Having weathered the economic storm of the past few years, ink manufacturers are, for the most part, cautiously optimistic about 2011, although raw materials remain a serious concern.
For ink manufacturers, 2010 was, generally speaking, an improvement over the past few years, as the economy showed some signs of recovery and sales strengthened. However, the volatility of the raw materials market, in terms of both pricing and availability of key ingredients, is a huge concern.
Charles Murray, president, North American Inks, Sun Chemical, said that overall, Sun Chemical has recovered volume in all sectors compared to last year.
“That being said, 2010 presented tremendous challenges for Sun Chemical and for our industry in general,” Mr. Murray added. “The commercial sheetfed market continues to struggle as companies cut back on their marketing collateral and other printing needs. The publication printing market, including newspapers worldwide, struggled considerably in 2010. In both of these cases, the affect of the general economic downturn has been exacerbated by a movement to Internet and other electronic alternatives as well as consolidation. The market shift in the publications market has been drastic and has not recovered to pre-recession levels, and we don’t expect that they will.”
Mr. Murray said that in terms of the packaging market, Sun Chemical saw some growth in 2010, although it was very moderate and tempered by the economic recession, and the company expects to see similar moderate growth in 2011.
“The packaging market faces different challenges than other market segments, such as migration in Europe, and the push toward smaller package size, recyclability and other efforts to reduce the impact of packaging on the environment, but these challenges are great opportunities for growth at Sun Chemical,” Mr. Murray added. “We’re working with brand owners and major packaging groups to provide them with solutions for specialized packaging of the future.”
Charles Knott, CEO at Flint Group, said that Flint Group performed well considering the global economic downturn and difficult industry conditions.
“We have focused on working with our customers to reduce the cost of print,” Mr. Knott noted. “In addition, we continue to leverage our total product and service capability and invest in improving our efficiencies with major capital projects and an important acquisition. Rapidly increasing raw material costs and continued challenges in some of our market segments will lead to further change in our industry. Flint Group is well prepared to work with our valued customers to ensure that change is an opportunity.”
Herbert Forker, CEO of Siegwerk, said that the first eight months of this year were quite satisfying volume-wise. “This was mainly due to strong packaging business, especially in EMEA and Asia,” Mr. Forker said. “Unfortunately, the situation of publication gravure is still challenging. The segment is facing a significantly shrinking volume market, fierce price competition because of overcapacities and a steep rise of raw material cost. Heatset, on the other hand, has shown a positive development, but is equally suffering from the raw material prices and shortages.”
Bob Davison, vice president sales and service, wide web for Siegwerk NAFTA, said that 2010 presented many opportunities to Siegwerk NAFTA, which it has been able to capitalize on.
“While the focus continued to center around customers, Siegwerk also looked internally for improvements with the implementation of the 5S and Lean Manufacturing processes globally,” Mr. Davison noted. “These improvements allowed Siegwerk to remain stable during a very volatile time.”
“As we entered the fourth quarter, sales have been slightly better this year compared to 2009, both in the U.S. and worldwide,” said Rick Clendenning, president and CEO of INX International Ink Co. “Some markets have performed better than others, but in many ways it’s been similar to last year.”
“We anticipated that 2010 would be a challenging year, so our 2010 budget was developed with low expectations, so that we will meet our budget,” said George Sickinger, president and CEO, Color Resolutions International. “Sales and income will be on a par with 2009. We have noted that the selling cycle has gotten longer as customers become more resistant to change and our competitors do more to guard their turf. We did some costing but also made some strategic investment in talent. We have added to our sales staff in some key markets.”
“Our sales have definitely improved when compared to 2009,” said Richard Czarnecki, senior vice president and chief technical officer for Superior Printing Ink. “Commercial sales have been flat at best, but our packaging and UV sales are growing, which more than compensates for reduced demand in other areas. We’ve brought in a number of new accounts on the packaging side, which is encouraging. We anticipate some moderate growth for next year, and we expect to add people to our team on the packaging and UV side.”
Coming off of a difficult past few years for the printing industry, ink manufacturers did see some signs of hope during the past year.
Mr. Forker said that the worldwide economic downturn seems to have been overcome. “The emerging markets in EMEA, Asia and South America show especially strong growth rates,” Mr Forker said. “Therefore, the economic environment for 2010 seems quite favorable, although the development of the U.S. economy still needs to be watched very closely.”
