National Geographic's May 2004 issue, printed by Quad/Graphics, received the 2005 Golden Cylinder Award for "Best of the Best" and Publication – Coated (over 40 lbs.) from the Gravure Association of America (GAA).
Even with this pressure, there continues to be no relief in sight for pricing, particularly for heatset inks. According to a survey conducted by the National Association of Printing Ink Manufacturers (NAPIM), the first six months of 2005 were tough for heatset ink manufacturers. During the first half of 2005, NAPIM reported that heatset ink volume rose 2.7 percent compared to the first half of 2004, but sales declined 1.7 percent.
The continued overcapacity in the heatset ink market remains a major obstacle for increasing prices. In essence, printers are still enjoying a buyers' market.
In the past month, both Flint Ink and Sun Chemical announced major price increases, with Flint Ink calling for 12 percent for heatset and Sun Chemical seeking 9 percent to 12 percent. Additional surcharges are also applicable due to the increased cost of transportation. It remains to be seen whether these prices will hold, but even if the companies achieve the higher end, these increases won't begin to cover the higher costs of raw materials.
It is also a time of change for the publication ink industry, as the planned merger of XSYS Print Solutions and Flint Ink will create the second-largest international ink manufacturer. The new company will have a major presence throughout the publication ink industry, and will be particularly strong in Europe, where it will be the leading news ink manufacturer and second-largest heatset ink manufacturer.
The Past Year
While the publication ink market has witnessed some growth in the past year, pricing has been a major concern for ink manufacturers.
Overall, the publication market in the U.S. has been somewhat flat this year, with slight growth in some segments, according to Mark J. Levin, president, Sun Chemical's North American Publication Inks. While consumption of ink is up slightly, prices had been heading down until recent increases in raw material and operating costs forced many ink makers to announce price increases, he said, adding that many of the rising costs have been driven upward by rapid and sustained increases in oil prices, from which many ink raw materials are derived.
Mike Green, vice president/general manager, North America Publication Inks Division and North America News Ink Division for Flint Ink, said that overall, there has been a minimal increase in sales volume within the North American publication market due to a limited increase within the books and publication direct mail markets.
There has been some growth on the heatset side, notably catalog and magazine industries, but competing technologies are gaining share.
"Advertising spending is up modestly over last year, with the magazine market supporting fair growth and catalog circulation up for the year," Mr. Green said. "However, competing technologies impose a major challenge for our industry to capture the placement of future advertising dollars."
Industry data shows advertising revenues increasing while the number of ad pages languishes, Mr. Levin said. He pointed out that Zenith/Optimedia was predicting ad spending growth of 4.3 percent in 2005, while Merrill Lynch said much of the increased spending is moving away from print to electronic media. Consumer magazine spending has grown, but trade publications continue to slide.
Most parts of the world face similar conditions for the publication industry, said Chris Morrissey, Sun Chemical's corporate vice president, marketing. The few exceptions would include countries with rapidly developing economies, such as China and India, where demand for print publications is growing. There, too, he pointed out, publications are facing increasing competition from electronic media.
"Similar to the North American market, the worldwide publication market has its challenges," Mr. Green said. "Fortunately, there continues to be growth markets in emerging economies such as India, Eastern Europe and China."
As for publication gravure, Mr. Levin said publication gravure printing is expected to continue shrinking slowly, as older presses are retired. Part of this, he said, can be tied to shifts in retail advertising. Consumer products companies are localizing their ads, which results in shorter runs on which gravure has more difficulty competing.
"The publication gravure sector has been flat, and while some new equipment is being installed, the growth in this segment will be marginal at best," Mr. Green said.
Cabela's Special Limited Spring Edition Volume, printed by Quad/Graphics, received a 2005 Golden Cylinder Award for the Publication – Lightweight Coated category from the Gravure Association of America.
Because of the higher prices for raw materials, notably oil derivatives, the costs of publication ink have soared. For ink manufacturers, there is an absolute need to educate customers on the necessity for higher prices.
"We have communicated to our customers that limited supply of key intermediate raw materials, the global escalation of petroleum derivative prices and demand have had a dramatic impact on the printing ink industry," Mr. Green said. "Crude oil has significantly increased in price, directly affecting key raw materials used to manufacture printing ink, such as middle distillates solvents, ink oils, hydrocarbon resins, carbon black pigments, color pigments, flushes and certain additives. We have taken extreme measures to reduce costs within our manufacturing and delivery operations. However, these measures have not fully offset the significant increase in raw material costs."
"Prices of publication inks have risen, but despite these increases, the prices still don't match the increases in raw material costs," Mr. Levin said. "Our customers understand that raw materials costs have gone up, but they still must face their own price pressures in a market that's only now getting back to the printing levels of before 2000. For ink makers, publication remains a highly competitive marketplace that is still challenged today by overcapacity, which continues to plague their pricing power."
