The beginning of 2010 has been marked by, among other things, a slight reverse in industry fortunes, and while it is clear that market demand has certainly increased (particularly in Asia were the economy in China grew in the first quarter of 2010 by over 12%), the economic revival has caused a supply/demand imbalance on the raw material markets.
The economic collapse at the end of 2008 was followed by a significant de-stocking of most raw material supply chains. As a consequence, the costs of base chemicals have increased continuously since early 2009. All key raw materials the ink industry relies on, like benzene, toluene, ethylene and propylene, have seen double digit price increases. Another factor driving up raw material costs is a number of “force majeure” situations and key base raw material suppliers moving away from the ink industry, like Dow exiting their vinyl resin business.
“Reductions in capacity are impacting on all areas of the industry with the packaging and narrow web ink markets also similarly affected by global shortages in key materials such as acrylates or acrylic resins which are derived from acrylic acid,” explained Jens Zimmermann, director global marketing, Flint Group Packaging & Narrow Web. “Acrylic acid is facing a global shortage, which started in North America after the production incidents at Dow and Arkema, but has now spread around the world. After significant increases prices for acrylates and acrylic resins are still clearly under upward pressure as a consequence, later also because the prices for styrene, which is used as co-monomer in styrene acrylic resins, are back at almost the record levels they were in 2008. As acrylic resins are a key raw material for water-based inks while acrylates is so for UV inks, the issues as described above are causing significant challenges for water-based and UV-based inks.”
One of the other challenges the industry is currently facing is that most pigment intermediates will see increased pricing pressure over the coming months, specifically for blue and red, while materials like TiO2 and several other speciality chemicals are also going up in the market.
“Flint Group is conscious of the fact that its customers are not having an easy time at the moment and that many raw materials together with energy and transport will continue to rise. However, Flint Group is not exempt from this phenomenon, and even though our technical team is constantly searching for ways to mitigate these effects, we ourselves are incurring tremendous increases despite our ongoing cost containment programs,” said Mr. Zimmermann. “The cost increases have now proved too large and the need to pass on these higher costs to our customers is necessary. Flint Group is regretfully forced to advise a price increase of 5% to 8% for narrow web inks with effect as of July 1, 2010. The price increase will enable the Flint Group to maintain our ability to deliver exceptional value, consistent quality, and continuous innovation to customers around the world.”