“At Toyo, we’ve seen ink orders picking up this year,” said John Copeland, president and COO of Toyo Ink America, LLC. “Relative to 2009, orders and sales have stabilized, and there is greater overall activity amongst printers. A recovery is still under way, but is not as strong as hoped following a dismal 2009.”
“We have seen some improvement in many segments of the business, but the commercial side has not recovered,” Mr. Clendenning said. “I think the commercial end of the business will show some improvement, but it may never get back to where it was a few years ago.”
“We did see some recovery in the print media market, but this was not quick nor easy,” said Bill Miller, president, Print Media Americas, Flint Group. “The economic trajectory will likely continue for some time to come, while consolidation and online media continue to be two major trends affecting the industry. Despite this, Flint Group’s Print Media North America division delivered some commendable results, particularly considering the industry is not out of the doldrums yet.”
“Within the packaging and label sector, we began to see some promising signs of recovery as early as the second half of 2009 particularly in regard to volume,” Jens Zimmermann, director, global marketing and business development, Packaging and Narrow Web Division for Flint Group, said. “The market did, however, face some significant challenges due to the increase in raw material costs and supply issues which have gotten steadily worse throughout the year.”
“Our business has been a bit like the stock market with its ups and downs,” Mr. Sickinger noted. “We have had some very good months and some disappointing ones. Although business seems to be firming up in the last few months, I don’t think we will see a real recovery until unemployment improves significantly. The packaging ink market has held up well.”
Raw Materials Remain A Major Concern
No discussion of 2010 would be complete without a serious analysis of the raw material market. Not only are prices changing rapidly, but availability of key raw materials is a serious concern going forward.
It is clear that the volatility in the supply chain that the ink industry is currently witnessing is indeed having a significant impact on the industry, right across the board.
“I’ve been in procurement in a number of different industries for more than 25 years, but the current raw material challenges, on such a wide front, I have never experienced before,” Jan Paul van der Velde, senior vice president procurement, Flint Group, commented. “While the challenges in 2008 were clearly related to pricing of crude oil, the current challenges have quite a differentiated background.”
Mr. van der Velde said there are two key contributors. “The first is a combination of a significant de-stocking of most raw material supply chains following the economic collapse at the end of 2008, with the current mild reverse in the industry and increased demands causing major shortages,” Mr. van der Velde said. “The second one is caused by ongoing base chemical cost increases since early 2009, which could be due to demand weakness earlier in the value chain not being passed through, but now, in a climate of economic revival, suddenly they are coming through quite hard. A contributing factor is a number of‘force majeure’ situations and key base raw material suppliers moving away from the ink industry.”
“There have clearly been many challenges this year with regard to availability of key materials,” said Diane Parisi, vice president supply chain, North America at Flint Group. “This dynamic almost always results in increased raw material costs. Phenolic resins, hydrocarbon resins, nitrocellulose, titanium dioxide, polyamides and many other materials have been tight in 2010 due to a variety of issues, including, but not limited to, capacity shortages, feedstocks and suppliers moving to alternate markets for higher value. Flint Group has successfully managed through these issues by maintaining strong supplier partnerships.”
Ed Pruitt, chief procurement officer for Sun Chemical, said that 2010 has been an extraordinary year in terms of raw material challenges.
“Arguably, the chemical industry has not seen a year of similar supply shortages and tightness in over two decades,” Mr. Pruitt said. “Among the many products under varying degrees of pressure, we would highlight rosin resin, specialty pigments, energy cure resins, acrylic resins, titanium dioxide, nitrocellulose and some additive resins.”
Mr. Pruitt said that the factors driving these supply issues fall largely into three areas. “First, we have seen our suppliers experience a large number of unexpected feedstock issues,” Mr. Pruitt noted. “An example would be the global shortage of acrylic acid for energy cure and acrylic resin producers. The second factor would be a surge in demand that occurred largely in the first and second quarter as businesses refilled their pipelines and addressed sharply higher demand from the developing regions. The third factor would be the general tautness in supply that resulted from the many cost and working capital actions taken by the chemical industry last year during the height of the recession.”
