The Asian Ink Review

By David Savastano, Ink World Editor | 09.06.05

Spurred by growing populations and surging exports, the printing industries in India and China are rapidly expanding, which is drawing increased attention from printing ink manufacturers.

Discussing the Asia Pacific region as a whole is a rather difficult challenge. After all, there are several distinct countries in the region, which have their own unique perspectives and economies.

What can be generalized is that the economic concerns that have plagued the region as a whole are beginning to abate, thanks to growing export markets. What also is clear is that there are two burgeoning economies – China and India – which are the fastest-growing countries in terms of population and wealth in the world.

Typically, officials say that the printing industry grows at a rate slightly higher than the gross domestic product (GDP), and with an increase in exports from China, printing is on the rise. That growth has ink companies scrambling for position.

“The ink market closely follows GDP, which should be 6 to 7 percent growth,” said Alan Henshaw, global marketing manager for Johnson Polymer. “Packaging is led by exports, and countries are trying to export their way out of economic problems. The export market demands packaging of high quality.”

For the purposes of this story, Ink World is looking at the Asia Pacific region as four distinct areas: Japan, China, India and Australia. Each of these areas have their own unique circumstances, which goes a long way toward explaining their economic growth.

General Trends
There are a number of interesting trends in the region as a whole. In the next five years, officials estimate that the region will show growth ranging from 10 percent in China/Taiwan and 8 percent in South Asia to 6 percent in Southeast Asia and 2 percent in Oceania. Still, economic concerns are a problem for the region as a whole.

“Throughout the Asia Pacific region, we’re seeing slowing economies,” said Jim Bitterle, president of Flint Ink Asia Pacific. “The degree of deceleration varies on a country by country basis. For example, Australia, Taiwan, Indonesia and Singapore have all slowed dramatically. In New Zealand, we’re just now seeing the beginning of a slowdown, while in China, we haven’t seen any signs of a slowdown. On the contrary, China continues to grow nicely.

“The biggest trend we see is related to the strong U.S. dollar,” Mr. Bitterle continued. “It has become very difficult for suppliers to provide U.S.-sourced products at commercially acceptable pricing levels. In essence, the U.S. dollar’s strength has made U.S. products uncompetitive in Asia Pacific. Consequently Asian- and European-sourced products are displacing U.S.-sourced products at a rapid pace. Within Flint Ink, we’ve shifted much of our production to Flint Ink Europe and Flint Ink Asia Pacific.”

In China and India, where demand for quality for both the expanding domestic and export markets are growing, sheetfed ink sales are increasing at 10 percent, and color pages for newspapers are also rising. Packaging is also an area of strong growth.

“At this time, packaging appears to be the most robust segment,” Mr. Bitterle said. “Regionally, packaging is strong and appears to have a nice growth trend. Conversely, web heatset and coldset markets have slowed noticeably.”

Environmental issues are also an important topic, particularly in Japan, where the major ink manufacturers are working with water-based and low VOC inks, and flexo is starting to make in-roads on gravure in packaging.

Here then, in depth, are the key nations within the Asia Pacific: Japan, China, India and Australia.

Japan is a crucial center for the printing ink industry, as a quick look at the top international printing ink companies attests. In terms of sales as reported in Ink World’s Top International Companies report (November 2000), the largest ink company worldwide is Dainippon Ink & Chemicals (DIC) and its subsidiary, Sun Chemical. Toyo Ink is the third-largest ink company, while Sakata Inx is fifth in terms of sales. Tokyo Printing Ink (seventh), Dainichiseika Color & Chemicals (11th) and Inctec Inc. are also headquartered in Japan.

The strategic alliance between Toyo Ink and Sakata Inx has already led to key efficiencies, including combining logistics and setting up an OEM-based production arrangement. Research is another area of collaboration.

The Japanese economy has been improving, but competition is strong among these companies for the country’s estimated $1.8 billion ink market. These companies are not just competing in their home nation, but are huge players throughout the Asia Pacific region, and in some cases, worldwide. For example, Sakata Inx has added production facilities in Thailand and Malaysia this year.

As for Japan’s domestic sales, gravure remains the dominant process, as cylinder costs are fairly low. Yoshihisa Kawamura, senior manager, sales & marketing department, printing inks division for Dainippon Ink & Chemicals, said that quality remains most important, which explains the strength of gravure.

“Customers are very demanding in quality,” said Mr. Kawamura, who added that heatset is expected to grow in the near future.

Environmental concerns are also critical. DIC introduced Naturalith 10, a soybean oil-based ink with less than 1 percent VOC. Toyo has put much R&D work into creating a VOC-free sheetfed ink as well as Leostep, a VOC-free total printing system. Sakata Inx is emphasizing its new water-based ink lines, as well as environmentally friendly commercial offset and news inks.

Toyo Ink and Sakata Inx have also created toluene-free gravure inks. Research and sales of UV and EB inks are also continuing to increase.

