For the past few years, the worldwide pigment industry has seen tremendous pressure on prices, partially due to the weakened demand stemming from the declining economy and also because of the increased presence of offshore suppliers who are delivering products at a much lower price. Increased raw material prices are further putting the squeeze on pigment companies.
Feed pumps for Toyo’s continuous coupling azo plant at Francolor, France. (Photo courtesy of Toyo Pigments.)
As 2004 begins, there is reason to believe the economy, at least in the U.S., has turned the corner. If that occurs, the printing industry should show some positive results, which will impact ink and pigment suppliers. However, concerns remain about the state of the pigment industry in the years to come.
2003: A Challenging Year
For pigment manufacturers, 2003 was another challenging year. Some companies did better than expected, but others had off years.
“CDR Pigments and Dispersions exceeded sales expectations in 2003,” said Tom Ashe, vice president of marketing and sales for CDR Pigments and Dispersions. “We finished with our best fourth quarter in the history of the company.”
“We had a strong year,” said Andy Grabacki, vice president of sales at General Press Colors. “Sheetfed was down for us, and from what I’ve heard, it was for the industry as well. However, toward the end of the year it has made a slight rebound. Heatset was strong throughout the year as well as news flushes. I did hear that these were decent for the industry as well. Our new improved UV line took off towards the end of the third quarter and talk on the street is that UV is growing in double digits.”
“Apollo Colors exceeded our 2002 sales, and we expect 2004 to show improvement from fourth quarter 2003,” said Larry Bykerk, vice president of sales and marketing for Apollo Colors. “We’re shooting for 4 percent to 5 percent growth.”
“Although the pigment industry is still struggling globally, we had a solid year in 2003 and expect an improved market in 2004,” said Edwin Faulkner, director, communications and regulatory affairs for Sun Chemical’s Performance Pigments.
Chuck Jones, marketing manager, printing industries for Clariant Corporation, said that the 2003 results varied by segment, with publication inks down and growth areas such as ink jet doing well.
“2003 was definitely a difficult year for Clariant in light of the continuously struggling ink industry and increasing competition in organic pigments,” said Mr. Jones. “In publication inks, consumption of pigments didn’t grow and price pressure continued. In packaging and specialty inks, some growth was realized, and a wide variety of pigments are still required in that area. Non-impact printing (NIP) grew double digit and Clariant benefited with broad product range for ink jet and toner applications.”
Mr. Jones noted the impact of offshore suppliers. “New pigment sources from Asia are emerging,” he said. “Quality is not fully up to industry standards yet but often are compensated by attractive pricing. ”
“Growth expectations for 2004 are not very high,” Mr. Jones added. “In the first half only very little growth is forecast and confidence in growth for second half is limited, especially in publication inks.”
Other pigment manufacturers found 2003 to be difficult, although they expect better opportunities in 2004.
“2003 was below expectations for Lansco and the industry,” said Rick Campbell, vice president of sales and marketing at Lansco Colors. “2004 brings expectations for significant growth at Lansco and uncertainty about the industry.”
“Sales were below expectations,” said Frank Lavieri, vice president of sales and marketing for EC Pigments. “Ink makers appear to be cautious for the coming year.”
“It is difficult for us to judge 2003 compared to prior years because 2003 was our first full year in production,” said David Grabacki, president of Dynamic Color Systems. “But we do find that as the business conditions tighten, our customers’ labs get more conservative as to changing suppliers. Two consistent comments from our customers is that they are under-staffed and they have too many projects. We are cautiously optimistic for 2004.”
Other pigment executives anticipate a better year in 2004.
“We see signs that the market in 2004 is making a comeback,” Mr. Ashe said. “Advertising spending is predicted to be stronger in 2004. Traditionally, election and Olympic years tend to be good years.”
“We are cautiously optimistic for 2004, but it’s getting more and more difficult to predict what’s ahead,” Andy Grabacki said.
“In 2004 we expect to see a slow improvement in the global economy, and so the ink industry will recover steadily,” said Christopher Bridge, Ciba Specialty Chemicals’ regional marketing manager Americas, imaging and inks business line. “However, with so much overcapacity in publication printing and ink making, it will take some time for a significant improvement there.”
Rulings May Impact Key Aspects of Ink, Pigment Industries
A pair of recent rulings by the U.S. government agencies may have a major impact on the ink and pigment industries in the coming years.
First, the International Trade Commission (ITC) ruled on Jan. 7 that carbazole violet pigment 23 imports from China and India are harming U.S. pigment manufacturers.
