Additives play a crucial role in the formulation of inks. Whether it is a wax, a defoamer or countless other additives, additives give an ink essential performance enhancements.
The past year has been a challenging one for many ink companies, as higher raw material costs dominated the first half of the year and the economic downturn sent the ink industry into a slump at the end of 2008. As a result, additive manufacturers also felt the impact.
“Like all industries, the additives industry is suffering from the current downturn,” said Patrick J. Heraty Jr. market segment manager graphic arts coating additives and specialty resins/Tego, Evonik Goldschmidt Corporation. “The ink industry showed more resilience than the coatings market in 2008 but it still had some pullback. Announcements of reductions in advertising and newspapers reducing their size negatively impacted the industry.”
Carol Durgan, regional marketing manager, graphic arts for Lubrizol Advanced Materials, Inc., noted that 2008 was a challenging year for many ink makers.
“We began to see the downturn in the economy and its effects on the printing industry,” Ms. Durgan said.
Joon Choo, vice president of Shamrock Technologies, said that 2008 started out well for most in the industry, as growth and investment plans continued from prior year growth.
“After September, as the economic downturn gained momentum, we have all had to rapidly adjust to minimize the logistical impact of inventory level fluctuations for various product lines,” Mr. Choo said.
“The economic slowdown has had a very significant impact on the printing industry, and this affects almost every aspect of our business,” said Chris Halvorsen, global marketing manager commercial, Hexion Specialty Chemicals. “Additives are no exception as they are used in all ink applications, which hurt along with the printing industry.”
“In 2008, the ink additives market was soft but stable,” said Sel Avci, marketing manager, industrial coatings and inks for Elementis Specialties. “We have not seen major declines in the ink markets as we have seen in the coatings sectors. Overall, the ink market was steady but showed decline due to the general economic conditions in 2008.”
“Our photoinitiator business grew in 2008 despite the economic downturn,” said William Wagner, business manager, inks and printing, Americas at Ciba Corporation. “Companies that had previously made the commitment to UV technology saw their business grow as more business shifted away from conventional solvent- and water-based technology.”
Andrea Napalowski, marketing manager NAFTA, coating additives and specialty resins/Tego, Evonik Goldschmidt Corporation, said there are some signs that R&D activity hasn’t been impacted as much as in earlier downturns.
“In the past, an economic downturn automatically meant R&D budgets were slashed and companies were downsized,” said Ms. Napalowski. “Presently, more companies are taking a long-term view that the economy is cyclical and that they need to be ready to compete when conditions improve. We actually have seen an increase in interest from the research community.”
However, Ms. Napalowski added that on the other side, fewer releases of printing media in favor of the internet as well as the recent consolidation of newspapers, paired with the overall poor economic performance of the past couple of months, make business very tough on the smaller ink companies. “We were certain that some will find it very difficult to find the resources necessary keep up with the changes the market is demanding,” Ms. Napalowski said.
Mr. Halvorsen said that 2008 was not a bad year for additives, as printers were more demanding than ever before in their quest for performance.
“Now, more than ever, the ink industry is compelled to obtain the highest degree of performance from their additive components to produce quality dispersions,” Ms. Durgan added. “Additives increase the wetting and dispersibility of pigments utilized in the ink industry, which produce an ink with stronger color strength. This allows ink makers to maintain or reduce their overall costs and improve the performance of their ink system.”
What Ink Manufacturers Need
Ink manufacturers are being asked by their customers to watch costs while providing better properties. Ink companies, in turn, are looking to additives suppliers to help provide solutions for printers.
“As the industry continues to demand performance products at lower total costs, the need for additives that can enhance value is increasing,” Mr. Halvorsen said. “With the consolidation of ink product lines and with fewer raw materials being used to make ink, the need for additives as a means of differentiation becomes more important. For example, water fighting additives that provide on press lithographic stability continue to be of interest. Additives that enable the ink to dry but also reduce skinning resulting in less waste are of significant value. Rheological control additives are more important now than ever before.”