With 1.4 billion residents, China is by far the largest nation in terms of population, and it should come as no surprise that it is a tremendous growth market for products. To meet the need for these goods, packaging plants, many of which are run by multinational corporations, are extremely busy. These companies expect consistent quality. In particular, sheetfed inks are expanding rapidly, with ink industry officials predicting 10 percent growth in that segment.

“China is the only robust Asia Pacific market at this time,” Mr. Bitterle said. “China is having its own industrial revolution, and is somewhat impervious to regional market conditions. Having said this, I’m sure China’s growth would be better if the global economy was stronger.”

“China is a dynamic market,” Mr. Henshaw said. “It is the engine of growth for Asia, and it is stimulating lots of demand for printing. The nation is a huge importer of kraft paper stock, which it prints and then exports. The ink industry is still rapidly growing, particularly on the eastern seaboard.”

“There are many global companies coming to China, and demand is increasing,” said Hiroshi Isozumi, director of the graphic arts group at DIC. “They want the same ink.”

“China has seen the best growth,” said Mr. Kawamura. “The standard of living is improving in China, so there is great opportunity.”

Mr. Henshaw added that internal demand for quality packaging in China is growing rapidly, particularly among the middle class.

Ink companies see an excellent opportunity there, and are working to add facilities. The Chinese ink industry is led by a group of international companies, including Toyo Tianjin, SICPA, Coates/DIC and Hangzhou Toka. Mr. Henshaw said that the Chinese ink market is expected to grow by 8 percent this year, largely due to the major export market.

The growth of the Chinese printing ink industry has been, in a word, spectacular. Ink World estimates (“Foreign Joint Ventures in the Ink Industry in China,” October 2000) show that the industry has grown from an estimated volume of 21,000 tons in 1980 to nearly 190,000 tons in 1999.

In order to meet increasing demand, joint ventures have been set up throughout China.

Hangzhou Toka Ink Chemical Co., Ltd. is co-owned by Hangzhou Printing Ink Factory, T&K Toka Ltd. (Japan) and the Bank of China Hangzhou Trust and Consultative Company. Tianjin Toyo Ink Co., Ltd. is jointly owned by Tianjin Printing Ink Co., Ltd and Toyo Ink Mfg.Co., Ltd. Toyo has another joint venture with Jiangmen Ink Chemical Co., Ltd. Shanghai Printing Ink Factory has a joint venture – Kele SICPA – with SICPA.

DIC is also active in China: Shanghai Dainippon Ink Co., Ltd. is a joint venture between Shanghai Zijang Group Company and DIC. Shenzhen DIC Co., Ltd. is a joint venture set up by Shenzhen Lionda Group Company and DIC.

The addition of Coates Lorilleux to DIC gives DIC more strength in China. “We have Coates, a new group, which gives us three new factories in China that we added to our two previous factories,” Mr. Isozumi said.

Other ink companies are importing their products into the Chinese marketplace. It is clear that the Chinese market will continue to provide opportunities for tremendous growth in the near future.

With a population of close to one billion, India is a powerful economic force.

“The economic conditions in India are very conducive for growth,” said Prashant Desai, a member of Hindustan Inks and Resins Ltd.’s board of directors. “The economy at present is growing at a rate of around 6 to 7 percent annually. The process of liberalization and economic reforms has been accelerated as a result of full integration with WTO. Also, increasing structural changes in the economy have created a very positive atmosphere for growth.”

India’s printing industry is growing fast to meet the needs of its residents and its sizable export market. This, in turn, has increased the demand for printing inks.

“We are very optimistic about the future of the printing ink industry in the country because of many factors,” said Mr. Desai. “There has been increased use of packaging in various industries, mainly the food industry. Secondly, the publication industry is booming, despite the increase in Internet penetration. Further, the usage of printing inks in various new applications is also increasing.”

“India is a fascinating market,” Mr. Henshaw said. “With a population of close to one billion, India has a tremendously burgeoning middle class, which is a significant consumer population. When major companies such as Kellogg’s go to that marketplace, they have to put an emphasis on packaging. They want to create packages at least equal to or surpassing that of Europe and the U.S.”

This leads to calendaring and litho lamination being used for consumer products. Corrugated printing is done mostly by sheetfed offset, although as the duty tariff has dropped to approximately 40 percent on machinery, flexo is starting to gain a small foothold.

There are several large ink companies in India, including Hindustan Inks and Resins, Ltd., Coates/DIC, Organic Coatings and Incowax, which are estimated to supply approximately half of the market. The rest of the ink manufacturers are smaller, regional ink companies that make ink on an as-needed basis.

“Hindustan Inks is the market leader in India with a market share greater than 33 percent,” Mr. Desai said. “The total size of the printing ink industry is about Rs 600 crores in value terms ($175 million to $200 million) and about 50,000 tons in volume terms. India has more than 200 ink manufacturers, with a large number of players in the unorganized sector. The current market share is divided equally between organized and unorganized players.

“The printing ink market has historically grown at a rate between 12 to 15 percent annually, while Hindustan Inks has grown at a much higher compounded growth rate of 61 percent per annum in the last six years,” Mr. Desai said. “We expect the domestic market to grow at a compounded rate of 15 percent per annum.”