According to the report, which appears in the Federal Register, Vol. 69, No. 8 on Jan. 13, 2004, “There is a reasonable indication that an industry in the United States is materially injured by reason of imports from China and India of carbazole violet pigment 23, provided for in subheading 3204.17.90 of the Harmonized Tariff Schedule of the United States, that are alleged to be subsidized by the Government of India and that are alleged to be sold in the United States at less than fair value (LTFV).”
According to U.S. pigment industry leaders, carbazole violet pricing has declined from $40 per pound to $12 per pound during the past few years.
The petitions were filed Nov. 21, 2003 by Sun Chemical Corp. and Nation Ford Chemical Co. The conference was held Dec. 12, 2003 in Washington, D.C. Should the U.S. Department of Commerce concur with the ITC’s findings, the final phase of the investigations will determine antidumping and countervailing duties.
There is a great deal of interest in this ruling for a number of reasons. First, while carbazole violet pricing was the most dramatically affected by imports, it is believed that certain greens, reds and yellows would also be candidates for ITC challenges.
Second, there is debate whether U.S. pigment manufacturers will raise prices once imports are impacted. However, there is overcapacity in the U.S. pigment market right now, and prices may not rise.
There is also the question of whether the Byrd Amendment, in which petitioners receive the countervailing duties, is still legal in the court of international law.
In the other case, U.S. Customs and Border Protection, Department of Homeland Security, revoked a ruling letter and treatment relating to the tariff classification of a flushed pigment color preparation. The revocation will go into effect on April 4, 2004.
According to the Customs Bulletin and Decisions, Vol. 38, No. 6, dated Feb. 4, 2004, a ruling letter dated March 27, 2000, stated that “Customs classified a flushed pigment color preparation called ‘Blue Flush’ as a printing ink,” subject to a different tariff rate that colorants being imported into the U.S.
The new report, dated Jan. 23, 2004, stated, “Based on industry resources and comments from industry representatives, it is clear that a ‘flush’ (flushed pigment) is an ingredient used to manufacture heat-set and sheet-fed printing inks, as well as several other applications, and is sold to ink manufacturers for such purposes. For a flush to be made into a printing ink, it is further processed with additional ingredients under conditions specific to attain the desired functional properties.”
The report concludes that flushed colors should be governed by heading 3204, HTSUS, defined by the report as including “synthetic organic coloring material and preparations based thereon, covers both dyes and pigments as well as preparations based on dyes and pigments,” rather than 3215, HTSUS covering printing inks.
– David Savastano
Metallic pigment manufacturers saw a slight decline in demand, although they expect 2004 to be a stronger year.
“2003 was a soft year for Eckart and did not perform up to our expectations,” said Ronald Oberstar, director of sales, graphic arts for Eckart America. “We experienced some selected market segment increases, yet overall there remains much work to do.
“We remain cautiously optimistic that 2004 will show improvement over 2003 as capital spending increases, cost of money remains low and the overall economy continues to gain strength,” Mr. Oberstar said. “Our product portfolio is sufficiently developed to support segmented market growth when that growth materializes.”
“The volume of metallic ink and pigment for the printing ink market declined in 2003 by 8 percent to 10 percent,” said Henry Brooks, vice president, sales and marketing for MD-Both. “This was primarily attributed to design change and movement to offshore printing. Our expectation for 2004 is growth. We are predicting growth in 2004 over 2003 but we do not expect to hit the peak levels we saw in 2000. Growth will be based on new packaging designs and opportunities they present. Areas such as corrugated, point of purchase display and flexible packaging will be our target growth areas.”
Specialty pigments, such as fluorescents, did have a good year in 2003.
“We saw modest gains in 2003, but overall the industry has been soft for several years,” said Jon Aber, marketing manager, DayGlo Color Corp. “We are hoping that 2004 will bring continued improvement, but we are not expecting any huge improvements.”
“We met our sales objectives in 2003, and we expect 10 percent growth in 2004,” said Bob Hess, Radiant Color’s vice president.
As has been the case for a number of years, the number one concern facing pigment manufacturers are the low prices for their products.
“Prices for pigments continue to be soft,” Mr. Campbell said. “We do not expect any general organic pigment price increases in 2004, although prices may increase for a few organic and inorganic pigments.”
“There is constant pressure to reduce prices,” Andy Grabacki said. “However, they were steady over the past year and appear to be for 2004.”
Mr. Hess said that there were some small price increases on selected products.
“We have a lot of pricing pressure as do most companies these days,” Mr. Brooks said.
“With our partners, our loyal customers, we will meet the price where we can or offer a new product where we can not. We will continue to bring our added value along with the price.”
