“In 2010, the Brazilian printing sector ended the year up 4.2% compared with 2009, with revenues of $23 billion,” said Toru Ishii, president of Toyo Ink Brasil Ltda. “The sector's trade balance, a deficit since 2007, registered a trade deficit of $85.8 million in 2010. Most of the graphic arts products imported into Brazil is sourced from the United States (18% of total), China (16.3%) and Germany (10.7%). The graphic arts industry saw an increase of 3.6% in employment in the region.
“In Brazil in 2010, there was a rebound in the service, food and mineral materials sectors, but not so much so for the chemical industry due to imports overtaking exports,” Mr. Ishii added. “The development of Brazil's infrastructure, such as its traffic, subway and bus systems, still lags far behind that of its economic growth.”
Ernesto J. Sanchez, managing director, Sanchez SA de CV, the leading Mexican ink manufacturer, noted that the economy in Mexico showed signs of improvement during 2010.
“Particularly in the market we serve, the recovery of the economy seemed slower than expected,” Mr. Sanchez said. “Regarding the economic crisis the area just suffered, it seems that the countries whose economies are more linked to the U.S., like Mexico, suffered the most. On the other hand, countries like El Salvador, whose exports to the U.S. are not as many, seemed to survive the crisis in a better way.”
“The fiscal results for 2010 reflected less than 1% net gain, but the economy was on an upswing in the fourth quarter, which will result in a 4% to 5% GDP growth in Mexico,” said Mario Arellano, operations manager, Color Resolutions International. “Regional growth along the Mexico-U.S. border is being restrained by the drug war violence. This regional insecurity is preventing foreign investment and market growth.”
“According to the Instituto Nacional de Estadísticas y Geografía (National Institute of Statistics and Geography/INEGI), the Mexican economy grew 5.1% during 2010 (the biggest advance in 10 years), and during the first quarter of 2011, has represented a growth of 4.6% compared to first quarter of 2010,” said Susana Medina, sales manager for Siegwerk Mexico S.A. de C.V. “Printers and ink producers that have had an increase of more than 10% have won purchase orders from their competitors or in the case of printers, they're getting into new export markets.”
“In general, the printing industry displayed negative growth this past year. However, flexo printing resulted with a small, positive advantage,” said George Sickinger, president and CEO, Color Resolutions International. “Within the flexo world, narrow web printing showed remarkable stability against economic downturns.”
Sanchez S.A. de C.V. has expanded its operations throughout Central America in recent years, and this effort is paying off.
“We have been working to increase our presence in Central America in the past years,” Mr. Sanchez said. “There we have good opportunities to grow because in some countries in the area, we are coming from very low market share, and we have the products and the technology customers are asking for.”
Mr. Ishii noted that Toyo Ink made its debut in Latin America in 2010, and is seeing further gains in the region.
“The South American market demands higher quality and a greater selection,” Mr. Ishii said. “As such, Toyo Ink products were well received at the show with many inquiries and leads established. This made for a very successful debut for Toyo Ink in South America.
“Demand for Toyo Ink products has gradually become bigger and bigger in Latin America with inquiries from countries throughout South America,” Mr. Ishii added. “Toyo Ink Brasil Ltda. started to sell sheetfed Inks in Bolivia and Uruguay in 2010, Peru in 2011. Toyo Ink Brasil Ltda. was established in May 2010 in Sao Paulo, Brazil to cater to the growing market and ensure steady supplies of Toyo Ink products in the region. The Toyo Ink Group considers Brazil, its neighboring countries and the surrounding area to be a key growth market and intends to gradually expand the range of products offered in Latin America.
“In June 2010, the Toyo Ink Group exhibited for the first time in South America at ExpoPrint Latin America 2010, a printing material fair taking place in São Paulo,” Mr. Ishii noted. “ExpoPrint was the first major promotional initiative undertaken by Toyo Ink Brasil. Since then, we have been growing steadily every month. Toyo Ink offers the highest quality of ink with unparalleled stability and technical service capability in Brazil and throughout South America. Up until now, we have worked to develop our sheetfed business. Moving forward, we aim to grow other areas of our business as the next step in our expansion plan.”