“Raw material prices have been increasing dramatically, which makes price adjustments absolutely inevitable,” Mr. Forker observed. “During the upcoming months, we do not see any change of the situation. At the same time, the availability of many key materials is limited due to closures of plants last year, and also higher domestic demand in the producing countries, mainly in Asia.”
“Availability and rising prices have been a problem with acrylic resins, nitrocellulose and titanium,” Mr. Sickinger said. “So far, we have met our customers’ demands by working closely with our suppliers.”
“The dynamics of the raw material market have consumed much of our attention as we wrestle with unprecedented volatility in both cost and availability,” Mr. Czarnecki said. “Although our customers are facing their own pricing pressures, it will be essential to pass on these higher costs going forward.”
“We are seeing tremendous volatility in the raw material supply chain, both in terms of cost and availability,” Mr. Davison said. “Like all other major ink suppliers, Siegwerk, has had to pass on the raw material increases to its customers. While customers understand the challenges being faced by ink suppliers today, it is still difficult in this type of economy to accept the monetary implications that this sort of tight economy may bring. The relationship between customer and supplier becomes even more crucial during these challenging and ever changing times.”
“We are still under some restraints with cost increases and we’ve had supply issues in some areas, but our global footprint has helped keep things in check,” Mr. Clendenning said. “Customers have made it clear that they don’t want to hear about our costs going up. We installed a modest price increase to our customers on Sept. 1, based on the rising costs of raw materials. We had no choice so we’ll continue to monitor the situation and see how we fare. Everyone is feeling the pressure.”
“To cope with these issues, we’ve been carefully coordinating our manufacturing systems with our customers’ orders, projections and investment levels,” Mr. Copeland said. “So far, we haven’t had any prolonged problems with raw materials sourcing.”
Nick Brannan, vice president product management, sheetfed print, Print Media Europe, Flint Group, said that communication with customers and suppliers alike is essential in these challenging times.
“This has been one of our major challenges of the last two to three years, but it definitely escalated in 2010,” Mr. Brannan said. “We believe it has been of paramount importance to hold open communication up and down the supply chain. As a result of our close relationships with our suppliers, we received early warnings of such issues as cost increases and possible short supply of vital raw materials, and by working with them, we were able to minimize the potential effect on our ability to supply. In turn, we communicated openly with our customers as early as possible, to allow them time to adjust their own business plans. In this way, we have maintained positive open dialogue with all our customers, and on the whole they have reacted positively to the situation.”
Expectations for The Coming Year
Having weathered the economic storm of the past few years, ink manufacturers are, for the most part, cautiously optimistic about 2011, although raw materials remain a serious concern.
“Toyo has now strengthened its ink lineup for both liquid and paste inks, thus enabling us to offer more opportunities to our customers and the industry as a whole,” Mr. Copeland said. “We see a flat year for the ink industry in 2011, although a more stable one.”
“I think 2011 will be a good year,” Mr. Sickinger said. “Our people and products are well positioned to capture our share or more of the recovering market.”
“We have continued to demonstrate our ability to make significant changes quickly and effectively,” Mr. Knott said. “While there will be more challenges ahead, we have an outstanding product portfolio and a very experienced team who will ensure that we deliver on our promises to customers and shareholders.”
Fredrik Broman, Flint Group’s vice president product management, Web Print, Print Media Europe, said he expects 2011 to be every bit as challenging as 2010. “The continuing increase in raw material costs will be a feature, and may even become the norm looking even further ahead,” Mr. Broman noted.
Mr. Mellado said that 2011 will continue to be a challenging year for Sun Chemical and the ink industry as a whole.“The cost of raw materials will likely continue to increase. However, Sun Chemical has taken steps to better meet the needs of its customers and offset these costs,” Mr. Mellado added. “Sun Chemical wants to continue being known as the company that is truly a partner with its customers. To be able to achieve this, our customers have to know that we are here to help them with their problems.”
“In 2011, Siegwerk is hopeful that the economic recession continues to trend favorably and that the packaging industry will continue to grow, as is the rest of the industry,” Mr. Davison reported. “Siegwerk will continue to look for ways to differentiate its customers either through technical offerings or through service. With continued consolidation throughout the supply chain likely, Siegwerk sees raw material cost and availability continuing to be a issue moving forward.”
