David Savastano, Ink World Editor10.10.05
For the ink industry, recent years have brought numerous challenges, and for the most part, 2003 was no different.
However, there have been exceptions, particularly in the Asia Pacific region. Fueled by booming economies in China, India and a few smaller countries, the ink industry is growing. In particular, the packaging side has seen opportunities as manufacturers and global packaging converters move into the region.
For the leading ink companies, having operations in the Asia Pacific region has become a necessity when it comes to meeting the needs of major printers, and companies are continuing to expand their operations in the area.
Growth in 2003
2003 was another year of strong growth throughout most of the region, and that translated well to the printing and ink industries.
“In all of India/Pacific we saw significant, sustainable growth,” said Damian Johnson, president, Flint Ink India/Pacific. “There has been tremendous printing capacity added in all countries. The main segments of growth are packaging, averaging greater that 15 percent volume growth, followed by publication. Overall, India, with a GDP growth of 8.4 percent, is just behind China’s 8.9 percent. These two have shown the greatest growth rate as they open up and develop their infrastructure.”
“The printing industries in Asia have remained buoyant with significant economic growth in India and China,” said Prashant Dasai, Micro Inks’ board member. “The packaging and publication newspaper segments have witnessed significant growth.”
“Asian countries represent growth markets for the Sakata Inx Group,” said Toshihiko Fukunaga, manager, international operations division for Sakata Inx. “In particular, our gravure ink for flexible packaging and water-based flexo ink for corrugated carton box showed significant increases of shipments.”
Hisato Tanemura, group marketing director, Dainippon Ink and Chemicals, Asia Pacific, noted that growth for the printing ink industry varied throughout the Asia Pacific region, with China showing the greatest increase at 10 percent. The Chinese economy has grown 8 percent, and the printing industry has had 9 percent growth. Many printers have built new factories and installed state-of-the-art equipment. Ink consumption in China alone has been estimated to be more than 300,000 tons last year.
To meet increasing demand, ink companies are expanding their efforts into China. Most recently, Flint Ink opened its new publication ink plant in Beijing in April (see sidebar on page 28).
“In the growing market of China, the demand of inks shows expansion of approximately 15 percent,” said Toshio Inaue, managing director, international operations for Toyo Ink. “However, the unit value and profitability are declining.”
Mr. Tanemura said that packaging has been at the forefront of the growth of the Chinese ink industry.
“In particular, packaging has shown strong growth,” Mr. Tanemura said.
Mr. Tanemura said that other Asia Pacific regions showed growth in 2003. For example, Southeast Asia is averaging 5 percent growth, and Mr. Tanemura anticipates more opportunities to develop.
“I believe there will be more competition and growth in new countries such as Vietnam in 2004,” Mr. Tanemura said.
“In Southeast Asia, Sudden Acute Respiratory Syndrome (SARS) had an adverse impact of printing industry, especially in the first half of the year,” said Mr. Inaue. “Revenues are dipping due to the hike of raw materials’ prices by the Iraq war and drops of market prices of inks. Sales volume in Japan remained the same as the previous year, but in China, the demand is surely expanding.”
Australia and New Zealand have continued to grow along with the region.
“The Australian market has been bouyant for some time with added presses entering the market,” Mr. Johnston said. “Due to its robust domestic economy, Australia was not affected by SARS or the Asian financial meltdowns. What has caused problems for Australia and New Zealand is that, due to their financial growth and strong domestic economy, their exports are becoming expensive as their dollars keep getting stronger. Multi-nationals are relocating their home offices back into Australia and New Zealand due to their stability, safety and strong growth. They are becoming the focal points of the regions.”
Japan has traditionally been the strongest economy in the region, but it has been mired in a prolonged slump. Mr. Tanemura noted that while Japan’s economy grew 2.7 percent in 2003, the printing and ink industries remained flat.
“Due to the sluggish economy in Japan, the market size is almost the same as last year,” Mr. Inaue said. “Market prices keep on decreasing, but there are signs that the fall is coming to an end.”
Mr. Fukunaga said there are signs that the economy may have bottomed out.
“Offset printing ink shipments from Sakata Inx in Japan show and indicate a gradual recovery trend of the Japanese economy, and liquid packaging inks show decreases compared with the previous year due to sluggish personal consumption caused by the cold summer in 2003,” said Mr. Fukunaga. “The printing ink industry tends to extend the market in proportion to the GDP rate. We don’t expect large growth in Japan due to customers’ production shift to Asian countries and impact of the falling birthrate and the aging population in addition to the prolonged deflationary trend in Japan.”
India’s economy continues to show spectacular growth, which is translating to the printing and ink industries.
“The Indian economy has managed healthy economic growth of above 7 percent,” said Mr. Dasai. “Good monsoon last year led to healthy growth in agriculture industries and services. The impact of agricultural growth has increased the demand in rural areas for the fast moving consumer goods (FMCG) sector, which are major consumers of packaging material. Printing and printing inks in India has grown by nearly 10 percent and 12 percent during 2003. The highest growth segments have been newsprint industries and packaging industries.”
To meet these growing needs, ink companies are expanding their operations in India.