“Ink manufacturers have always looked for the best cost/performance in their raw materials,” Mr. Heraty noted. “They continue to seek additives that help their products meet and exceed their customers’ expectations.”
“Rub resistance and slip are the key properties in the additives Shamrock supplies,” Mr. Choo said. “The instant need for a ‘cost-down’ mentality as customers reacted to the economy refocused our technical and development efforts to meeting short-term requirements. Combining recent technology enhancements with more efficiently performing products opened up opportunities in an otherwise downtrend environment.”
“The majority of our products are performance additives such as rheology control agents, wax dispersions and surface active agents such as dispersants and flow control agents,” Mr. Avci said. “These additives will enhance the key ink application properties during high speed printing processes. For example, organoclays are utilized to provide thickening while controlling the misting properties of the oil-based inks on the press. The defoamers and flow control agents are utilized to improve the applications properties of liquid inks during manufacturing or application.”
“The key properties sought by ink manufacturers include increased pigment concentration, improved rheology and stability, and optimal color development,” Ms. Durgan said.
One area where additive manufacturers can help is assisting ink manufacturers develop products that run faster on press.
“Ink manufacturers are looking to develop products that allow their customers to be more efficient in their operations,” said Mr. Wagner. “This could translate into printing at higher speeds without loss of quality of the final product. Therefore, the ink manufacturers look to their suppliers to offer products that can help them fulfill that need.”
Ms. Napalowski said that one of the main challenges is the use of chambered doctor blade presses.
“This application generates increased foam when the ink is applied to the substrate,” Ms. Napalowski said. “Besides the foam development, there are a couple of other properties like dispersing and stabilizing the pigments in the formulation. Overall, the cost/performance ratio has to meet the ink manufacturers’ needs; performance is rarely neglected with keeping the cost position at bay.”
Mr. Kalmikoff said that innovation will differentiate additives companies from low cost competitors.
“Customers are willing to look at additives if there are new, innovative and cost effective ways of producing products with their use,” Mr. Kalmikoff said. “Otherwise these days, we see the big boys in dispersants, surfactants and wetting aids being challenged more and more by lower cost ‘copy cat’ products from emerging markets.”
Raw Material Costs
A year ago, driven by the dramatic increases in the price of crude oil to upwards of $140 per barrel, raw material prices skyrocketed and availability became limited. Today, crude oil prices have declined to $40 per barrel, which has stabilized costs. In turn, that allows additives manufacturers to catch their breath.
“We are keeping our costs in line due to stabilization in major feedstocks in the industry,” Ms. Durgan said. “We see no key issues that will affect the additives industry.”
Mr. Choo noted that like others in the industry, Shamrock struggled through 18 months of price increases and severe shortages of waxes, although these concerns have stabilized.
“With the onset of the economic downturn, both pricing and supply issues have stabilized, opening the door to better planning and more reasonable acquisition factors,” Mr. Choo said.
“We have all experienced the significant increase in raw materials and in certain areas we are now seeing decreases,” Mr. Halvorsen reported. “ For the additives industry and the additives formulator, the challenge is to have a consistent source of product and provide consistent product performance.”
“Over the past decade we have encountered a steady increase in raw material and energy costs and this is still the case,” Ms. Napalowski said. “Most additives suppliers have passed these impacts on to their customers on a regular or irregular basis. However, it should be mentioned, that the cost of an additive contributes only a small amount to the final formula cost, depending on dosage levels. As a strategic resource, Tego keeps additive costs stable for longer periods before passing it on to customers, offering reliable planning data to their business partners in the ink industry. We are not expecting any impacts on the supply side.”
Mr. Avci and Mr. Wagner said there is still some volatility in the raw material marketplace, driven by supply shortages.