Key Growth Opportunities
There are plenty of opportunities in the Latin America market. For example, Ms. Medina pointed to Siegwerk’s acquisition of Environmental Inks as potentially opening up the Latin American narrow web segment for Siegwerk.
“With the acquisition of Environmental Inks from Siegwerk Group, there's planned growth in the narrow web market,” Ms. Medina said.
Mr. Sickinger and Mr. Arellano said that capital investment is bringing opportunities to printers.
“The flexo printers have begun to invest in newer equipment to meet export requirements for more color graphics and higher quality printing,” Mr. Sickinger said. “The narrow web market is showing niche growth in beverage and H&B products. Due to increased demand for shrink labels, there has been a flurry of investments in press equipment with UV capacity.”
“The trend for more graphics in packaging and narrow web, along with increased emphasis on productivity gains, is placing more pressure for investment in new print equipment,” Mr. Arellano noted. “The 2-3 color market is shrinking and 4-color process and higher graphics is dominating the market.”
Partnering with customers is important for ink manufacturers.
“Regarding inks, quality, stability and technical service are the key selling points for doing business in the region,” Mr. Ishii said. “In Brazil, our customers are seeking better quality systems for printing as they compete from foreign countries for print jobs. We understand these challenges and work in close partnership with our customers to help them develop and refine their printing requirements. Our technical service staff is on hand to monitor jobs and press performance to help push through jobs with maximum performance and efficiency.”
Raw Materials in Latin America
Higher raw materials prices and supply availability concerns are a major issue globally for the ink industry, and Latin America is also facing the same challenges. Flint Group Latin America announced increases in January, while in February, Sun Chemical Latin America issued price increases on liquid packaging inks, print media inks and chemicals.
“In the last few years, the cost increase of raw materials, added to the lack of stability in supply, has impacted dramatically on our printing industry,” said Claudio Labbé, president, Flint Group, when the increases were announced. “Therefore, following the increases announced by our subsidiaries in the rest of the world, we are taking a similar action for our region."
“With crude oil prices exceeding $90 a barrel, tightness of supply and unprecedented increases in key raw materials, this price adjustment is necessary,” Gregory Lawson, president, Sun Chemical Latin America, said in issuing these price increases. “Some of the most affected materials are the main components of our inks like nitrocellulose and alcohol, acrylic and polyamide resins, gum rosin and tall oil resins, TiO2, and pigments like blue, and carbazole violet among others.”
Ms. Medina said that higher raw material prices and availability concerns are key challenges for ink manufacturers in Mexico, as printers look to hold costs down.
“There's a little bit of uncertainty,” Ms. Medina said. “The lack of raw materials as well as higher prices have generated rough price adjustment negotiations with our clients. Our competitors are living with the same situation, and there's a lot of work beign done on evaluations for clients who are looking for an alternative with a lower price and better performance.”
Expectations for the Coming Year
All in all, ink manufacturers are optimistic about the Latin American ink market.
“Color Resolutions’ recognition has increased throughout the region, and we expect growth to equal or surpass GDP growth by the end of 2011,” Mr. Sickinger said. “However, 2012 is a real concern. Unlike past recessions, it looks like we might be in for a double dip recession that will impact the U.S,. Mexico, and Latin America. Raw material prices have been rising all year, and it has been very difficult to pass them on in a recovering economy.
“In the face of all this, productivity rates have been increasing. Companies have learned to do more with less,” Mr. Sickinger added. “Color Resolutions International has responded to the economic conditions by offering products and services to help printers be more effective in applying color at higher press speeds while achieving higher print quality and a broader color gamut. We have observed that the most successful companies in this economy are the one who seek to get to the ‘next level’ of graphic reproduction and are listening to what the consumer products companies are asking for to boost consumer demand.”
Both Toyo Ink and Sanchez S.A. de C.V. have expanded their operations in Latin Americxa, and they anticipate further growth in the region.
“We aim to not only bolster our offset ink lineup, but also introduce other Toyo product lines to the Brazil market,” Mr. Ishii said. “We expect to see much more sales and marketing activity in South America than the previous year.”
“For the coming year, we expect to take more market share in Central America, where our affiliates are giving good results and proving to be the right way to increase our sale and presence,” Mr. Sanchez said.