The Latin American Market

By David Savastano, Ink World Editor | 09.06.05

Economic concerns, acquisitions are among key concerns facing ink manufacturers

The Latin American printing ink market is, in many ways, a microcosm of its U.S. neighbors. There is a tremendous move toward globalization, as printers expand their operations into Mexico through the North American Free Trade Agreement (NAFTA) and Latin America.

Many larger printing ink manufacturers believe it is imperative to follow their customers, and as a result, are also reaching into the region. New facilities are being built, and acquisitions of smaller ink companies are occurring rapidly.

However, as this is occurring, the economic problems affecting the U.S. and key Latin American countries are also having an effect on business. Ink companies are taking a wait-and-see approach to what 2001 brings in the region.

Major international printers have set up shop in many Latin American markets, and as their customers have been moving into Latin America, leading international printing ink companies have been doing the same. In some cases, such as SICPA and Nazdar, the growth has come from within. More frequently, though, leading worldwide ink companies have been acquiring key Latin American ink manufacturers in order to provide more complete service to their customers.

“Smaller companies continue to be absorbed by global players, both in the ink industry as well as the printing business,” said Ursula L. Stevens, corporate vice president and general manager, Latin America and Export at Sun Chemical Latin America.

“In terms of ink suppliers, the concentration process is on-going, reinforcing the presence of international suppliers like BASF, Sun and Flint,” said Romain Boulot, regional marketing manager of BASF Printing Systems in South America. “The share of national suppliers is decreasing every year.”

Sun Chemical has made a series of important moves, including the acquisition of Coates Lorilleux in 1999. Coates had significant business throughout Latin America, and strengthens Sun Chemical’s already solid position in the region. In 2000, Sun Chemical added Tintas Supercor S.A., a Rio de Janeiro, Brazil-based manufacturer of offset, flexo and gravure inks in 2000.

Sun Chemical is keeping Coates and Tintas Supercor S.A. as separate units. “We continue to operate both Coates and Tintas SA as separate businesses, as they have distinct technology,” Ms. Stevens said.

In February 2001, Flint Ink Corporation acquired all of the assets and business of Caracas, Venezuela-based INKS-Chemicals B&T, SA, a major supplier of news inks to the Venezuelan and Andean markets. Flint Ink officials estimate the company has a 70 percent share of that market.

“This expansion of Flint Ink Venezuela SA fully reinforces our commitment to serving the Latin American market on a local basis,” said Jerko Rendic, president, Flint Ink Latin America. INKS-Chemicals B&T, SA also manufacturers sheetfed and heatset inks, and Flint Ink plans to add water-based flexo ink manufacturing and expand the facility to expand its coverage in the region. Flint Ink’s strategy with INKS-Chemicals B&T, SA fits in nicely with its two 1999 acquisitions in South America. Polychem SA, the largest ink manufacturer in Argentina, and Companhia Quimica Industrial Brasileirao, a $50 million ink maker based in Sao Paolo, Brazil, gave Flint Ink a major presence in their respective portions of the region.

Flint Ink did not stand still in Mexico, acquiring Alper Ink Group’s Kromos S.A., a water- and solvent-based ink company located in Mexico City, in 2000.

BASF has also been active, acquiring Tintas Graficas in Chile, Tintas Graficas Vencedor in Peru and the distribution and production licensee agreement with local ink manufacturer Neograf in Argentina.

“BASF is now achieving its global product concept with local service and local production in Peru (Tintas Graficas Vencedor), Chile (Tintas Graficas), Argentina (licensee agreement with Neograf) and Brazil (5 Mio USD production investment at BASF Sistemas Graficos),” Mr. Boulot said. “In other countries, BASF is present through distribution partners for BASF printing inks and BASF printing plates.”

Mr. Boulot said that the August 1999 addition of Tintas Graficas Chile, which is the market leader in the country with a 65 percent share, has been a strong one for BASF.

“The acquisition process is finished, and BASF investments for a new plant for Tintas Graficas were $6 million,” Mr. Boulot said. “The new plant is located in Pudahuel, Santiago in a ground of 50,000 square meters with 10,000 square meters buildings. It is one of the biggest and most modern plants to produce printing inks in Latin America.”

Sericol International also made a significant move in 2000, acquiring Silkor Industria de Tintas e Vernizes Ltda., a Sao Paolo, Brazil-based supplier of UV inks to Brazil’s screen printing market. The acquisition allows Sericol to manufacture its own products in Brazil, and provides a gateway for the company to expand throughout Latin America.

Financial concerns continue to dominate the market, as the weakened U.S. economy affects Mexico and Latin American countries try to recover from their own economic woes.