There is a squeeze on margins, as raw material prices are on the rise while pigment prices remain flat.
“Selling prices have remained flat year to year although key raw material and operating costs continue to increase,” Mr. Oberstar said.
“Some raw material price increases are expected and will, no doubt, be passed on to pigment consumers as there is no longer any fat to absorb these increases,” Mr. Jones said.
Much of the pressure has come from the proliferation of imports.
“The ever-growing flow of pigments from China and India continues to put pressure on pigment pricing,” Mr. Faulkner said.
“The pricing of pigments in publication inks and low-end water-based inks is now dominated by Chinese offers, even if the business is actually made by a ‘traditional’ supplier,” Mr. Bridge said. “The Chinese prices, of course, are supported by export rebates and by a currency which is kept artificially low.”
“We see some areas of pigments for packaging inks facing higher price pressures,” Mr. Bridge said. “All ink makers declare that they will focus less on publication inks and will find higher price areas, particularly packaging inks. This simply makes the competition higher, and this will produce a similar effect as seen in publication inks in areas where the degree of differentiation is perceived as low. Prices of inks will fall, transferring the pressure to pigment makers.”
“We have not had a price increase in eight years,” Mr. Aber said. “We face competitive pressures from Asia and spend most of our time trying to cut costs and improve efficiencies. It is getting to the point where there is nothing left to cut.”
“Raw materials and overheads have increased, and offshore competition has increased,” Mr. Brooks said. “We are holding prices, definitely not lowering them because we can’t afford to. Our value is in what we can do with our customers to provide value to their customers.”
Mr. Jones said that new environmental regulations in China and demand within the exporting nations may impact pricing.
“Clariant expects pricing to stabilize, and perhaps even rise slightly as increasing environmental pressures, even in China, and increasing local demand will result in pressure to increase prices for products exported from these countries,” Mr. Jones said.
Mr. Bridge said that high-performance pigment prices remain strong.
“There are still areas in which performance differentiation has a higher value both in the ink and in the pigment, and there the price levels remain relatively stable, as long as the performance margin is maintained,” Mr. Bridge said.
There are a variety of recent trends in the ink industry, and pigment manufacturers are carefully monitoring those changes.
Consolidations remain a fact of life in business, and the ink industry is no exception as the December 2003 acquisition of Color Converting Industries (CCI) by Siegwerk clearly illustrates. Ink manufacturers are also watching their printing customers merge, such as the recent consolidation between R.R. Donnelley and Moore Wallace.
EMD Chemicals’ Iriodin Pearlets are pigment preparations in granule form. (Photo courtesy of EMD Chemicals.)
“The consolidation of printing ink manufacturers is continuing and now there appears to be an acceleration of consolidation amongst printers in the U.S.,” Mr. Faulkner said. “There also seems to be a move on the part of European ink makers to be a part of the U.S. industry. The recent acquisition of CCI by Siegwerk is an example of this.”
The changes in the marketplace have been clear. For example, Mr. Lavieri noted that solvent-based flexo is growing at the expense of water-based flexo. This is largely due to the loss of manufacturing jobs, and with it, corrugated printing jobs overseas. Mr. Jones noted that major ink companies are now reaching out to China to sell their products.
“Flexo continues to grow, gravure remains steady, screen has all but disappeared in the face of ink jet and lithography is redefining itself to be just-in-time printing,” Mr. Aber said. “However, overcapacity has hurt the litho printing market.”
“There are both positive and negative trends in the ink industry,” Mr. Ashe said. “The positive trends continue around the theme that ‘color sells.’ In newspaper, the trend is more color. In packaging there is more individual packaging, again with emphasis on more color. The negative trend is that more non-time-sensitive printing is being done in Asia and shipped back here.”
The greatest growth has been occurring in packaging, UV and digital ink, and pigment companies are working to meet new opportunities.
“In publication inks, there is still tremendous cost pressure and attempts to use as much cheap pigment as possible and to try to overcome any performance issues which come from that,” Mr. Bridge said. “In packaging inks, there is still scope for performance differentiation, and the moves to higher pigmentation, inks for fine line screens, new packaging films, create new demands on pigments. Specialist packaging applications are now a focus, for example, in applying various branding security technologies. The growth of UV inks, particularly flexo inks, has also created demands for rheology enhancements in the pigment offer.
“Of course, the greatest growth has been in digital printing, and so far particularly in jet inks, though this is from a small base,” Mr. Bridge added. “This area has created new demands for high performance pigments in particular, and we see now this area splitting into specialist applications, with photo-realistic applications now becoming clearly differentiated from various ‘industrial’ applications.”
