There’s an important catch, though: because of the recent surge in energy costs and crude oil, pricing has become a critical issue. For ink manufacturers, purchasing cost-effective products has become even more critical.
“When it comes to lithographic vehicles, our customers continue to ask for new and innovative systems,” said Josh Rosenheck, commercial platform manager, Noveon Surface Modifiers. “However, this new technology must fall within some very precise cost parameters. In other words, our customers are looking for affordable innovation. In polymers, we are seeing trends toward excellent printability and enhanced resolubility. In other words, the high resolution printing we are seeing primarily in the flexo area requires increased printability and resolubility to produce a sharp clean image for reproduction.”
“Sheetfed vehicles are facing similar economic challenges as well as demands for technology that will reduce waste and provide faster job turnaround,” said Guy Trerotola, business manager, commercial offset at Hexion Specialty Chemicals.
“Cost effectiveness with value-in-use performance is a particularly high priority in today’s business environment,” said Rick Krause, director of marketing at Johnson Polymer. “Johnson Polymer continues to invest in advancements to water-based technology that bring value to the printer, converter, ink manufacturer and overprint varnish manufacturer.”
“Cost effectiveness is critical in light of ever increasing raw costs from oil, to rosin to the modifiers,” said John Schultz, commercial director Akzo Nobel Ink & Adhesive Resins.
“For publication vehicles, the most common requests we get are for lower cost, less misting and lower tack with stable rheology,” said Phil Runge, product manager for Hexion Specialty Chemicals. “Lower tack and less misting are being driven by faster press speeds and lower quality substrates.”
Industry leaders believe that consolidations are inevitable in these markets, and 2005 marked one such move when Inksolutions purchased Bria Graphics, now Westcoast Inksolutions, in May.
“This is a great addition to our company,” said John Jilek, president-again at Inksolutions. “It now give us a dominant presence on the West Coast, which has been ignored in the past. They also had a strong background in overprint varnish, which was an area that we just starting in. Now with the combined technologies, the Inksolutions family has a complete line of oleoresinous overprint varnish.”
The Importance of Vehicles and Varnishes
Vehicles and varnishes are critical to the performance characteristics of printing inks. When formulators develop their inks, they pay particular attention to vehicles.
“Vehicles are the building blocks that determine ink performance,” said Mr. Trerotola. “Ink makers expect the vehicle formulator to provide the solutions to the challenges that they face. Accordingly, our product introductions in 2006 will focus on vehicles that take advantage of our resin expertise and that will attempt to provide some degree of cost stabilization.”
“Vehicles yield the performance properties of inks,” said David Aynessazian, vice president of sales and marketing for Kustom Group. “The vehicle allows the pigment to be transferred from the ink fountain and be attached to the substrate. Vehicles also gives the finished properties, such as gloss, rub and other non-color characteristics.”
“Vehicles and varnishes increase the performance and resistance properties of the formula,” said Mr. Rosenheck. “Vehicles are pigment carriers that have tremendous influence on press performance characteristics and film-forming properties for post-press requirements.”
“Water-based vehicles continue to be the most cost-effective, environmentally-compliant and user-friendly technology for printers, converters and ink and overprint varnish manufacturers,” Mr. Krause added.
Rising Raw Material Costs
As is the case throughout the ink industry, vehicle and varnish manufacturers are trying to cope with higher prices form everything ranging from raw materials to energy costs.
“We continue to see unprecedented increases on nearly all of our raw materials, with further increases projected in coming months,” said Dan Romani, director of sales, inks, Americas for Hexion Specialty Chemicals. “We believe that we have entered a different business dynamic based on considerably higher global costs for energy. All manufacturers are impacted by the cost of energy directly or indirectly. We are also hearing of tightness in some key raw materials that will further drive up the costs of raw materials particularly in the rosin resin areas.
“As a business, we are focused on improving our ability to handle the volatility of the market,” Mr. Romani added. “We believe that Hexion will continue to be the major supplier to this industry and we appreciate the support of customers during this time.”
“We have continued to see increased raw material costs due to steadily increasing oil prices,” Mr. Rosenheck said.
“Raw materials continue to increase, said Dan DeLegge, vice president, smoke ‘n’ mirrors at Inksolutions. “In 2005 it was the oils that raised sharply, and now in early 2006, rosin seems to be the main product which is increasing.”
The volatility in the market makes it difficult for suppliers to project what the future may hold.