“The raw material prices continue to be volatile,” Mr. Avci said. “Some of the key raw material prices have not come down due to the tightness in the market. We are still experiencing price fluctuations in the raw materials derived from petroleum/oil-based chemicals while some of the other key raw materials have come down. We are working very closely with the ink manufacturers to offer them the products for their specific application requirements.”
“Concerning some specialty additives, there are relatively few suppliers of key intermediates,” Mr. Wagner said. “Companies like Ciba which have strong relationships with those suppliers allow them to continue with uninterrupted supply of product and in cases hold the price of these materials down. These relationships are key to ensure the supply of finished goods is uninterrupted.”
Mr. Kalmikoff said that pricing of raw materials is likely to become more competitive if demand continues to decline.
“Higher raw material costs are always a factor, especially on the specialty side of the business, where alternative uses for various raw materials creates vying for access to those raw materials yielding higher base costs,” Mr. Kalmikoff said. “In terms of waxes for 2008, we saw big spikes upward last year and prices are slow to coming back on ethylene and paraffin-based products. If 2009 usage declines, competitive pricing may become more active depending on capacities and economics.”
Considering the global, economic conditions, the additives industry is facing plenty of challenges in the coming year.
“I would say the most difficult challenge is the state of current global economic conditions,” Mr. Avci said. “As long as the global economy remains soft, we will continue to be impacted by lower demand on ink products due to the decline in the advertising and overall printing demand. We are dependent on the ink maker’s business and hope that we all come out off the slump very soon.”
“As in all raw material component marketplaces, the challenge is to continue to create value to your customer while differentiating yourself from the competition,” Mr. Kalmikoff said “Our parent, Keim-Additec Surface GmbH, is a very innovative company and continues to invest in resources to provide the types of products and attentive service that specialty chemical companies should provide.”
Ms. Durgan said that one key area is developing additives for organic pigments for the inkjet business.
“In the coming years, I see organic pigments becoming the colorant of choice for the digital market,” Ms. Durgan said. “Our challenge will be to provide additives with enhanced wetting and dispersability to provide stable colorants for the digital market. In addition, we see continued growth and expansion of additives in the UV/EB market.”
Developing environmentally friendly chemistries is also an area that additive manufacturers are examining.
“Ink manufacturers will continue to develop formulas with ‘green’ technology,” Mr. Wagner said. “This move away from VOC is consistent with what has been developing over the past seven-plus years. In addition, as formulas are modified, manufacturers are optimizing their systems to reduce both their complexity and to reduce cost. This in turn will drive the additive supplier to develop and offer products that meet or exceed the performance the manufacturer was accustomed to and to offer them in a ‘green form.’”
In line with the environment, the European Union’s REACH regulations are a challenge to additives suppliers.
“Increasing regulations, from lower VOC requirements in the US to the new REACH requirements in Europe, pose one of the most difficult challenges to the additives industry,” Mr. Heraty said. “While very important to maintain and improve our environment, these multiple regulations often conflict with each other and make it difficult to meet the customers’ requirements while being a good corporate citizen.
“To respond to these challenges, Tego continues to develop new environmentally-friendly products for the water-based and UV ink markets. We utilize cutting-edge technologies that are recognized as environmentally safe while still offering the best possible performance in our customers’ formulations. We support our customers’ environmental requirements as well by supplying them with the information they need to meet their reporting obligations,” Mr. Heraty said.
“There are a number of different new requirements that need to be met by ink and coating manufacturers alike,” Ms. Napalowski added. “Most of these requirements center on environmental aspects like low to zero VOC, low to no odor, APE-free, and formaldehyde-free, others are linked to the REACH regulation. On the environmental side, there are several regulations worth mentioning: SCAQMD and low VOC regulations initiated in California and spread out on a national basis play an important role in a formulator’s world.
