“The North American flexo market did ‘OK’ in 2010,” said Mike Impastato, vice president strategic marketing, Packaging and Narrow Web, Flint Group. “It was a much improved year over 2009, but did not reach its pre-recession levels. This is mostly due to the ramping up that was seen as the economy began to pick up through out the year. The third quarter was better than Q1 or Q3. Of course flexo is fortunate in that a good bit of flexo volume is food related which tends to soften the cycles we see in the economy. In addition, flexo's short run capability was very supportive in the recovery. With the indecision about building inventory we saw in the early stages of the recovery, most print buyers wanted to hold those early purchase levels to a minimum. This was a good fit for flexo.”
“In North America, flexo did okay with modest growth in solvent- and water-based inks and more robust growth in radiation curables,” said George Sickinger, president and CEO, Color Resolutions International. “Latin America seems to be stronger and less constrained by the global recession.”
“Flexo printing continues to grow and prosper, not only in North America but around the world,” said Joe Kelly, vice president – technical director, INX International Ink Co. “A group of dynamic and innovative suppliers, coupled with effective trade organizations, make flexo very formidable.”
According to Tony Renzi, vice president of product management for liquid inks, North American Inks, Sun Chemical, overall, the flexo market saw very moderate growth during the past year, tempered by the economic recession. “We expect to see a similar level of growth throughout 2011,” he said. “One factor that has negatively impacted the overall market has been a gradual decline in the corrugated packaging market since peaking in 2006. Our flexo customers are relying on Sun Chemical to maintain an intense focus on value and supporting them in managing their cost. It is our goal to help customers grow their businesses and succeed in this challenging economy and in times beyond. We strive to do that through quality, service and innovation in ways that drive productivity and enhance value.”
“There was steady recovery of volumes in flexible packaging, labels and folding cartons, although with continued pressure on margins,” said Martin Hambrock, vice president Canada and flexible packaging market leader for Wikoff Color.
“In North America, flexo was already the dominant printing application, especially for the packaging industry, and many printers are now trying to catch up with gravure printing quality in flexo than going to try on gravure printing,” said Shingo Harako, marketing manager, printing ink division, liquid ink sector of Toyo Ink America LLC. “In European countries, flexo printing has been expanding its share, and it is said that it has exceeded the share of gravure. This trend is also seen in Asian markets, and even in Japan, which is ‘gravure country,’ where more than 95% of flexible packaging is printed by gravure, they have started working on flexo printing in flexible packaging, though that movement is still limited.”
Improvement in the Market
Although the market continues to improve, raw material issues continue to present challenges for the flexo ink market.
“The market continues to strengthen, so we have seen solid market demand,” Mr. Impastato noted. “But, the biggest issue in the market currently is the cost and availability of raw materials. Quite frankly this is the most difficult raw material market I have ever seen. Where in the past we saw cost increases in the mid single digits maybe once every year or so; now we are seeing double digit cost increases coming almost back to back on some materials.
“Our strong economy in North America had always been a prized market for foreign suppliers,” Mr. Impastato added. “It was big and growing market and suppliers fought for share. Now we see other markets in emerging nations growing at three to four times that of North America. These other markets are competing for the available raw materials. North America now is not the only market that is attractive to these chemical suppliers. It has gotten to be a bidding war for some materials. And it is certainly a sellers market for the time being. This is stressing the printing market as it struggles to pass those costs through the supply chain. We are seeing evidence every day that the printers are moving the costs through because we see CPC and retailers announcing price increases. It is not necessarily good to have cost inflation, but it is healthy for the industry to get those costs past through rather than having to absorb them.”
“In the last few months of 2010 and the first quarter of this year, yes,” Mr. Kelly said. “The economy appears to be on the rebound and the consumer is less cautious than a year ago.”
“For the flexo market, our answer is a definite maybe,” said Dr. Don Duncan, director of research & development at Wikoff Color. “In flexible packaging, there is a continued consolidation of mid-tier printers, but with limited overall growth. There is also continued pressure on lower value packaging, particularly the PE bag markets. Raw material availability and raw material price increases were significant issues during the year. In the label area, we have seen some consolidation among ink suppliers. The overall market is no longer in decline, and that may meet someone’s definition of ‘improvement,’ but the industry is nowhere near a strong place.”
“The economic downturn clearly impacted our customers,” Mr. Renzi said. “Many of our customers have adjusted their manufacturing by shifting man hours and the number of days worked each week. In today’s economy, our customers want to be more efficient and are increasingly turning to high speed presses to help them operationally realize this efficiency. These presses provide additional challenges for inks and coatings, and we are meeting those challenges.”
“Yes, the economy is improving and business is slowly picking up, but it is far from robust,” Mr. Sickinger said. “The raw material increases are squeezing margin and customers are reluctant to accept price increases in this stage of the economic recovery.”
“If the purchase of capital intensive printing presses is any indication of improvement, then yes I see both improvement and additional high tech flexo printing capability,” said Jim Newkirk, general manager, Toyo Liquid Ink Sector, Toyo Ink America.
“The combination of press equipment, prepress, plates, sticky back material and improved process ink chemistry continue to push the envelope,” added Scott Carey, technical sales representative, liquid ink sector for Toyo Ink America LLC. “However, without the assistance in the press room by the vendors of these processes, many customers fail to push the limits of their new equipment purchases. Future partnering with these associated vendors either directly or indirectly will impact the abilities of the vendor and the customer to achieve the target.”
Despite the challenges presented by raw material costs and supply issues, flexo ink manufacturers expressed optimism for 2011 and beyond.
“We expect to see continued pressure on raw material availability and costs, which will challenge margins, accompanied by some continued overall recovery in volumes,” Mr. Hambrock said.
“In mid-April, I paid $4.19 a gallon for regular grade gasoline,” Mr. Kelly said. “If record high prices for fuel, energy and petroleum feedstocks continue, it will drive consumer demand downward. Otherwise, if this is just a blip then expectations are that flexo will continue strong across all markets.”
“At Color Resolutions, we are very optimistic about 2011 and beyond,” Mr. Sickinger concluded. “We see more rapid change ahead, particularly in the equipment areas that will need ‘smarter’ inks and coatings to match higher productivity and quality demands.”
“We are expecting a great year with exceptional opportunities for companies that can perform at a high technical level with consistent products and dedicated press side support utilizing manufacturing methods that focus on being a low cost producer of quality, consistent flexo inks,” Mr. Newkirk said.
“I expect 2011 to be a solid year, but growth will be modest,” Mr. Impastato said. “The economy is still fragile and everyone is being careful. Energy costs are high and predicted to go higher. This will likely hurt consumer spending in the areas that support the printing industry. Fortunately flexo is strong in the food packaging and label markets so this will help to modify some of the dips and support modest growth.”