Latin America Report

By Jenn Hess, Ink World Associate Editor | 09.02.05

Economic recovery and recent acquisitions by key industry players have turned the spotlight on the Latin America printing ink market.

Although Latin America’s ink industry does not compare to other global ink markets in terms of size or demand, it has become a hotbed of activity for global ink manufacturers. In the past year, BASF, Sun Chemical and Flint Ink have made acquisitions to increase their market share in this region. Nazdar recently opened a new facility in Mexico, while Sicpa plans future investments in new manufacturing activities in this region.

“Historically the region has been known for a high number of local manufacturers aligned/related to global players,” said Juan Carlos Salaberry, Sicpa’s managing director, South America. “This situation is changing rapidly as the global players are more focused and there have been important acquisitions; from the beginning of 2000 the regional market is led by international companies, among them Flint, Sun Chemical, Sicpa and BASF.”

Why the sudden interest in this part of the world? Market Tracking International (MTI London) estimates that the Latin America printing ink market is valued at $650 million. Brazil continues to be the dominant player in this region, with Mexico close behind. (For a more detailed breakdown of the market, see p. 28 in the print edition.)

“Certain parts of Latin America are among the fastest growing ink markets in the world,” said Ursula Stevens, vice president and general manager, Sun Chemical Latin America. “The recent Brazilian currency devaluation, however, has affected growth in that country, as well as Argentina and Chile. These effects will take some time to recover.”

Brazil has already begun to show signs of economic recovery. “In Brazil, we still have low inflation rates and the politics are doing well,” said Dr. Thomas Peter Schiele, BASF’s manager, South America. “The economy presents a reduction in the interest rates and will have a slight increase this year, and in 2001 the growth will be higher. Big investments have been done in Brazil. The tendency is a growth in the population income that will increase the demand for packaging and paper with positive effects for the printing ink business in the region.”

“Only Brazil, after the devaluation of its currency in early 1999, shows signs of recovery of the economic activity, thus impacting favorably in the printing inks market,” said Mr. Salaberry. “The rest of the region remains stable after the contraction of activities suffered during 1998-1999.”

As the economy continues to get stronger, it appears that the Latin American ink market will only get larger. “In the region, the print shops have been making high investments since 1994 in new printing machines (mainly in web offset, sheetfed and flexo machines) and equipment,” explained Dr. Schiele. “The labor force is receiving training too, which is very important. In the Brazilian market for example, the editors have been launching new magazine titles, newspaper issues are increasing and the market has a large potential to increase the volumes because we still have, in Brazil, one of the lowest rates of the region in paper and packaging consumption per inhabitant.”

Movers and Shakers
Acquisitions have been the name of the game in the global ink industry, so why should Latin America be any different?

Flint Ink has greatly expanded its Latin America portfolio through three major acquisitions. Included in Flint’s acquisition of the Alper Group is Kromos, a Mexico City-based manufacturer of water- and solvent-based inks. Comphanie Quimica Industrial Brasileirao (CQIB), which Flint acquired in November 1999, is a manufacturer of inks for news, packaging, publication and commercial printing inks that is based in Sao Paula, Brazil. Also new to the Flint family is Polychem S.A., an Argentina-based manufacturer of packaging inks.

“Flint Ink operates in Argentina, Brazil, Chile, Colombia, Ecuador, Peru,
Venezuela, Costa Rica and Mexico. The recent acquisitions of CQIB, PolyChem and Kromos have added manufacturing capabilities to our existing facilities in Mexico,” said Kathy Marx, vice president of marketing, Flint Ink Corporation. “These acquisitions have enhanced our local manufacturing presence in Latin America, and significantly increased our visibility in the packaging market, an area that we believe has high growth potential.”

In January, BASF acquired a 92 percent stake in Tintas Graficas, the largest printing ink manufacturer in Chile. Tintas Graficas, which BASF has held a minority stake in since 1985, manufactures inks for offset litho and packaging alongside other products. New production facilities for offset litho and packaging inks are currently being built at Pudahel, near Santiago de Chile. The plant will commence production at the end of 2000. According to BASF, Tintas Graficas holds a 70 percent share in the Chilean printing ink market, and also exports its products to many other South American countries. “This acquisition will make BASF the market leader for printing inks in Chile and improve the company’s strategic position on the South American continent,” said Dr. Schiele.

Sun Chemical’s presence in Latin America was also strengthened with two acquisitions – Coates Lorrilleux and Tintas S.A.

With the Coates acquisition, Sun expanded its Latin America operations into Jamaica and Trinidad.

Sun has also purchased a 50 percent interest in its subsidiary Tintas S.A., a Colombian ink manufacturer with ink sales and production facilities in Colombia, Venezuela, Ecuador and Peru.

“The most significant aspect is the fact that Sun Chemical now has a presence in the Andean countries, which we feel is essential to our growth,” said Ms. Stevens.

Ink manufacturers haven’t been busy just on the acquisition front. Expanding facilities is another way that the companies are increasing their presence in this region.