“I expect the raw material situation to tighten further, which will lead to more backwards integration,” Mr. Forker said. “At Siegwerk, several successful initiatives in this direction are underway to gain more independence from market volatility. On the other hand, we build on operational excellence to become fit for the future. At the same time, we have held on to our biggest asset – our employees. This experience, that Siegwerk is and remains a reliable and attractive employer, brought us closer together. That is why I am very confident that we will also successfully manage the challenges of tomorrow.”
“Sales are strong and I’m looking forward to another good showing in 2011,” Mr. Clendenning concluded. “As 2011 opens, we will continue to be under some restraints with supply issues in the first quarter. I don’t see raw material prices dropping, but hopefully they will stabilize at some point.”
Key Highlights for the Printing Ink Industry in 2010
The past year has been an active one for the ink industry, with a few key acquisitions and personnel moves.
Flint Group continues to make significant investments into its packaging and narrow web business to improve its offering to customers. In February 2010, Flint Group signed an agreement to acquire Torda, a leading manufacturer of printing inks for the packaging markets in Northern Europe, the Balkans and the Middle East with a substantial presence in Eastern Europe.
“The company’s business model and performance is an excellent fit for Flint Group’s strategy,” Jens Zimmermann, director, global marketing and business development, Packaging & Narrow Web Division, said. “Torda’s setup ideally complements and expands Flint Group’s network of manufacturing and service facilities into exciting growth markets. The acquisition of Torda thus supports Flint Group’s strategy to grow in the packaging print consumables market in a sustainable and profitable way by strengthening its position in these developing markets. Moreover, Torda has some excellent technology positions which we will be able to leverage throughout the global Flint Group organization.”
“The recent Torda acquisition falls in line with our strategy to participate in industry consolidation where it makes economic sense and to add businesses where we can selectively strengthen our product range or regional coverage,” added Charles Knott, Flint Group’s CEO.
In April, Toyo Ink acquired partial assets of Fluid Ink Technology, a leading producer of flexographic, gravure and UV ink products for the flexible packaging, paper packaging and label printing markets.
“The coupling of Fluid Ink’s technology, service and sales expertise with Toyo Ink’s existing packaging capabilities will enable us to provide our customers with unique solutions in support of Toyo’s commitment to driving innovation through the development of value-added and customized products,” said John Copeland, Toyo Ink America’s president and COO.
On the digital side, INX International Ink Co. formed INX Digital International.
“In 2009, we were very proud with the formation of INX Digital International,” said Rick Clendenning, INX International Ink Compnay’s president and CEO. “In the last year, the INX Digital group has established themselves with printers in the traditional marketplace. Their business strategy of EVOLVE Advanced Digital Solutions is proving to be very effective, and it has enticed more customers to put their toes in the water when it comes to digital products.”
In personnel moves, in August, Sun Chemical named Charles Murray president of North American Inks, a role which gives him responsibility over all of Sun Chemical’s North American ink business. Mr. Murray brings 27 years of industry experience and knowledge to the position, and most recently worked as the managing director and corporate vice president of Sun Chemical’s business in the UK, Ireland and Nordic markets since 2004.
In terms of new facilities, Sun Chemical displayed its commitment to the food package printing market through the grand opening of its new state-of-the-art sheetfed ink manufacturing plant in Frankfurt, Germany in March.
“The plant was built using clean room and HACCP directives to ensure that the best possible standards are adopted in manufacturing of Sun Chemical inks,” added Felipe Mellado, chief marketing officer for Sun Chemical. “Representing a significant investment, the new facility is dedicated to the highest level of cleanliness and utilizes the world’s most advanced technology to create high-quality sheetfed packaging inks. The facility features the most modern mixers and mills on the market, process control computers, as well as two new blending stations. One blending station is specifically used for low migration inks; the other, which is housed in a separate building to avoid cross-contamination, is used for conventional inks. To ensure the purity of the inks manufactured at the Frankfurt, Germany facility, all raw materials are hand-inspected to make sure they contain no contaminants and have low odor as required by strict European food regulations. Additionally, quality control officers are on-site to check product quality at all times.”
New products and services are an area where ink manufacturers showcased their capabilities. For example, Flint Group launched its Flexocure FORCE in the U.S.
“After the successful market introduction in Europe in 2009, our new narrow web milestone development in UV flexo technology will now also enable label printers in the U.S. to take another step in print quality,” said Mr. Zimmermann.