“The economy in Latin America is in a slowdown mode,” said Ms. Stevens. “The currency devaluation in Brazil together with the energy crises concerns us. All countries are flat and no significant growth is projected. The most promising growth is going to come from the flexible packaging industry once the economy recovers.”

“After a general positive growth during 2000, the economic conditions are uncertain and contrasted for the second semester of 2001,” said Mr. Boulot. “Mexico is depending on the future U.S. growth. Brazil is affected by the R$ depreciation against the U.S. dollar and the incertitude regarding energy restriction for the months to come. Argentina and Peru are trying to recover from economic and political crisis.”

“I see positive trends ahead, despite bumps in the road,” said Charles de la Rock, northeast regional sales manager for Kerley Ink. “We see a bright future because the population is very young. Consumer growth is huge, and packaging is very important. People also read newspapers a lot.”

“Chile, Mexico and Brazil are the strongest growing markets with best perspectives for 2001,” Mr. Boulot said.

Carlos Burbano, general manager, Mexico for Flint Ink Corporation, said he sees growth in Mexico, Colombia and Chile, particularly in the packaging market.

Offset is still the most predominant process, with gravure also strong. Flexo is making inroads, particularly in the label market.

“Flexography is showing the biggest growth, partly due to the substitution of some rotogravure applications,” Mr. Boulot said. “The second ink segment showing strong growth is advertising and commercial printing, with many new special interest magazines. In these two segments, investments in new printing presses were very important during the last two years, bringing over-capacities in Latin America.

“In terms of print-shops, the concentration is increasing the importance of industrial printing groups looking for high quality processes and optimized ink management systems,” Mr. Boulot said. “In terms of products, the trend of the print industry is to look for European standards of quality for inks and printing presses.”

The U.S. is the largest trading partner for Mexico, and the economic slowdown in the U.S. has affected Mexico as well.

“Our Gross National Product (GNP) was pushed down from 6 percent to 2.5 to 3 percent top by President Fox, so our expectations for the moment is that it will not grow as fast as previously thought,” said Mauricio Vidales, commercial director of Sun Chemical, S.A. de C.V. in Mexico. “The contraction of the U.S. economy is affecting a lot of the Maquiladora businesses along the border, which has also affected our market, particularly in packaging. There have been 20,000 workers laid off in the border areas. You’ll also see some contraction in employment nationally, as almost 200,000 jobs have been cut.”

NAFTA has been credited with opening up trade between the U.S., Mexico and Canada, and as a result, many international printing companies have built operations in Mexico. For example, R.R. Donnelly and Sons Company, Weyerhauser, Willamette, Smurfit, Inland Container and Print Pak have all built plants in Mexico, and Transcontinental signed an agreement with Refosa for a joint venture. This has led to increasingly tighter specifications for inks, as printers and their customers expect to see the same quality coming from Mexico as elsewhere throughout the world.

“This has changed the standards for printed products,” Mr. Vidales said. “NAFTA has had an impact, as printers are more aggressively moving in. The market is becoming more global in terms of quality and efficiency. For example, Tetra Pak has built a plant in Queretaro that is a world leader in quality and efficiency. Our customers expect Sun Chemical and other ink manufacturers to deliver the same quality. With these global accounts, we can understand their needs and respond faster.”

NAFTA has also led to stronger environmental laws being put in place. For example, Mr. Vidales said that Sun Chemical uses only organic pigments to comply with U.S. regulations.

“Because of NAFTA, the printing industry is being driven much more by U.S. regulations, and that benefits the public and the end users,” said Mr. Vidales. “This allows us to be a solid corporate citizen as well.”

The major ink companies in Mexico are Sun Chemical and Sanchez, with SICPA and Flint among the ink companies that also have a strong presence. Sun Chemical’s 1999 acquisition of Coates Lorilleux, following closely behind the company’s prior acquisitions of liquid ink specialists BTG (in 1997) and Pyrolac (1993), gives Sun Chemical a major stake in Mexico. Sanchez, a family-owned company that began in the 1890s, is the market leader in inks for uncoated stocks, while Sun Chemical leads among the coated stocks. In addition, locally owned companies hold approximately 20 to 30 percent of the market.

“Liquid packaging is the leading process in both the paper and flexible packaging segments,” Mr. Vidales said. “Flexo is improving. Printers are bringing in more solvent-based flexo and lamination inks. UV is also starting to increase. The government is placing more restrictions on printers, and more people are going over to UV silk screen.”

The next few years are likely to see further consolidation in Latin America and Mexico, as leading ink companies look to provide more service to their customers. The state of the economy, both in the U.S. and within the region, will also play a major role in the further expansion of the printing ink industry in Latin America and Mexico.