Consolidation by major companies is a fact of life worldwide, and India is no exception. Sun Chemical/DIC’s 1999 acquisition of Coates Lorilleux, one of the major ink companies in India, gives DIC an important presence in the nation.

Overall, prior to the 1999 acquisition of Coates Lorilleux, DIC had a strong presence in the Asia Pacific region. However, there were significant areas that were not covered by DIC. The addition of Coates helped to change that, giving DIC operations in India, Pakistan and Australia, and additional factories in China.

“Before the acquisition, we had very little business in Australia,” Mr. Isozumi said. “Now that we have Coates, we are growing quickly there. We also didn’t have any factories in India or Pakistan, but Coates has facilities here and we now have business in that region.”

Meanwhile, Flint Ink’s March 2001 acquisition of a majority of shares of Incowax, a liquid ink supplier to packaging industries, gives Flint Ink access to the Indian and Southeast Asian markets. Meanwhile, Flint Ink plans to offer its paste ink technologies to Incowax.

Sakata Inx, another top five ink manufacturer, has opened new liquid ink facilities in India as well.

Mr. Desai said he expects the printing ink industry in India to continue to consolidate.

“The structure of the industry will change with greater consolidation in the future,” Mr. Desai said. “We expect there to be greater domination by the organized players. This is because the unorganized players are not backward integrated, and secondly, they will not be in a position to offer quality products catering to the industry at competitive prices.”

Hindustan Inks and Resins Ltd. continues its vast expansion at Vapi and other locations, with an eye toward improving R&D and production.

“We are preparing to transform Hindustan Inks and Resins, Ltd. into a $1 billion company,” Mr. Desai said. “Our emphasis is mainly on research and development and technology. Over the last year, extensive research carried out at Hindustan’s state-of-the-art R&D centers has resulted in significant breakthroughs for the company. Currently the R&D is working on some interesting projects, such as development of VOC-free offset inks, an ecologically acceptable uni-solvent system for flexo/gravure inks, user-friendly dispersed pigments and hybrid resins. All these products will give tremendous impetus to the future growth of the company.

“Apart from this, coming up at Vapi is another unique ‘single stream’ plant for seamless manufacture of inks,” Mr. Desai said. “This mega plant is one of its kind in the world both in terms of size and in terms of manufacturing concept. Here in a single stream, pigments, flushes and inks will be produced. Also, the other critical raw materials for inks such as resins, varnishes and wax compounds will be pumped via pipelines from the adjacent resin facility. This will make the new ink plant extremely cost efficient, and give Hindustan Inks complete control over quality.”

The southernmost portion of Asia Pacific region is comprised of Australia and New Zealand. However, unlike China and India, Australia/New Zealand is not a growing area. There are approximately 20 million residents in the area, which is separated by vast distances from other Asian regions.

“Australia is an intriguing marketplace which is printing at the leading edge,” Mr. Henshaw said. “However, it is a finite marketplace, and it’s physically removed from the rest of Asia.”

Much like the rest of the Asia Pacific region, multinational companies have a major portion of the market, and it seems likely that more moves will be in the offing.

In April 1999, DIC purchased Colortron, a leading sheetfed ink manufacturer, giving the company a manufacturing base in the region. The Coates Lorilleux acquisition further strengthened DIC’s interests in screen, packaging and news inks.

In 2000, Flint Ink made a major move, purchasing Creanova Inks Pty. Ltd., a major manufacturer of liquid inks for flexible packaging.

“The Creanova customer base has accepted the change extremely well,” Mr. Bitterle said. “Additionally, the Creanova acquisition has substantially improved our employee talent base.”

For Flint Ink, having a manufacturing location in Australia serves as a major building block for expansion into other portions of Asia.

“As we are now the number one ink company in the Cross-Tasman region (Australia and New Zealand), we are shifting our focus to Asia,” Mr. Bitterle said. “To date, we have opened Flint Ink Asia’s headquarters in Singapore. We have also set up a distributor network throughout eastern Asia. We are now evaluating various acquisitions and starting plans for our first major manufacturing site in Asia.

“At the same time, we haven’t abandoned additional investment in Australia and New Zealand,” Mr. Bitterle added. “For example, we’re currently in the planning stages for building a new Flint Ink headquarters building and mother plant in Auckland. Additionally, Flint Ink Australia is constructing a new headquarters building and plant in Melbourne. It will be operational in September 2001. We’re also evaluating adding a blending branch in Perth, Australia.”

Other international companies also have large outposts in the area: SICPA is still acknowledged as a top printing ink manufacturer, while Sericol Australia Pty. Ltd. is a leading screen ink manufacturer.

Locally, Pacific Ink in New Zealand and Modular Ink Pty. Ltd., an Australian ink jet ink manufacturer, are among the home-grown companies succeeding in the marketplace.

The Future
The Asia Pacific region offers great diversity. In particular, the economic growth in China and India is serving as a catalyst for printers, particularly in the packaging segment.

This is leading to great opportunities for printing ink companies, which are working hard to meet the growing demand.