Pricing Pressures Continue To Threaten Heatset Ink Industry

By David Savastano, Ink World Editor | 10.10.05

Pricing Pressures Continue To Threaten Heatset Ink Industry

For the printing ink industry, there is much to talk about in the past month. Much of the industry was on hand for Print 05 in Chicago, where leading ink companies showcased new products and services. The Siegwerk Group’s acquisition of SICPA’s packaging ink division has been completed, and by the time this issue comes out, the huge Flint Ink – XSYS Print Solutions merger, led by CVC Capital Partners, most likely will be finalized.

However, there is an undercurrent that continues to flow through the publication ink industry and threatens ink manufacturers. While some of it is caused by forces impossible to anticipate and control, other aspects are self-inflicted.

This undercurrent is the continued tightening of margins, partly caused by higher raw material and operating costs, but also the result of the inability of ink companies to get higher prices for their products and services.

We have watched pricing on key raw materials skyrocket in the past two years, as the cost of crude oil and other major ingredients have dramatically increased and availability has become an issue. We have also witnessed the horrifying tragedy as Hurricane Katrina, with all of the unspeakable suffering, ravaged the Gulf Coast of the U.S. On the economic side, the hurricane disrupted oil refineries and other key raw ingredients for countless industries, including ink, which is further impacting pricing.

These effects cannot be helped. However,  ink companies have to relay the price increases to their customers. It is a simple fact of economic life. Indeed, price increases have been announced since the end of 2004 by major ink companies, and a new round was just announced by Sun Chemical and Flint Ink (see Fresh Ink, page 10).

Yet, as detailed in “The Publication Ink Report” beginning on page 38, the first-half numbers from the National Association of Printing Ink Manufacturers (NAPIM) show that the previously announced price increases on the publication side not only did not stick, but prices have regressed. In particular, heatset ink prices declined 1.7 percent compared to 2004’s first half, while volume rose 2.7 percent. Considering the price of solvents and just about every raw material that goes into heatset inks have risen, this is inexplicable.

The heatset ink industry has long complained that printers see their inks as a commodity. If this latest round of price increases fail, it will become sadly clear that major publication printers don’t see much value in truly partnering with ink companies, nor do ink manufacturers have the ability to get paid for the value of their products and services. That combination would be an ominous sign for the heatset ink side of the industry.    

David Savastano
Ink World Editor