As 2003 draws to a close, there remains serious concern over the direction of the economy. For the printing and ink industries, momentum seems to shift on a monthly basis, which makes for an uncertain time.
For the most part, waxes, solvent and additives suppliers to the ink industry reported that 2003 was an improvement over 2002, with new technologies such as UV and digital driving growth. Despite the present uneven results from the printing and ink industries, suppliers remain optimistic that 2004 will finally be the year that the ink industry begins to fully recover.
A Look Back at 2003
For suppliers of waxes and additives, 2003 was a year of slight recovery, particularly in the past two quarters.
“2003 saw modest recovery toward the third and fourth quarters, and we expect this to continue into 2004,” said Joon Choo, vice president of marketing worldwide for Shamrock Technologies.
“2003 was a slight improvement over 2002, as the overall paste ink market saw a slight recovery in volume,” said Marc Owens, product manager , wax compounds and waterborne at Eastman Resins, Inc. “In 2004, we expect to continue this upward trend as we continue to offer new, technologically innovative products to our ink makers.”
“Elementis Specialties sales will end the year flat to slightly ahead of 2002,” said Craig Baudendistel, business director, Elementis Specialties. “The anticipated growth for 2003 never got off the ground, although there has been some improvement over the last quarter. I expect business to improve in 2004, but not until the second or third quarter.”
“During the past year, we have found many companies interested in looking at our unique wax products,” said Eric Post, marketing manager, resins, NAFTA for Degussa’s coatings and colorants business unit. “We expect that 2004 will be strong due to the high interest from the industry in our product range and with signs that the U.S. economy is strengthening as we enter 2004.”
“We met expectations and are optimistic for 2004,” said Walt Magee, market manager, Aerosil business line at Degussa.
In particular, growth areas such as UV and ink jet provided suppliers with opportunities in 2003.
“Despite a difficult economy, Tego was able to continue its double-digit growth in 2003,” said James P. Yosh Jr., business director, North America for Degussa Tego Coating & Ink Additives. “Much of this can be attributed to the move to compliant technologies. We are optimistic that our growth will continue in 2004 as the economy continues to recover and even more systems move toward water and UV.”
“In general, our additives business is in the fastest growing areas – ink jet and UV curing inks and varnishes,” said Christopher Bridge, regional marketing manager, imaging and inks business line, coating effects segment at Ciba Specialty Chemicals. “As a result, and with our innovation record, we have seen growth in these businesses, although we have experienced price pressures for some photoinitiator products.”
As has been the case since the downturn in the economy, pricing remains tight for ink ingredients, and waxes, solvents and additives are no exception.
“The high degree of uncertainty associated with the economy and the decreasing demand of finished ink exert pressure on pricing and led to competitive intensity,” said Iuliana Nita, marketing specialist at Noveon. “In addition, there has been significant pressure on raw material feedstocks, and we see very modest signs of relief in 2004.”
“Margins and pricing continue to face significant pressure,” Mr. Yosh said. “Increased raw material and manufacturing costs, coupled with general increases in the cost of doing business (increased security for chemical plants in light of 9/11, Responsible Care initiatives, etc.), and more competitors recognizing the benefits and attractiveness of the additives market have hurt profitability. The big challenge will be to continue to provide cost-effective solutions to the ink industry. We feel that we are up to the challenge.”
Still, there are hopeful signs, particularly in specialty products.
“Pricing continues to remain a focus with both the ink maker and the compound supplier,” Mr. Owens said. “While key wax raw materials have remained fairly stable, the price of the oils and resins used in their carrier systems continue to increase. Combine this effect with the rising costs of utilities and transportation, and a bleak picture begins to form. However, many ink customers do realize that the low levels of compounds and additives used in ink formulation often contribute very little to the overall cost of the ink. Therefore, many customers see the additives area as one area that they can afford to spend slightly more to see a large return in product performance.”
“There is pressure on the downside for commodities, but pricing seems to be holding on the specialty side,” Mr. Choo said.
“In our additives business pricing is very mixed, with some heavy pressures in the older photoinitiator chemistries, but in the developing technologies there is less pressure, as customers seek efficacious solutions and are prepared to pay for the added value provided,” Mr. Bridge said.
While traditionally strong areas of printing have suffered, emerging technologies such as ink jet and UV are areas where there is growth.
“We see the publication ink market as still suffering, packaging inks holding well and great opportunities in ink jet, where we offer a package of colorants, receptive coatings, various stabilizer types and UV curing agents,” Mr. Bridge said.
