For resin manufacturers, 2003 was a somewhat flat year, although signs that the economy is beginning to improve is creating some optimism.
“In 2003 the ink industry was affected by global market factors such as the recession in Europe, Japan and U.S., the weakening of the U.S. dollar, the war on terrorism, market dislocations and cross global outsourcing,” said Dr. Iuliana Nita, marketing specialist – paper, printing and packaging for Noveon. “The industrialized economies, having reached bottom, started to recover at a moderate positive growth. The U.S. grew at 2 percent, Western Europe at 2 percent and Japan 1.8 percent.”
“Sales to the ink sector were flat in 2003 versus the 2002 and below our sales plan for the year,” said Robert Clinger, director of sales for Neville Chemical. “Like everyone in the industry, we were optimistic that the industry performance would rebound in the latter half of 2003.”
“Johnson Polymer had a solid 2003 in spite of lagging and stagnant printing and packaging industry results,” said Rick Krause, Johnson Polymer’s director of marketing, printing and packaging. “The ink industry and supporting suppliers continue to face stiff competition. The tough economic times of the last couple of years have continued to reinforce cost conscientiousness throughout the entire industry. Budget cutting, cost reduction initiatives, facility consolidations and re-organizations continue to pervade the industry.”
While there is hope that 2004 will bring much-needed improvement, there are also concerns that cost increases and further economic and political issues will keep the economic recovery less than anticipated. For example, Eastman Resins officials said that while 2003 was certainly a better year for resin sales than either of the previous two years, it fell below the company’s projections. The company remains cautiously optimistic that resin sales will continue to increase, and that some pricing recovery will occur as well.
“Due to the global economic and political turmoil and the continued emergence of China as a world influence, we see 2004 as another year of uncertainty,” Mr. Clinger said. “Raw materials, energy and health care costs continue to escalate and will challenge our ability to significantly improve margins. We are focusing on the things that we can control such as productivity, cost reduction and new product/market development to provide growth opportunities. We’re looking for new ways to provide value to our customers and challenging our chemists, engineers and commercial people to think creatively, without limitations.”
“Albeit slower than anyone would like, general business conditions for the printing industry appear to be improving since the fall of 2003,” Mr. Krause said. “We continue to be optimistic about general industry growth in 2004. Offshore sourcing of raw materials (e.g. pigments) and packaged goods continue to place pressure on U.S. industry, including the printing and packaging industry.”
“NeoResins’ strength as a specialist supplier maintained a good level of growth in 2003, and expectations for market recovery in 2004 offers confidence of increasing growth, specifically in flexible packaging,” said Michelle Moss, NeoResins’ industry manager. “NeoResins continues to develop and introduce new grades within our emulsion-, water- and solvent-based urethane product portfolio and this continues to be our focus for 2004 and beyond.”
Ink manufacturers are working to meet the needs of their customers, and resin manufacturers are doing their part to come up with new products that will help meet these requirements.
“The main trends we are seeing from the ink industry are increasing demands for low odor, low residual products as well as hybrid technologies and self-cross linking technologies,” Dr. Nita said.
“We see two main trends,” said Scott Seeley, marketing manager for Arizona Chemical. “On the publication side, litho and gravure, we see lower cost and performing papers continuing to flood the market. This has put a tremendous stress on the inks to increase holdout and film forming, which are leading to new resin technologies. On the packaging side, water and solvent, we are seeing an increased need for lower viscosity resins, which allow for higher pigment loadings to increase color development and work well with finer anilox rollers.”
“We are seeing increasing use of film substrates in more and more complex laminates to serve the needs to the increasing demanding requirements for the flexible packaging industry,” Ms. Moss said.
Price pressures are having an impact on resins.
“The focus in paste inks is on lower price, in many cases at the expense of product performance,” said Phil Runge, product manager, resins at Eastman Resins.
“From the commercial point of view, we see continuing pressure on pricing,” Mr. Clinger said. “Low cost raw materials seem to be driving decisions in developing new ink formulations. There seems to be a determined focus on the establishment of operations in Asia – especially China. We sense that domestic investment is being directed away from the mature markets of news ink and heatset toward evolving, higher growth markets such as UV, flexible packaging and ink jet.”