“Tego’s philosophy is to offer a broad product range tailored for waterborne or UV ink formulations,” Ms. Napalowski noted. “We can offer additives that meet the aforementioned requirements like APE-free, low VOC, etc. Whereas the real impact on REACH has not been unfolded to a full extent yet. The pre-registration deadline ended December 1, 2008 and the following transition periods will embed challenges for small- to mid-cap companies. Raw materials might disappear due to missing registration with REACH and will force customers to switch to different additives. Fortunately, Tego has taken the necessary actions to pre-register most of the affected materials.”
Mr. Choo sees companies cutting back on development, which will be a costly decision in the long run.
“In this economy, many additives suppliers are cutting back across the board,” Mr. Choo said. “This greatly impacts the development efforts needed to sustain improvements and the breakthroughs necessary to meet customers’ process and material changes. Being a technical leader in what we do, our biggest challenge rests with the delivery of new developments under tight budget conditions.”
When some ink companies are looking to cut costs, they examine all ingredients, including additives. However, additives enhance the inks’ properties.
“With the continued pressure to reduce costs and to meet the performance expectations, ink formulators will look to additives to bring additional value by correcting technical problems and bridge performance gaps within a given product line,” Mr. Halvorsen said. “Ink additives are a critical component of our product portfolio and we will continue to invest in resources to support the development of those products.”
“Additives improve various properties of the ink, and you can’t really take them out,” said John Jilek, president of Inksolutions LLC.
“Actually, rather than try to cut additives out of their formulas, ink manufacturers will likely need to put more additives into their formulas,” noted Dan DeLegge, vice president of Inksolutions LLC.
Expectations for 2009
With the state of the economy the way it is, it is difficult to get much agreement as to when a recovery will begin, and additives manufacturers are understandably unsure of what is coming in the next year.
Mr. Kalmikoff said that he feels that 2009 seems to be a “wait and see” year as customers continue to make cutbacks which tends to slow growth opportunities in favor of internal retrenching.
“As the economic stimulus gains traction, the second half of 2009 could have a more optimistic outlook than the first half,” Mr. Kalmikoff added.
“We expect that the economy will bounce back in second to third quarter time-frame but it will not be at the levels of previous years,” Mr. Avci said. “We are seeing more and more customers are coming back to replenish their depleted inventories.”
“We believe the ink industry will return to ‘normal’ by the fourth quarter,” Mr. Wagner said. “For the first three quarters of the year, we expect the entire value chain to take out cost wherever possible. Ciba is taking the appropriate measures to contain costs while keeping a watchful eye on the turnaround of the business because we desire to be in position to support our customers when this occurs. We expect some suppliers will not be able to support future business because of short-term decisions on inventory and cash management.”
“It’s going to be a tough 2009,” Mr. Jilek said. Everyone is paying slower and you have to keep a close eye on your receivables.”
With that in mind, additives manufacturers expect slow sales for the most part in the coming year.
“Our projections are for ink demand in 2009 to fall short of that in 2008,” Mr. Halvorsen said. “There will be greater pressures for companies to run more efficiently in order to remain competitive in a contracting market.”
“We expect to see slow to stable sales in our existing markets and an expansion in new and developing markets,” Ms. Durgan said.
Mr. Heraty and Ms. Napalowski both said they expect 2009 to be a challenging year, although they see opportunities as well.
“The economic slowdown will certainly impact additives and ink manufacturers alike,” Mr. Heraty said. “But there are still opportunities to pursue. The companies that best respond to their customers’ needs will be among the first to break out of this slowdown.”
“We might not have seen more than the tip of the iceberg yet,” said Ms. Napalowski. “However, we continue to focus on offering our knowledge and expertise as a strategic resource to our partners in the ink and coating industry. With our knowledge and expertise pool, we are confident to be the first one out of the block when the turnaround kicks in and our partners in the ink and coatings industry are looking for a reliable business source.”
“We expect 2009 to be a watershed year for our customers and the industry,” Mr. Choo concluded. “Most expect the downturn to be global in scope and extended. Global-based suppliers and customers will need to work even more closely to optimize mutual strengths and competencies for mutual survival.”