The Additives Market
Additives manufacturers report that they are seeing a turnaround in the economy, and are cautiously optimistic about the future.
By David Savastano, Editor
There are some signs that the economy, battered by the global recession that has heavily impacted the ink industry and its customers, is starting to improve.
Craig Baudendistel, Shamrock Technologies’director of sales, noted that the recession has been affecting his company’s business, but Shamrock Technologies is now enjoying growth.
“Shamrock Technologies experienced lagging sales in 2008,” Mr. Baudendistel said. “We saw a nice recovery beginning in the second half of 2009.The first quarter of 2010 has continued this recovery.”
“The recession has had a significant impact on all product lines associated with printing inks,” said Chris Halvorsen, global marketing manager for Hexion Specialty Chemicals. “Additives tend to be small volumes, so with the slowdown over the past two years, our product management teams have had to take measures to consolidate and rationalize products. We have seen a slight recovery, but this is difficult to measure based on the sales volume of additives.”
“As with most industries, the recession did have a significant impact on our business, especially in the fourth quarter of 2008 and first quarter of 2009,” said Patrick J. Heraty Jr., market segment manager graphic arts coating additives at Evonik Goldschmidt Corporation. “Following Q1 2009, business began to steadily improve the rest of the year. Q1 2010 continued that trend.”
“Clearly the ink industry was hit hard by the recession, and in some way was hit harder than the additive manufacturers as the latter often sell into other markets that either were not hit as hard by the recession or started their recovery earlier and stronger,” said Chris Henkee, specialty additives Americas marketing manager for Air Products & Chemicals. “We saw the market for ink and graphic arts additives’ market really bottom out in the fall, and have seen fairly strong growth in the last couple of months.”
Sel Avci, marketing manager, industrial coatings and inks at Elementis Specialties, reported that the recession impacted the additives business for the inks as bad as for the paint companies.
“We had the worst market sectors being the publication and the news ink markets in 2009,” Mr. Avci added. “The packaging ink markets were slow but was not as bad as the publication sectors. We have seen good recovery in all ink markets for the first quarter of the 2010. It appears that some restocking as well as the regular ordering is coming from all types of ink manufacturers.”
“The ink industry took a beating in 2009, with double-digit reductions in top line sales,” said Alan Kalmikoff, president, Keim Additec Surface USA LLC. “So did the rest of the graphic arts industry. Signs of recovery at large need to come before signs of recovery in printing, such as banks lending more freely, incomes rising, home price stability and jobs returning. I think there is optimism out there, certainly the NAPIM State of the Industry report will indicate that, and that is the first clue that things will move forward for the future. The return of all issues will not be as dramatic a rise as they were when they fell.”
Ink Industry Needs
Additives play a wide variety of roles for inks. With the impact of the recession being felt by ink manufacturers, the ability to reduce costs was one area of great interest.
“The recession really focused the industry to optimize efficiency and look for lower cost solutions to their additives requirements – i.e. higher efficiency and lower cost-in use,” Mr. Henkee said. “As the recession abates, we are seeing the ink formulators again start to look at new and novel formulation components and applications (such as improved resins and new pigments) and an interest in additives that will assist in achieving the performance and quality of the inks that incorporate these components. We are also seeing the substrates onto which inks are applied continue to evolve, such as an ever-increasing amount of recycle component, and the need for additives that will allow the ink to be applied to these substrates without problems.”
“Ink makers are very much focused on costs vs. value,” Mr. Kalmikoff noted. “Additives are needed to create the value in ink products. Ink manufacturers are always looking for improvements to differentiate their product from the competition.”
“There is always pressure to develop lower cost products,” Mr. Baudendistel added. “We have had requests to develop ‘green’ alternatives for petroleum-based materials to help minimize price fluctuations and short supply situations.”
“Ink manufacturers need additives that work faster and more effectively while maintaining cost-effectiveness,” Mr. Heraty said. “Our customers are asking us to help them meet the always-increasing demands of the end-user. Specific areas include dispersants that allow higher pigment loadings; defoamers that are more universal across a range of resin systems; additives that have worldwide registrations; and additives that meet worldwide regulatory requirements, especially for food packaging applications.”
“Of course the performance will always be the driving force for the additives,” Mr. Avci noted. “The ink companies are interested in new technologies, but at lower applied cost vs. what they are using right now. Regardless of the additive type, the cost saving is always sought for the improved performance.”
“Additives are being used to extend the reach of primary product platforms,” Mr. Halvorsen noted. “By using specific additives, it is possible to offer differentiated printing ink products with very little additional complexity to the primary platform. Typically we see that ink water balance, setting speeds, oxidative properties and rheological are key application problems that can be partially solved with the use of additives.”
Raw Materials a Concern
With the economy seemingly on the rebound, there is hope that good news is on the horizon. However, there are plenty of obstacles that lie ahead, most notably potential price increases for key raw materials.
“Raw material prices are increasing across the board and in some cases dramatically,” Mr. Baudendistel said. “We are also experiencing raw material shortages for some feedstocks.”
Crude oil costs are critical to the supply chain for virtually all additives, and there have been increases in prices recently.