Sicpa operates manufacturing and service operations in Brazil, and has customer service subsidiaries in Argentina, Chile and Colombia. Its products are also distributed in Peru, Uruguay and Venezuela. “The accelerated growth of Sicpa’s activities in the region, apart from ongoing acquisition negotiations, will be supported with new investments in manufacturing activities, which will become operational by the second quarter of 2002,” said Mr. Salaberry.

BASF has invested more than $3 million in a new production site in Brazil for packaging and publication gravure inks. The company moved from Caieiras to a facility in Sao Bernardo do Campo that, according to the company, is the biggest and most modern ink production site in the South American continent. “Our presence in the South American countries includes offices and a dealer network covering all the region that sells inks for the print media industry and printing plates imported from the European mother plants,” said Dr. Schiele.

BASF is the first ink manufacturer in the region to offer the bonded warehouse service to their customers, according to Dr. Schiele. “It is a warehouse distribution center located in Guaruja, Sao Paulo, closer to main Brazilian customers, which can supply imported inks directly to customers and other South American countries where we have locations with high flexibility,” explained Dr. Schiele. “With this service the company is able to supply imported inks for printing media (newspapers, heatset and sheetfed consumers) segments like a local supplier. Problems concerning vessels arrival, purchase of large amounts of inks and storage will not disturb BASF customers anymore. We have been working to improve the competitiveness of our customers.”

Markets that BASF intends to increase its position in include packaging and news inks. “BASF intends to maintain the growth in the market that it had in the last few years, mainly in the coldset newspaper segment in which we had our entrance recently,” said Dr. Schiele. “We will focus our growth in the sheetfed, heatset and coldset through high quality imported products. In packaging we will supply high quality inks through local production plants with the latest technology in production and developments in Europe, in-plant concepts and a new range of services to help our customers to achieve high competitiveness in their markets.”

Nazdar recently opened a new branch location in Mexico City, Mexico. Offering a comprehensive line of high quality Nazdar UV and solvent-based ink products for industrial and graphics printers and plastisol inks for textile printers, Nazdar Mexico is headed up by general manager Javier Gomez.

Market Demands
Just like the markets in other global regions, gravure and flexo are dominant printing processes in Latin America. “The inks type market is similar to those of other regions: 55 percent of consumption for gravure/flexo applications, 30 percent for offset printing technologies and the rest distributed in other applications,” said Mr. Salaberry. “In Brazil, gravure printing is most common due to its great population and the dimension of print jobs.”

“Flexo, sheetfed and heatset are showing the highest growth rates at the moment and in the future this movement will continue,” said Dr. Schiele.

Flint’s recent acquisitions will especially be visible on the flexo front. “Flexo packaging is a strong – and growing – market in Latin America and we expect to increase our share of that business as a result of the recent acquisitions,” said Ms. Marx. “We also have a strong base in the newspaper and publication offset ink markets, having built that business over a number of years.”

Digital printing is a growing global market, and has already begun to reach into Latin America. “We saw a high demand and increase in the digital printing area but it is very important to remember that this technology managed to occupy a niche market, which did not exist before,” said Dr. Schiele. “There are trends for a speed increase in heatset and sheetfed printing and in the near future the digital technology is going to get a bigger share in small and mini volumes of sheetfed.”

“The demand for digital applications is increasing everywhere, and the fact that Flint Ink has a digital group allows us to explore these opportunities,” added Ms. Marx.

Screen ink is another growing niche market. “The screen ink market in the region grows with the application of UV technology,” said Dr. Schiele. “We expect the growth of the application of UV in other technologies like sheetfed UV and flexo too.”

Looking Ahead
Manufacturers who spoke with Ink World said they expect Latin America’s printing ink market to continue to grow as the economies become stronger. “It is important to remember that the market in the region is not a mature market and some time will have to pass to reach the maturity of the markets of big countries like the U.S. and Europe,” said Dr. Schiele. “The investments were higher in the last years and will not stop. Some print shops invested a high amount in the last few years. We saw numbers that show that in the Brazilian market more than 70 web offset printing machines and 280 sheetfed offset printers were acquired in the last four years.”

Brazil continues to recover from the devaluation of its currency in early 1999, which is impacting other countries as well. “In an analysis of the recovery of the economy since the currency devaluation in the Brazilian market that affected Argentina and Chile, it is possible to realize that we have a large potential for growth,” said Dr. Schiele. “This makes the South American market very attractive for international manufacturers which still did not have a relevant presence in the market. The competition tends to grow in a closer future and the pressure for prices could start.”

“All countries in this region are on the verge of bringing new technologies and creating mergers,” said Ms. Stevens. “The economic situation in Brazil created some bankruptcies, which will slow down the recovery process for the entire region. But we do expect the pendulum to swing back in a couple of years.”

Further involvement of global printers will also help the ink industry expand. “In the printing market, world leaders, by means of acquisitions or new investments, are changing the regional scenario,” said Mr. Salaberry. “For example, the publications market is already led by companies of NAFTA origin, such as R.R. Donnelley & Sons, Quebecor and QuadGraphics. In the packaging area this process is also expected, but with more European origin participants.”

“We see signs of improvement and are optimistic – not only because our business will benefit, but also because stronger economies should help improve the general standard of living,” said Ms. Marx. “That will be good for everyone.”