“For liquid ink resins, pricing pressures continue to dominate most discussions,” said Marc Owens, product manager, liquid inks at Eastman Resins. “However, opportunities are still available for some areas such as high product resistance and reduction of waste during press startup. Eastman is currently focusing our product development efforts in these areas in order to create improved products for our ink customers.”
Resin manufacturers are facing numerous challenges, whether it is profitability, the changing nature of manufacturing, consolidation of customers or how business has evolved over the years.
In particular, profitability is a serious concern.
“The biggest area of concern today is profitability,” Mr. Clinger said. “For the most part, our industry has not been able to pass along the dramatic increases in raw materials and other expenses. Global overcapacity and slow economic growth in the U.S. and Europe has had a detrimental effect on our ability to justify capital for investment in our business. An economic turnaround in both the U.S. and Europe can’t come soon enough.
“Although Asia has been a growing factor in recent years, the influence that this region will have on us in the years ahead will present both challenges and opportunities for growth,” Mr. Clinger said. “We see the domestic manufacturing sector pulling up stakes and setting up shop in China in order to take advantage of lower cost operations and to establish a presence in this emerging market. What effect that this exodus has on the U.S. economy concerns many of us in the chemical industry and is sure to be a hot topic in this election year.”
“We continue to face issues of overcapacity, lack of standardization and inexpensive imports,” Mr. Runge said. “Finding new areas of value that can be enjoyed by both ourselves and our customers will be our most difficult challenge.”
“Some of the most difficult challenges facing the industry are cost pressure, global sourcing and print on demand,” Dr. Nita said.
Mr. Clinger said that the way business is being conducted has changed dramatically, and resin manufacturers must be able to evolve with their customers.
“Continued consolidation of the entire supply chain will force the suppliers to the graphic arts industry to redefine how we do business with our customers and our suppliers,” Mr. Clinger said. “We are already dealing with larger customers that also have a greater multinational focus than they did just a few years ago.
“The graphic arts market has experienced a fundamental change in how business delivers its message and this change has really taken hold over the last several years,” Mr. Clinger said. “The Internet and corporate web sites are no longer simply curiosities meant to dazzle web-surfers. They have become serious business tools that are used everyday to market products and services, gather information, process orders and facilitate communication between customers and suppliers. It wasn’t that long ago that we depended on printed material to play a major part in many of these transactions. This trend is here to stay.
“As a resin supplier, we must be responsive to these changes and help our customers find ways to take advantage of these changes,” Mr. Clinger said. “It’s all about providing value to our customers. Recent statistics show us that the printers are deriving a larger and larger share of their revenue from non-traditional sources. They’re evolving and it’s up to us to find profitable ways to evolve with them.”
Responding to Challenges
For resin manufacturers, meeting these challenges is the key to their success now and in the future.
“There is an increase in raw material and manufacturing costs and the changing manufacturing base in the emerging markets such as China and Brazil,” Ms. Moss said. “We are responding to those challenges mainly with strong and focused support in these regions. Customers in these regions are very adaptive toward new technologies and these markets are clearly key for us.”
“Being a global supplier, Johnson Polymer can support its customers throughout North America, South America, Europe, Asia and the rest of the world,” Mr. Krause said. “We continue to look for ways to support our customers in the most cost-effective manner possible and bring new products and value enhancements to those buying ink and overprint varnishes in the printing and packaging industry.”
To continue to remain successful, resin manufacturers are doing what they can to keep an eye on their costs while maintaining the R&D necessary to meet their customers’ needs.
“We are underlining organic growth emerging from our new product development initiatives and increased sales, marketing and R&D focus,” Dr. Nita said. “We are committed to offering innovative solutions to the global marketplace.”
“Over the last few years, we have cut costs and streamlined our business and processes,” Mr. Clinger said. “We’re much more focused on running our business today than just a year ago. We continue to focus efforts on new product development that will meet the needs of the market and provide value to our customers. At the same time, we continue to look for ways to contain costs and maintain very tight controls on spending.”
“Commodity pricing and off-shore pressures continue to spur innovation and improvement,” said Dr. Hemant Dandekar, global general manager, inks at Eastman Resins. “Our research efforts continue to not only improve and extend our current lines, but we are also examining completely new chemistries for liquid ink applications. On paste inks, our focus is to reduce fixed cost by reducing cycle times and improving process robustness. We are also working on providing lower cost product alternatives for our customers. Overall, Eastman Resins is very excited about the challenges and possibilities that lie ahead of us.”