“The price of crude has shot up again to almost $90 per barrel,” Mr. Kalmikoff reported. “Upward movement seems to always be an indicator of cost pressures as most additives are petroleum derived. U.S.-supplied firms always have to worry about service disruptions from seasonal hurricanes in the Gulf of Mexico. European-supplied firms have less of an issue with that. U.S. currency being a bit stronger these days should indicate some price stability from that aspect for U.S. consumers.”
There is also an impact beng felt due to companies eliminating production facilities.
“The recession resulted in many raw material manufacturers drastically decreasing inventory and sidelining production units,” Mr. Henkee noted. “As the recession ebbs, many of the necessary raw materials are in short supply and raw material pricing continues to climb. This is exacerbated by strong demand for raw materials in other parts of the world. Thus going forward, raw material pricing remains a top concern.”
“We have seen key raw material price increases in petroleum and natural gas derivatives such as ethylene and propylene, solvents and second and third tier chemicals,” Mr. Avci said. “This is mainly due to the cracker shutdowns, supplier consolidations and increased demand from all regions including Asia. There seems to be tight supplies in various types of raw materials based on various acids right now. Recently, we have announced price increases in additives based on these key raw materials.”
“Raw material prices continue to rise on a number of our key raw material streams,” Mr. Heraty reported. “The current shortage of acrylic monomer and acrylates is a concern, although it has not yet impacted our supplies. Our major concern is the recent shortage of acetophenone due to the exit of a major supplier of that product.”
“We were having relative stability with the raw materials used in our additives,” Mr. Halvorsen said. “However, at this time we see some price increases and product rationalizations from our suppliers. It seems most of the increases are largely due to the rationalization process rather than commodity raw material prices.”
Additive manufacturers stiff face plenty of challenges. For example, Mr. Heraty noted customers’ need for universally-acceptable products.
“The different regulatory environments across the world make this exceedingly difficult, especially in the case of additives for food packaging applications,” Mr. Heraty said. “Besides the official regulatory rules, there are also end-user specific rules our customers must meet. Often these are even more stringent than the governmental requirements.
“To meet this challenge, we are constantly talking with our customers about their needs while monitoring the regulatory landscape,” Mr. Heraty added. “We are targeting specific environmentally-friendly technologies in our R&D processes that will satisfy our customers’ demands. Raw material pricing and shortages are another major issue. We are constantly working with our suppliers to obtain consistent, guaranteed supply. Our R&D group is also looking to develop new platform technologies based on readily available and environmentally-friendly raw material streams. Both these efforts will continue.”
“Many in the industry have and will continue to simplify their product lines and reduce the number of products,” Mr. Halvorsen said. “Additives will play a role in differentiating a more robust and less complicated product line portfolio. The challenges will be to identify the additives that truly solve problems and bring value in specific applications. Regulatory issues, like REACH, will become more challenging and will force suppliers to evaluate the small volume products based on the costs of managing regulatory requirements.”
“At Shamrock Technologies, we continue to emphasize new product development based on our customers' needs,” Mr. Baudendistel noted. “Our strong customer focus has helped to keep us ahead of the competition by developing value added performance advantages. We also continue to improve our manufacturing processes for cost savings to help absorb some of the continuing escalation of raw material prices.”
One challenge is the competition from southeast Asia.
“Many new additive sources are coming from southeast Asian countries,” Mr. Kalmikoff said. “While there is little in terms of innovation or product differentiation coming from these sources, it does present competitive situations for commodity additive materials. Keim Additec Surface GmbH has an ongoing program to continue to innovate and differentiate based on identified customer requirements. Sourcing of raw materials on a global basis is also an ongoing strategy.”
“The major challenge for allis to survive in these difficult economic times,” Mr. Avci said. “As one expects, the packaging markets would continue to do better vs. the publication markets. We are hoping that all sectors of the ink markets bounce back to their normal levels, but it is going to be very difficult for certain sectors. We are focusing on various types of performance additives for all types of ink applications that provide solutions to our customers.”
Thoughts on the Future
All things considered, additive manufacturers are fairly positive heading into the next 12 months.
“Most pundits and forecasters will say that we hit bottom in the economy in 2009,” Mr. Kalmikoff said. “Therefore, 2010 is expected to go up and continue to improve for 2011. Keim Additec Surface GmbH looks forward to continuing to serve customer needs, which will then drive positive growth.”
“Everyone is expecting 2010 to be better than 2009, but are very cautious in getting their hopes up too high,” Mr. Avci said.
“Shamrock Technologies is expecting a recovery year with significant growth due to the focus on customer needs, the improving economy as well as capitalizing on new opportunities,” Mr. Baudendistel said.
“We are optimistic that the good first quarter results will continue into the rest of the year and beyond,” Mr. Heraty said.
“For the coming year, our expectation is that the ink industry will continue to recover, pushing volumes up significantly over last year,” Mr. Henkee said. “We also are seeing the ink formulators again invest in innovation and development, which was essentially ‘put on hold’ during the recession. Thus we expect that new product development will again be a driving force in the industry. We have been and continue to invest in our own additive technologies to be ready with new products that will be required by the new developments within the ink industry.”