There are signs that the flow of Chinese pigments into the European market is beginning to slow as production overcapacity in China starts to trigger consolidation. Nonetheless, the presence of Chinese pigments in the European printing sector is being strengthened by moves by Chinese companies to set up their own distribution channels in Europe.
Meanwhile, as prices for organic and effect pigments, including those for certain high performance pigments, are being weakened, production costs, particularly the expense of raw materials and energy, are rising, causing a tightening of margins.
In the longer term, the European Union’s new REACH legislation on the safety of chemicals, which is worrying pigment producers, could be a big cost burden.
Pigments from China
Chinese-sourced pigments already account for the majority of classical or standard printing ink pigments sold in Europe. Most of the Chinese products come from the wholly-owned or joint venture plants of western or multinational companies including Ciba Specialty Chemicals, Clariant, Flint Group and Dainippon Ink and Chemicals (DIC), the parent company of Sun Chemical.
Chinese-owned pigment companies have also been gaining a big foothold in the European market through European traders and distributors.
Many of the Chinese pigment exporters compete on price, which has tended to soften the prices of a wide range of pigments, even those at the upper end of the market.
“Direct investments and joint ventures by major pigment manufacturers in China are contributors to the increase in Chinese-sourced pigments in Europe,” said Chris Weighill, vice president, general manager for Sun Chemical Performance Pigments. “The market has seen an increase in the average selling price for inks over 2005 and 2006, which gives credence to the move by Chinese manufacturers into higher performance pigments such as Red 122 and Red 254. Manufacturers in China are beginning to set up distributors in European to reach end-users. In retrospect, these actions are impacting the margins of European manufactured materials. As a result, European manufacturers continue to absorb significant cost increases and compete against USD purchased products purchased using U.S. dollars and converted into favorable European prices. Sun Chemical Performance Pigments continues to grow its pigments business in Europe by providing solutions tailor-made to customers, by maximizing our products’ value and by emphasizing to customers the positive aspects of our cost structure.”
“Prices have been coming down, even with some high performance pigments,” said Birgit Genn, head of global marketing and business development at Heubach GmbH, Cologne, Germany, which makes its pigments in India.
“The squeeze on prices is not just due to the Chinese,” she added. “End-users are demanding lower prices right down the chain. They are wanting an improved performance from pigments with greater fastness and environmental compliance but at a lower cost.”
At the European Coatings Show in Nuremberg, Germany, in May, Chinese pigment manufacturers were offering high performance pigments at prices as much as 30 percent lower than those provided by their Western counterparts.
However, despite having low prices, Chinese pigment exporters face obstacles in Europe. The biggest of these are concerns over quality and a lack of backup support. Now, however, a growing number of Chinese producers, particularly the larger ones, are making big efforts to tackle the issue.
“There are two classes of Chinese producers active in Europe,” said a sales manager at one European pigments producer. “One will use traders to sell on price with quality a secondary consideration. The other class is taking a long term view. Their pigments will be cheaper but they are also intent on building a reputation for both service and quality.”
A few of the larger Chinese pigment producers are building up their own channels of distribution in Europe rather than relying on European traders. By having their own subsidiaries in Europe, they can maintain closer ties to customers, which will help them not only allay anxieties about quality but respond more effectively to their technical requirements.
Longyu Pigments & Chemicals Corporation, Changzhou, China, which is country’s largest independent pigments producer with an annual capacity of 60,000 tons, has created its own company in Europe: Union Colours Ltd., Stalybridge, Cheshire, England,
The 100-percent-owned subsidiary, which acts as a distributor, quality controller and new product developer for Longyu in Europe, is led by executives previously employed by the European-owned pigments companies.
“We offer a technical service which can match or exceed those of the multinationals,” said Phillip Myles, operations director with Union Colours. “Longyu has a long term view of the European market and is naturally seeking long term relationships with its customers through our Union Colours division.
Through Union Colours, Longyu is targeting the European segment of pigments for nitrocellulose and solvent-based packaging inks. Over the last 12 months it has launched a new range of yellow, red and orange pigments which have been jointly developed at its facilities in UK and China.