Mr. Bridge said that screen ink manufacturers that have adopted digital technologies are doing well.
“The screen ink makers have come through the changes surprisingly well, and are in a position to create a good future,” Mr. Bridge said. “They were well placed in UV technology, saw the change to ink jet early and now they can lead UV ink jet technology as well as having a share in UV flexo inks. So they have gone from being in a steady to declining industry to having a role in two of the major growth areas.”
Developing new products are key for pigment companies. For example, Andy Grabacki said that he is seeing much interest in highly pigmented flushes with good flow and press stability.
On the metallic side, Eckart America and MD-Both/Wolstenholme International are working with Metal FX, a new approach to printing metallic colors.
“A recent trend is a new printing process/company called Metal FX, which is five-color process printing using silver as the first down color followed by conventional four-color process,” said Mr. Oberstar of Eckart, a certified supplier of standard and premium silver inks for the new process. “This creates a whole new palette of colors and visual appearances that opens up new design and packaging options.”
Another trend is the need for supplier technical support at ink companies.
“There has been downsizing of staff, rationalizing of raw materials inventories and heavy reliance of technical support on suppliers,” David Grabacki said.
As competition increases, ink companies are taking a closer look at their total costs, and are examining the total value that the pigments provide.
“Selling to the ink industry requires quality, service and value,” Mr. Brooks said. “The biggest value we offer is technical assistance on running metallic inks at their customer. We have high quality competition and we don’t sell on price. We can provide more value in producing a quality print job then we can by lowering prices.”
Specialty Areas Flourish
Certain segments of the ink industry such as the publication side have faced declining sales in recent years. However, UV, flexible packaging and non-impact printing led by ink jet applications have seen strong growth, and pigment manufacturers are focusing their attention on these areas.
“I don't think it's any secret that we are in a mature market for oil-based offset printing,” Andy Grabacki said. “I would be surprised to see a 4 percent to 5 percent growth in 2004. However, there appears to be a significant opportunity for growth in UV and ink jet. We have addressed ourselves to the UV market and have some plans for the future in other areas.”
“We have seen two years in a row of market contraction,” Mr. Ashe said. “We believe 2004 will not follow that trend. Niche areas have continued to grow and that should hold true in 2004. CDR is continually developing its technology for new products as well as enhancing our manufacturing process.”
“All indications are that 2004 will be a better year for the ink industry in general, but the real growth seems to be in the specialty areas,” Mr. Faulkner said. “We have dedicated a significant amount of R&D effort in the high growth areas.”
“In packaging, and particularly in special areas such as ink jet, UV inks and branding, we do expect to see above average growth,” Mr. Bridge said. “We shall participate with a number of new products already launched, and others also coming forward through our innovation pipeline.”
“Any growth we see is in those specialty areas and not in conventional commercial sheetfed or heatset inks,” said David Grabacki. “Our development efforts are truly focused on products for the ‘specialty ink’ market and helping solve the challenges our ‘conventional ink’ customers face.”
“In specific areas like UV and NIP, continuously higher growth rates are forecast,” Mr. Jones said. “Clariant puts special focus on these areas where we can add value to our products and on customers’ products through continuous product development and modification. Energy curable inks continue to be the fastest growing sector in our industry and are making new opportunities available for pigment manufacturers. Clariant sees an increasing interest among U.S. offset ink manufacturers to venture into the use of dry colors from flush to give more formulating latitude to the ink manufacturer than he currently enjoys from using flush color.”
Ink jet applications are particularly promising.
“Increased use of non-impact printing methods in the office environment mean additional opportunities to those positioned to supply either raw materials or finished ink for ink jet or toner applications,” Mr. Jones said. “Clariant Corporation has responded to these opportunities with new ranges of waxes based on metallocene catalysts, new dyes for the growing use of color in DVD and CD disks and new colorants for both dye-based and pigment-based ink jet inks.”
“We continually work with our customers to develop new products to meet their demands,” Mr. Aber said. “Ink jet is the only process that is showing staggering growth. Other new technologies are growing but at a slow pace.”
Challenges Facing Pigment Manufacturers
The pigment industry is facing a variety of difficult challenges. The concern over offshore competition is most frequently cited by pigment manufacturers as their number one problem. The overcapacity that has been created is creating direct pressure on prices and margins.
“The most difficult challenge we are facing and will continue to face is worldwide capacity versus demand,” Mr. Ashe said. “The world has more pigment capacity than it has demand and yet more capacity is still being added in Asia.”