“Raw materials continue to escalate with the current volatility in the petrochemical market,” said Mr. Runge. “Volatility of raw materials seems to be a consistent theme, making it difficult to forecast future trends. We are currently paying a significant amount of attention to the global rosin market. Most recently, crude tall oil (CTO) availability has dwindled, leading to a very tight tall oil rosin (TOR) market. At the same time gum rosin is hitting 10-year highs, limiting its use in North America. Derivatives of TOR and gum rosin increased in price in both Q4 of 2005 and Q1 of 2006 and further increases in rosin and petrochemical intermediates may drive the market even higher this year.”
Despite implementing price increases, suppliers are not making up for the increases they are taking on.
“Basic energy costs spiked last year,” said Mr. Aynessazian. “There is a perception in the marketplace that suppliers have passed along increases at the same rate of energy costs, and that isn’t the case. Solvent prices have increased nearly 100 percent, and varnish and ink companies can’t pass that along because the market can't handle it. We pass along as much as our customers can handle, step by step, and our margins are getting squeezed in the meantime.”
Being able to pass along price increases is essential to survival for printing ink manufacturers and suppliers alike.
“Over the last two years, our industry has undergone major structural changes in basic feedstock and raw material costs,” Mr. Krause said. “Every company in the value chain has felt the pain of dramatic cost increases, raw material shortages, fuel surcharges and month-to-month cost volatility. The ramifications continue throughout our industry with company consolidations, restructurings, and manufacturing and service center closures. Ink and overprint varnish companies that have been successful in raising prices are surviving. Those that haven’t are struggling.”
To help ink formulators meet new requirements for their customers, vehicle and varnish manufacturers have developed new technologies.
“We are very excited about our new shear resistant technology,” Mr. Rosenheck said. “This technology resists viscosity reduction caused by shear while having greater flow and lower dot gain than traditional systems. We are also pleased with our pre-emulsified low VOC vehicle system which exhibits shortened make ready times, greater press stability and reduction of heatset ink VOC content by as much as 20 percent. Both technologies are available for heatset and sheetfed applications.”
There is also room for customized products. “Inksolutions does not have a published list of new products,” Mr. Jilek said. “Our products are usually tailored to our customers’ particular needs. There are very few products that are sold across the board. If you need specific help with your vehicle system, give us a call and we will make it our top priority, to develop a product that fits your needs.”
Late last year, Hexion renamed a large number of Lawter Graphic Arts Technologies products to simplify product names and product lines. For instance, heatset vehicles are called Webvar and Luminex, overprint varnishes are Miraglaze and Miradull, web vehicles are called Webpro, and most sheetfed varnishes are called Cinergi.
“At this point, the focus of Hexion Specialty Chemicals is to continue to provide technically viable, economical and unique solutions to our customers’ vehicle needs,” Mr. Runge said. “With the backward integration and technical capability of Hexion, combined with our 60 years of history and leadership in the graphic arts industry, we are well positioned to continue to grow with our customers and the ink industry.”
Expectations for 2006
Even with all of the concerns over pricing, major vehicle and varnish manufacturers remain optimistic about the upcoming year.
“A strong fourth quarter in 2005 keeps us optimistic for a steady and solid 2006,” Mr. Krause said. “Raw material availability is looking healthier and we’re anticipating some stability in costs, albeit at a significantly higher plateau than 18 to 24 months ago. The industry is still struggling to adapt to this fundamentally higher cost structure.”
“We expect the ink market to grow modestly in 2006 and have tried to position ourselves to both advance and participate in that growth,” Mr. Runge said. “We are focused on business sustainability and expect to take firm positions throughout 2006 as we try to do the right thing for our employees and customers. We can not and do not expect any benefit from lower raw material costs in 2006.”
“We are looking for 2006 to be better than 2005, and we do think that there will be more opportunities this year,” Mr. Romani said. “We have been positioning ourselves to better compete in the marketplace and expect that we will begin to see a payback on our efforts in 2006. We see a future that has potential in the vehicle and varnish markets.”
“Although we predict more stability in the market in the coming year, 2006 promises to be a year full of challenges,” Mr. Rosenheck said. “However, we are preparing to meet those challenges by introducing some new and exciting vehicle technology.”
“We are very excited about 2006,” said Mr. Jilek. “We think that there is great opportunity for specialty niche companies that want to put in the extra effort for their customers, and that is what we do.”