“In India, Micro Inks, Sakata Inx and Coates have all added capacity to handle the growth being exhibited,” Mr. Johnston said. “Flint Ink is pleased to announce that we, too, are going to build a state-of the-art facility in India to service the rapidly growing news and publication sectors. In India we have secured the Times of India, which is adding more capacity to address the dramatic rise in literacy and disposable income.”
Mr. Dasai and Mr. Fukunaga said that packaging will continue to be a tremendous opportunity.
“The Indian packaging industries are currently worth $15.2 billion, which represents 2.3 percent of the world market,” Mr. Dasai said. “It is growing at nearly 15 percent per annum, more than twice the global average. India has one billion consumers whose demands are increasingly becoming more sophisticated. Approximately 80 percent of the Indian packaged goods are consumed by just 20 percent of the population. Per capita consumption of packaging in India is just $15.10 per annum compared to worldwide average of $105 per annum. Only 2 percent of India’s food production is currently being processed. The government of India wants 10 percent of production to be processed within the next 10 years.”
“The Indian market is still showing significant growth, especially for flexible packaging industries that are improving print quality,” Mr. Fukunaga said. “One of the main factors is that middle income group is growing very fast, which is pulling the consumption.”
Mr. Dasai said that the UV ink market is slowly increasing in the print finishing area, as plastic lamination is being replaced with UV coatings. UV inks are being applied on large format printing, label printing and CD printing.
Overall, the outlook for the Indian printing ink industry is excellent.
“The outlook for the ink industry currently is reflecting the high growth rate with the good economic growth,” Mr. Dasai said. “Newsprint inks along with packaging inks will continue to grow at a high speed. India’s export growth in the printing industry will also benefit the domestic ink business. With this high trajectory growth, we expect overall growth of about 10 percent to 12 percent.”
Packaging in China
In particular, the packaging industry in China has seen excellent growth in recent years. Helmut Unkel, director, H.J. Unkel (China) Limited, places the growth of the Chinese packaging industry at approximately 8 percent annually for at least the past five years, and added that it is said to represent 6 percent of world output today. As more international companies move into China, that growth will continue.
“Global players have increased their presence,” Mr. Tanemura said. He added that packaging is an area of potential growth in the region, with retort packaging and non-toluene inks being of particular interest.
“Chinese printing and ink markets are tremendously growing by multinational companies’ penetration after China’s entry in the World Trade Organization (WTO),” Mr. Fukunaga said. “As many Japanese consumer-electronics makers are moving into China, ink consumption for corrugated carton box has been increasing gradually, and they are exporting their products worldwide so that quality requirements and environmental issues to ink makers have become very restrictive. Our Shanghai plant will be ready to start production in June 2004.”
The region as a whole has seen strong growth in packaging.
“The packaging industry has been successful in most Asian countries due to ever-increasing exports and continuing demand by buyers for better, more attractive and environmentally-friendly packaging for their imported goods,” Mr. Unkel said.
“The packaging side has seen excellent growth, with food and beverage, pharmaceuticals and tobacco being the leaders and health and beauty following,” Mr. Johnston said. “Packaging has the highest growth of any segment and it is sustainable. It also has the shortest life cycle and therefore requires constantly changing formulations. Labels, packaging and corrugated in Australia and India have shown excellent growth as companies use the technologies and capabilities available to export to nearby regions.”
“Demand in Southeast Asia is certainly growing,” Mr. Inaue said. “Substrates vary from OPP films to PET or nylon films. It leads to the high requirement for high-end and high-speed printing. This is a result from widening of the fields of printing such as snacks, retort foods, pet foods, shampoos and detergent. As this trend gets popular, the market for gravure inks with polyurethane resins is growing.”
Outlook for 2004
The outlook for the ink industry in 2004 remains one of optimism.
“On the positive side, we see more European factories coming to the Far
East or planning to do so,” Mr. Unkel said. “In many cases they are still wary due to the scare stories about the lack of protection for intellectual property rights and/or the difficulties in enforcing them. In light of this, the Japanese successes are the more admirable. The new markets to watch will be in Indochina on account of low labor costs. Still, all eyes will remain firmly focused on China in 2004.”
“It seems that the demand in Southeast Asia increases stably,” Mr. Inaue said. “High-end packaging continuously increased this year, especially in Thailand and Malaysia. Refillable packages have been on the market in Indonesia as well and active demand is expected. Also, further globalization in business will be highly required in the printing ink industry.”
Despite the continued growth, there are a few hurdles to overcome, such as rising raw material costs and competition.
“The overall outlook for the ink industry is excitingly strong,” Mr. Johnston said. “Still, there will be increased competitor activity, higher raw material costs and lower selling prices, resulting in the need to increase profitability by adding value for our customers.”
“On the negative side we see steadily increasing raw material and energy prices as well as disruptive oil and power shortages,” Mr. Unkel said. “We see serious inventory build-up, particularly in Chinese-made chemicals (most severe in pigments), and simultaneously, shortages of some imported specialties.”
Overall, the growth of the ink industry throughout the Asia Pacific region remains a success story.
“There is a true story about a foreign synthetic resin maker who carried a sample of finished ink made with his product that was proven as highly successful in his own country for a test in a south China printing plant,” Mr. Unkel said. “The result was an abysmal failure because the printing machines in his own country are perhaps a decade old. In China, they are the most modern available. Clearly, inks must move with the times.”