The raw material markets have been very challenging since the beginning of the year. Many key material and feedstock producers began the year with depleted inventories and reduced capacities. The recession had caused many producers of specialty chemicals and feedstock to drastically cut back supply when demand dried up in 2008.
After living through a number of years of very low margins, and then making the difficult choices of shutting locations, these producers found with a leaner operation and with supply matching much closer to demand it was possible to improve margins. Consequently, as demand picked up, raw material producers as well as ink producers were forced to increase prices.
In the last quarter of 2010 as well as in 2011, it appears however that raw materials will remain a concern, resulting in further issues with extended lead times, short shipments and severe shortages, thus driving costs up further. The main drivers of this will be:
• Solvent prices will stay respectively, or near, all time highs, due to strong demand and limited capacity.
• TiO2 volumes are extremely low and remains difficult to source.
• Nitrocellulose is short due to the exit of suppliers and lack of wood pulp.
• Prices of acrylic acid and acrylated materials will remain under pressure as strong Asian demand is being sourced abroad.
As distressing as it has been, the rising costs have not been – and will not be – the primary concern. A number of materials will continue to be short in supply and will be difficult to obtain. Several raw materials have already been placed on allocation, restricting the amount available to any single buyer.
“With its worldwide supply and logistics operations Flint Group has however – with very few exceptions – been able to obtain the materials necessary to ensure continuous supply to its customers,” said Jan Paul van der Velde, senior vice president procurement and executive management team member of Flint Group. “Despite this strength of a global, multinational company, the continuous lack of some key raw materials for packaging and narrow web inks may require product adaptations. Flint Group’s technical teams and R&D centers are working in close cooperation with its customers to ensure a smooth transition in case any change in technology is needed.”