“On the product development front,” noted Doug Labertew, vice president of product management and strategy, Flint Group Print Media North America, “we introduced two new sheetfed inks recognized by industry organizations as environmentally friendly. Arrowstar 8041 inks contain less than 3% VOCs – among the lowest VOC levels available today. The ink series earned a bio-renewable content (BRC) index of 70 from the National Association of Printing Ink Manufacturers (NAPIM) and are EcoLogo-certified to “Printing Inks CCD-040”. These low-tack inks keep dot gain to a minimum, are ideal for perfecting, and are compliant to ISO as well as IDEAlliance’s GRACoL 7 standards. “
“K+E Novavit F 928 PRIME PROTECT BIO inks offer very fast oxidative drying and are highly rub resistant – ideal for printers with demanding, high-end jobs that require post-print processing,” Mr. Labertew added. “These color-intense inks offer top-quality performance on straight-line printing and on perfecting presses. K+E Novavit F 928 PRIME PROTECT BIO inks earned NAPIM’s BRC index of 70 and are compliant to ISO and GRACoL 7 standards.”
In the area of UV inks, Toyo launched the H-UV series in conjunction with the eco-friendly and ozone-free Komori H-UV drying system. “We also introduced a new series of specialty adhesive inks formulated for inline UV foil or cold foil systems,” Mr. Copeland said. “At Graph Expo this year, Toyo Ink America featured our ‘NEX’ generation of soy-based, solvent-free sheetfed inks, a series that is more forgiving when printing on today’s papers that contain more chemicals and cruder fibers.
At FESPA in Munich, Germany, Sun Chemical unveiled new global brand names to describe its screen inks for promotional, digital and industrial printing. The global brand names are SunPromo for indoor and display materials, SunCure for UV offset inks for display and commercial printing, Streamline for digital inkjet inks for display graphics, SunDisc for screen and offset inks for optical disks, SunCarte for screen and offset inks for plastic cards, SunHytek for screen inks for plastic components and in-mold decoration, SunVetro for screen inks for decorative and container glass, SunPoly for screen inks for plastic containers, and SunPad for pad printing inks.
Delivering services is also extremely important.
“We delivered on a number of customer driven initiatives,” Bill Miller, president, Print Media Americas, Flint Group, said. “We have made it easier to service paste ink customers in the Northeast and the greater Houston area with paste ink blending operations in those locations. We became the first ink company worldwide to deliver coldset UV inks from 379 gallon totes – a significant convenience for newspaper printers. More than that, Flint Group operations continue to work side-by-side with customers on a daily basis to make sure they are getting the best value possible from our products and services.”
At Labelexpo Americas 2010 in September, Sun Chemical announced its partnership with EskoArtwork was extended to further integrate access to the Sun Chemical SmartColour database in a workflow where EskoArtwork pre-production tools and GMG proofing solutions are combined. At Graph Expo 2010 in October, commercial printers learned how to decrease their overall ink spend by up to 46 percent by participating in the Sun Chemical Dispenser Program.
Environmental issues are also important to ink manufacturers.
“In today’s ‘green’ environment, our customers and the marketplace are looking for much more than the standard sustainability rhetoric,” Mr. Mellado said. “They want to know what their suppliers are doing to improve their sustainability performance and we responded with very specific metrics. In December 2009, Sun Chemical released its first sustainability report, which provides data-driven performance measurement for seven key sustainability metrics to help customers and consumers understand the company’s environmental impact. The first of its kind report shows data collected since 2005 from approximately 170 Sun Chemical sites in more than 25 countries. The key sustainability metrics measured in the data include: energy consumption/conservation at production and non-production sites, the energy carbon footprint at the production sites, process waste reduction, water consumption, materials safety, and employee safety.”
All in all, ink manufactures are looking ahead to the future.
“I am very grateful to the fine people we have at CRI,” Mr. Sickinger said. “They understand the times we are living in and continuously step up to meet our customer’s demands. Our R&D group has spent a lot of time this year developing new products for some of the new equipment being installed at many of our customers’ plants, as well as consolidating many of the dated lines.”
“One year after the low point of the downswing, I can say that we have overcome the crisis and are investing again in our future,” Mr. Forker said. “We are one Siegwerk family with ‘Ink, Heart & Soul’ and we are all pulling in the same direction. We are able to focus on the really important things, which will lead to success in the end.”