When it comes to raising prices, news ink price increases are completely justified. A typical black news ink consists of approximately 50 to 70 percent oil, carbon black – itself cracked crude oil – and resins, which are oil derivatives. For color news inks, the pigment intermediates are also derived from oil.
Reports indicate that napthenic oils are a major concern in the marketplace. The possible responses – reformulating, using soy or other oils, or raising prices – all have challenges. Flint Ink is calling for a 12 cent/pound price increase on coldset inks, while Sun Chemical is raising its prices from 9 percent to 12 percent.
"Napthenic oils are a major issue for the news ink market," said Norm Harbin, vice president, market and technical development, North America News Ink Division of Flint Ink. "We have been faced with multiple napthenic oil price increases due to the diminished napthenic oil capacity in 2004 and 2005. Additionally, crude oil prices have affected news ink prices as many ink ingredients, not just the carrier oil, are derived from petroleum. Alternative options are being pursued, like soy oil, but presently these are available at an even higher cost."
Considering that the cost of West Texas Intermediate (WTI) has risen 116 percent in the past two years, one can see that the cost differential between oil-based and soy-based news inks may be narrowing.
Mr. Harbin said there are some key trends to note.
"Newspaper circulation continues to decline. However, color ink usage continues to increase," Mr. Harbin said. "Newspaper advertising is slowly rising."
Mr. Harbin noted some other trends, including:
• Newspapers seeking cost savings through lighter base weight newsprint and narrower web widths;
• Newspapers printing more non-daily publications – alternative, free, commuter newspapers; and
• Newspapers seeking ways to utilize more press capacity, increase productivity, increase advertising/jobs and increase revenue, which has resulted in a notable interest in Flint Ink's Arrowlith UV ink system for coldset web applications.
There are major changes occurring in the European news ink industry, as the planned merger between XSYS Print Solutions and Flint Ink is reshaping the news ink market. The black and process inks for newspaper printing from XSYS Print Solutions are known under the names ANI, Trenal, Lindgens and Newsking, and once the addition of Flint Ink is completed, further adds to the company's production capabilities and technology portfolio.
The New York Times Style Magazine, printed by RR Donnelley, received a 2005 GAA Golden Cylinder Award for the Publication – Supercalendered category.
The printing industry remains highly competitive, and printers are looking for new technologies such as stochastic screening and UV to differentiate themselves. Ink manufacturers are responding with new technologies that are impacting the market.
"New screening techniques continue to replace conventional screening and our existing ink systems are robust, to enable use with various screening technologies," Mr. Green said.
"All printers are seeking new technologies that can help them compete while reducing their costs," Mr. Levin said. "Some are asking for higher-strength inks so they can achieve equal densities while applying less ink. Many printers are using prepress techniques such as gray component replacement to reduce ink usage in areas of high color coverage. Stochastic screening continues to gain acceptance because it can improve quality dramatically on lower-grade stocks if the right inks are used."
Reducing inventory is another goal for printers. Mr. Levin said that Sun Chemical has applied many of these technologies in its PrintEasy line-up, which is designed to reduce the number of ink formulations a printer needs to print on various substrates. By designing wide-latitude formulations, PrintEasy allows printers to save time and money printing on a wider array of substrates with even better quality production, Mr. Levin said, adding that now, those capabilities are being enhanced with new Rycoline fountain solutions that have been added to the PrintEasy product line to optimize printing with the new inks.
On the news ink side, Flint Ink's Arrowlith UV system has drawn much attention, receiving the prestigious GATF InterTech Award.
"At Flint Ink we continue to develop new technologies to drive revenue growth for our customers," Mr. Harbin said. "Specifically in the coldset market, these printers want to increase advertising dollars and improve efficiency. They want to meet the demand for high-end printing applications in-house, with faster turnaround times and greater control over the printed product, meeting and exceeding the expectations of readers and advertisers. Flint Ink's Arrowlith UV ink system's cutting-edge technology is the answer for coldset printers. Arrowlith UV inks allow coldset printers to print full-color, high-end, high-volume newspaper inserts, Sunday sections and other special projects in-house on a wide variety of substrates, including coated, supercalendered and newsprint stocks."
Mr. Levin said Sun Chemical continues to invest more in R&D because customers expect new technology such as PrintEasy and the breakthrough technology of Kohl & Madden's new Liberty inks to help them stay competitive.
"Printers know that even though inks are just a small part of their total costs, the impact of ink performance can be a deciding factor in whether they are profitable or not," Mr. Levin said.
The ink industry is developing new technologies and services that will help their customers differentiate their own products. However, operational and raw material costs continue to rise, and for ink manufacturers, the need to increase their prices is an absolute necessity.