The struggles of their printing ink customers in 2002 had a major impact on the resin business, as prices were forced downward.
In addition, resin suppliers faced uncertainties created by consolidation and foreign competition.
Still, there were some bright spots, as UV and water-based packaging inks made gains. However, economic conditions have yet to significantly improve in the U.S. in 2002, which is definitely a cause for concern as the year progresses.
A Difficult Economy
As was the case with the ink industry, resin manufacturers found few bright spots in 2001 and in early 2002, with most companies happy to be breaking even for the year.
“We performed well in resins relative to the industry and held our own on vehicles and compounds,” said Phil Runge, business manager, resins for Lawter International. “Our waterborne products gained nicely. Overall, the year was disappointing for both the industry and us due to the general economy and downward price pressure from other regions.”
“2001 was a positive year, despite the difficult economic environment,” said Doreen Miller, printing and packaging market manager for Johnson Polymer. “Johnson Polymer has been able to find growth areas with new opportunities and applications. We expect to continue our growth trend in 2002.”
“We found 2001 to be just like the ink industry,” said John Starkweather, NAR commercial manager, graphic arts at Rohm and Haas. “I don’t have strong optimism for 2002, and with oil prices running up and the Middle East in turmoil, the predicted economic recovery is questionable. I do remain hopeful, however.”
“2001 was a down year versus 2000,” said John Schultz, Akzo Nobel Resins’ commercial manager, North America. “The first half of 2002 will be flat, with a hopeful upturn in the second half.”
“We did just fine in 2001, and we see 2002 gradually recovering,” said Jim Volz, vice president of sales for Kustom Group.
Neville Chemical officials said they anticipate a slow year in 2002, with the economy hopefully improving toward the end of the year.
Aside from the economic slump, there are other concerns throughout the industry that are on the minds of ink company suppliers.
Consolidation throughout the entire printing chain is an area that has resin suppliers watching warily.
“The big players are getting bigger and the smaller ones are more endangered,” Ms. Miller said. “Throughout the printing and packaging industry, from paper mills to packagers, consolidation seems to be in the daily news. There is a domino effect that is a direct hit to the ink industry.”
Reduced pricing driven by foreign competition is also having an impact, as ink manufacturers try to meet the prices of competitors. As a result, suppliers are being asked to help share the burden.
“We are constantly asked to assist our customers in their efforts to hold down or reduce costs,” Mr. Runge said.
“There’s continued downward pressure on pricing, which is not keeping up with raw materials. Overcapacity, especially in the ink area, is also a major concern,” said Mr. Starkweather.
“It has been very difficult for anyone in the packaging value chain to implement price increases,” Ms. Miller said. “Current raw materials have allowed our prices to remain stable. Uncertainty on raw material prices leaves question to whether prices can remain at their current levels.”
As a result of environmental concerns about solvent usage, UV and water-based flexo ink continue to make inroads among printers.
“We hear strong formulator interest in developing new UV systems for flexographic printing,” said Ken Bryan, commercial manager – UV specialties at Dow Chemical. “In addition, we believe the trend to reduce the use of volatile organic solvents will continue. Waterborne UV ink systems and 100 percent solids UV ink systems will therefore play a key role in future ink developments.
“Three difficult technical challenges facing the ink industry in the coming years will be developing new UV inks for food contact applications, developing UV ink systems with good adhesion on a wide range of substrates, including many plastics, and reducing the use of volatile solvents,” Mr. Bryan said.
Responding to Challenges
As the ink industry develops ways to meet its challenges, suppliers are working on new approaches to help provide solutions.
Mr. Runge said that finding ways to gain value while still utilizing the newest and best technologies is one challenge faced by resin makers. He added that Lawter is emphasizing “new and better technology while we work internally to become the lowest cost provider in the industry so that our customers can improve their products without sacrificing value.”
Providing value and service at a competitive price is an important goal. For example, Neville Chemical officials said that the company is emphasizing fostering long-term domestic and global partnerships and introducing value-added products.
“Lower costs seem to be what’s on everyone’s mind,” said Mr. Volz of Kustom Group. “We are responding to the challenges of the market by maintaining our course of providing new products to the industry backed with good technical service to our customers.”
“The key way to rebound is to manage costs and be a responsible supplier and develop products that will add value to systems,” Mr. Starkweather said.
Mr. Schultz said that Akzo Nobel Resins will continue to focus on the needs of the printing ink industry, “Akzo Nobel corporately views resins as a growth business,” Mr. Schultz said. “We have a global position – we can manufacture resins on three continents (Europe, South America, and North America), have an assured gum rosin supply and technology.”
UV and packaging technologies were two segments that showed growth in 2001, and suppliers see opportunities in these markets.
“I believe 2001 was a difficult year for the UV industry due to the worldwide slowdown in industrial activity,” said Mr. Bryan. “On the positive side, UV cure continues to be one of the fastest growing technologies in inks and coatings. New applications and expansion of existing applications will drive UV growth even faster as the world economy recovers.”
“2001 was the first year Dow introduced specialty epoxy acrylate products for the graphic arts and coatings industries and we were very pleased with their reception,” Mr. Bryan added. “Dow’s XZ 92551 is a low viscosity, monomer-free epoxy acrylate which can be used as the basis for 100% solids or reduced-solvent content UV curable inks and overprint varnishes. Dow’s patented dispersion technology can be used to produce shelf-stable, waterborne UV ink systems, which completely eliminate the use of volatile solvents. New low temperature drying technologies plus high-solids, UV waterborne systems show great promise for the ink industry.”
Water-based flexo is another area of growth, as ink sales and volume increased in 2001.
“Increased competition has stirred up pressure on profits. However, packaging, particularly water-based flexo, is still a good place to play,” Mr. Starkweather said. “We also need to continue to improve print quality in flexography and to understand the economic and environmental drivers for going water-based flexo.”
“Packaging is changing to meet the needs of today’s consumer,” said Ms. Miller. “The shift from board to flexible packaging is changing the printing process and increasing the ink usage in those applications. The movement toward flexible packaging is creating new challenges: finding the right supplies to meet the needs of every facet of the value chain from the supplier to the consumer. The ink industry and their suppliers must be ready to face the new opportunities that new technologies offer.”
“Through the development of innovative products, Johnson Polymer continues to improve ink and OPV performance that focuses on the needs of the package printers and converters,” Ms. Miller said. “The Joncryl DFC line is one of our important new developments. They have FDA approval for direct food contact for all food types at all temperatures. Inks and overprint varnishes made with Joncryl DFC polymers can now be used in contact with all types of food. This provides consumer goods and packaging companies a new opportunity to extend their marketing and brand image.”
If the optimism voiced by resin manufacturers is on target, then the second half of 2002 should bring with it a stronger economy.
However, even if the economy improves, there remains many of the same problems that are facing the ink industry today, including consolidation and foreign competition. Undoubtedly, companies throughout the supply chain will be asked to help shoulder these burdens. For resin manufacturers, the challenge is to develop new systems and provide ever-increasing value for their customers.