“There is more investment toward new printing technologies, especially in digital,” Mr. Choo said.
As ink companies look toward management processes such as Six Sigma and Lean to control their operations, suppliers are working with them to meet their goals.
“There is a focus on cost reduction via process and raw materials consolidation,” Mr. Choo said.
“Recognition of the value of added services that ink companies offer their customers seems to be growing,” Ms. Nita said. “Three areas that continue to benefit the ink industry and its customers are quality control, value-added services, and research and development. To assure their customers that ink products meet the highest quality and performance standards, more companies are achieving ISO 9000 certification as affirmation of quality management. The larger companies also are implementing either or both the Six Sigma data-driven continuous improvement program or a Total Quality Management system. Finally, consolidation will continue to be a major driving force within this industry.”
“We continue to experience the same trends as in the past couple years: increased competition both domestic and abroad, continued price pressure on raw materials and continued emphasis on value-added product development and problem solving initiatives,” said Mr. Baudendistel.
“As consolidation and pricing pressure mount, companies continue to seek ways to reduce their inventories while continuing to maintain their flexibility,” Mr. Owens said. “As with the overall paste ink market, pricing pressures dominate most discussions. Eastman Resins, Inc. has met this challenge by combining economical wax alternatives with technological breakthroughs that allow for reduced pricing for the ink maker and ultimately the printer.”
Mr. Yosh said that environmental concerns of ink companies and their customers are driving growth in certain sectors.
“Tego concentrates our product development efforts toward environmentally-friendly technologies,” Mr. Yosh said. “We still see the need for achieving a balance between compliance and performance as a main driver in the ink industry.”
Competition remains the most serious challenge facing suppliers today.
Mr. Baudendistel pointed to continued competition, pricing pressure on inks and raw materials, and how the industry promotes and sells value to customers as the largest challenges.
Ms. Nita said that there is intense market competition, which tends to be fueled to some degree by the printers’ consolidations over the last several years and the reduced printing volume. Customers expect more value added services but are reluctant to pay for them.
“The most difficult challenges facing the industry are the transition from strong publication inks toward the liquid packaging ink and specialty inks segments over the past few years, as well as shorter runs and higher costs and competition as production shifts offshore in some areas,” Mr. Choo added.
In order to succeed, suppliers are working overtime on new products and services while looking for opportunities to improve their own operations.
Mr. Choo said that Shamrock Technologies is realigning product focus to meet the emerging needs of customers as they shift their mix of products, while providing intense training for local technical sales representatives to support global customers.
“Noveon is faced with harsh realities in the business environment with customers consolidating, global competition, exploding technology and competitors with lower profit goals,” Ms. Nita said. “Noveon’s response to these conditions is shedding old habits, practices and attitudes and having the fortitude to make changes necessary to ensure top line growth and bottom line sustainability. We continually benchmark with competitors all over the world, we are constantly learning what drives and retains customers, and also how groups of customers differ from one another and how these differences can be served with a better product package.”
New products and services are essential to growth.
“At Elementis Specialties, we strive to provide cost saving product and service solutions to our clients,” Mr. Baudendistel said. “We have developed and continue to develop innovative products that provide higher efficiency, faster throughput, etc., all of which help save money. We have recently started a new initiative where we carry out joint Six Sigma projects with our customers to improve product and manufacturing performance.”
“The most difficult challenge is the ‘copy products’ from companies who make no investment in innovation, as older products move to semi-specialties,” Mr. Bridge said. “We are managing our resources to develop more quickly new solutions to customer problems and by expanding our range of product offerings, while at the same time managing costs in the older product areas.”
Mr. Post said that Degussa is continuing aggressive technology development when many companies are reducing R&D spending.
“Degussa remains committed to developing new synthetic waxes to help meet the future application challenges of the printing ink industry,” Mr. Post said.
Working closely with customers has become a necessity.
“As industry consolidation and pricing pressures continue to act on the ink market, ink makers will continue to seek ways to achieve differentiation at an economical cost,” Mr. Owens said. “A great strength of Eastman Resins, Inc. is our ability to work with our customers to allow them to differentiate themselves through specially tailored additive systems. Eastman Resins, Inc. continues to provide laboratory support for all of its products, and we frequently partner with our customers to evaluate their current system and recommend improvements.”
For suppliers of waxes, solvents and additives, partnering with customers and developing innovative products and services offers the best possibilities for growth in the coming years.