunities for our color management offerings – especially our own TrueColorBalance. In the narrow web flexo market, we’re seeing the trend for increased use of UV inks for niche specialty markets such as shrink sleeves and security products. We are receiving increased inquiries for these niche markets.”
Mr. Sickinger said that the greatest flexo opportunities for CRI are in the narrow web market.
“Mexico has numerous web flexo printers who are in pursuit of specialty niches through the use of UV flexo and water-based inks,” Mr. Sickinger said. “Two years ago, Color Resolutions was an ‘unknown’ entity in the Mexican market. We are establishing a good reputation for quality products and excellent technical service that is slowly being recognized in the market. Presence in national trade shows has helped, but the best strategy has been to focus on servicing recognized print leaders.
“High end packaging companies are seeking our support to provide that ‘next step’advancement that will help them compete in the high graphics field,” Mr. Sickinger added. “Color Resolutions will continue pursuing growth in Mexico before venturing into other Latin American countries. We must first establish a solid reputation in Mexico before we can look further south.”
Overall, ink manufacturers are optimistic for the coming year. “For Sanchez, the fact of servicing different markets and countries in the region give us the balance needed to support the slowdown of the economy,” Mr. Sanchez said. “ Our goal is to hold and increase our position of leadership in the region.”
“Sun Chemical has facilities throughout Latin America and plans to grow in all ink product lines by combining quality, service, and innovation,” Mr. Lawson said. “Sun Chemical is committed to Latin America long-term and helping our broad range of customers grow their business.”
“There has been a positive outlook from printers and ink manufacturers, however, that the downturn has reached bottom and production will rise slowly during the last quarter, 2009,” Mr. Arellano said.
“We are poised for quantum leaps in sales in the packaging and narrow web markets in Mexico,” Mr. Sickinger said. “In the near term, we will reflect vigorous growth rates that we expect to slow to industry growth rates in the long term. Our greatest focus in Mexico is to maintain the quality standards in products and services that CRI has established in the U.S. The driving force for this dynamic growth will be our commitment to the market, formulating the proper inks and coatings for the application, providing superior technical support and a focus on the key printers.”
Brazil and South America
Heading further south, the South American printing and ink markets also enjoyed some growth, led by Brazil. Brazil's gross domestic product grew by 5.1 percent overall in 2008, although growth in the fourth quarter slowed to 3.6 percent and estimates have placed this year’s GDP growth at less than 2 percent.
As for the Brazilian ink market, the major international ink manufacturers, led by Sun Chemical and Flint Group, dominate the region. Acquisitions in the past decadeby Sun Chemical (Tintas Supercor S.A.) and Flint Group (Companhia Quimica Industrial Brasiliero) have left Rio de Janeiro-based Cromos Tintas Graficas S.A., a specialist in sheetfed offset inks, as the largest independent ink company in the region.