“I think that not only cheap dry pigments, presscakes and flush color from the Far East, but also cheap inks from the Far East are going to challenge the industry going forward,” Andy Grabacki said. “It’s hard to have any type of domestic manufacturing anymore.”
However, tariffs bring up a whole different set of issues.
“A real ‘Catch-22’ is brewing with tariffs and restrictions being placed on the offshore sourcing of raw materials, but by the same token, the flood of products available from overseas will continue to be a challenge,” David Grabacki said.
The ink industry is clearly not immune from the dynamics being seen throughout the business world.
“The ink industry will see a further consolidation of their suppliers,” Mr. Campbell said. “The ink industry will also see their customers losing some of their business to imported products that will be manufactured and printed overseas.”
“Competing with offshore printing and keeping printing jobs in the U.S. are the most difficult challenges facing the industry,” Mr. Oberstar said.
Remaining profitable while continuing to stress R&D is another significant challenge.
“The most difficult challenge is to meet the expectations of ink makers for product improvements, and at the same time meet their needs for low prices,” Mr. Bridge said. “We have to ensure that costs are controlled, and that cash is generated to develop the new products.”
“With regard to the pigment industry, the challenges will certainly include increasing demands on the technology, the need to develop products for the new, high growth areas and the necessity to deal with the global overcapacity situation,” Mr. Faulkner said.
“The biggest challenge is meeting technical requirements for newer, faster printing processes, such as EB and UV curing presses, and finalizing our product line for ink jet ink,” Mr. Hess said. “We have made a substantial commitment to our technical staff, and we our cooperating with the industry-leading vendors and customers.”
Mr. Brooks said it is incumbent on pigment and ink manufacturers to work together to develop value for their respective customers.
“If we don’t work with our customers, the ink manufacturers, and develop our value together, then we will lose our value, our competitiveness and our drive for new technology,” Mr. Brooks said. “We have to recognize the cost of buying everything the cheapest way we can, and this can only be offset or countervalued by understanding the total cost and the total value that the synergy of the supplier and customer bring when they work together.”
Like their customers in the ink industry, pigment manufacturers have much to keep an eye on in the coming years. In the near future, it remains to be seen how strong the economy will rebound and what further impact offshore competition will bring.
In the long-term, the changes facing the printing industry and its suppliers are of tremendous interest. As digital applications continue to emerge, pigment manufacturers will be called upon to develop innovative products to help their ink customers compete.
For pigment manufacturers, bringing value and new technologies to their customers remains the best approach for doing business.
Responding to Challenges
To meet these challenges, pigment manufacturers are examining the way they do business, including sourcing products worldwide.
“We source from all over the world and continually review procedures and processes for efficiencies and savings,” Mr. Aber said.
“We are looking at foreign pigments and trying to reduce cost anyway we can,” Andy Grabacki said.
Pigment suppliers are developing new technologies and enhancing their facilities to meet customer demands. For example, Apollo Colors updated their facilities with larger, more efficient equipment.
“We are positioning resources so that Eckart can respond to global demands for metallic products and ink solutions wherever they may arise,” said Mr. Oberstar. “We recently introduced new world-class aluminum pigments and pastes manufactured in Louisville, KY.”
“Lansco Colors has built a new lab to assist us in improving quality and helping our factories develop new pigments,” Mr. Campbell said. “Lansco will continue to search the world to offer the best value through consistent quality, low prices and excellent service. We believe our customers will continually look for opportunities to reduce cost from new sources of quality pigments.”
Clariant has undergone changes this year, and is refocusing its efforts on its colors businesses.
“Clariant changed their strategic focus in 2003 away from life science intermediates toward colors and surface effects,” Mr. Jones said. “Clariant’s printing industries strategic direction is to become the global leader in coloration of ink jet inks, specialty inks and packaging inks through innovation, advanced technology and distinguished services. In raw materials for publication inks, Clariant will be a cost leader through professional commodity management.”
Ultimately, meeting the market’s challenges can make a company stronger, whether it is through developing new technologies or becoming more efficient.
“We have a very strong cash focus, and at the same time a program, Managing for Growth, in which all the considerable capabilities of the company are focused into key technology growth areas, but also into key projects to ensure future competitiveness,” Mr. Bridge said. “This program will bring new pigment forms forward, and take us into new application areas such as packaging security.”
“Challenges have always made CDR stronger,” Mr. Ashe said. “We will continue to meet and beat these challenges by being a leader in process automation, product quality, product consistency, and most importantly by our employees’ commitment to making sure our customers are satisfied.”