Dispersants Make Gains In the Marketplace
The availability of low-priced pigments from China and India has accelerated the growth in supplies of pigments in Europe in the form of dispersants or preparations in which they are combined with binders and solvents.
Some of the vertically integrated ink producers which also have pigment-making operations have already been stepping up their sales of dispersants in Europe.
“(The trend to pigment dispersants) is driven by technology and alternative treatment strategies,” said Edward daPonte, global marketing manager for pigments at Flint Group. “Many companies have invested in technologies which allow their customers to buy the added value with less complexity and capital outlay than setting up their own shop. Many customers see our scale and dispersion expertise as a benefit to them, allowing them to focus on their end-market needs.”
“The sales of solvent-based pigment preparations have been impacted by cheaper dry pigments coming from China,” Mr. Weighill noted. “European manufacturers have reacted by increasing the sales of dry pigments into the solvent-based market. Ink producers are now rethinking their ‘make vs. buy’ discussion on dry grind versus purchased water-based dispersions. There is a recognizable trend in importation of water-based dispersions from China. Sun Chemical has maintained its competitiveness in the water-based dispersion market through economies of scale and the use of Six Sigma methodology in manufacturing.”
“Preparations is a major growth area for Clariant,” said Bernhard Ehrenreich, vice president printing business for Clariant International Ltd. “We want to double our business with this product group in the printing business within the next five years. We have our local production units around the world and are investing in the newest dispersion technology.
“We have a full range of pigment dispersions available, but we are also prepared to produce tailor-made solutions, dependent on batch size,” Mr. Ehrenreich added. “We are just about to develop a complete new generation of water-based dispersions for printing inks, and we already have a leading position with water-based pigment preparations for inkjet inks. We are able to offer to our customers our full range of pigment preparations and the chance to reduce their own product and production complexity combined with a high level of innovation.”
Independent European dispersant producers have been taking advantage of easier access to a wider range of pigments to expand their activities in the printing inks and coatings sectors. Degussa of Germany, a leading producer of carbon black and additives for inks and coatings, has just set up a joint venture with the Italian company Inxel Srl, Milan, to make pigment preparations in granule form for solvent-based inks and coatings.
Black pigments are already being provided in the granules, while they will also shortly be marketed in shades of yellow, red, violet, blue, green and brown.
“The immediate advantage of granules is that unlike the conventional dispersions in powder form, they are dust-free and easier to handle,” said Thomas Hermann, head of Degussa’s advanced fillers and pigments business. “But the extrusion technology developed by Inxel has a lot of long-term potential. It has the capability of adding a range of resins and additives to the granules so that customers will have only a minimal number of additional steps to complete before they have a finished product.
“In addition to broadening the range of colours available through the use of inexpensive pigments, our next challenge is to provide a broader range of binders in the granules with the printing inks sector being initially the main target,” Mr. Hermann added.
REACH and the Pigment Industry
A major problem looming on the horizon for pigment manufacturers in Europe – as well as ink makers – are the uncertainties posed by the new European legislation on the safety of chemicals, called REACH for the registration, evaluation and authorization of chemicals. The legislation came into effect on June 1.
“REACH will impact the pigment supply dramatically, since many small products and products with low margins will disappear from the market,” Mr. Ehrenreich said. “The reason is that the registration costs for such products are not in relation with the profit. Pigment customers should prepare themselves in advance, and check whether the supply of these products will be secured in the long term.”
“REACH will have a large impact on the European pigments business as major manufacturers will be forced to pool their resources on a ‘consortia’ basis to reduce expenses,” said Mr. Weighill. “It will be difficult to justify the testing cost for low volume color indexes, which may disappear. Without a significant volume, the cost of testing for the distributor in the future will be questioned. How the market shares the costs of testing and implementation over the years to come remains to be seen. Sun Chemical Performance Pigments is well-prepared for REACH, and we plan to pre-register all chemicals in our products starting in June 2008.”
REACH requires that all chemicals which are produced or imported in amounts of one metric ton or more annually should be registered with relevant safety data with the newly established European Chemicals Agency in Helsinki, Finland. The rule will be “no data, no market” so that producers and importers of chemicals which cannot provide sufficient information on their safety will not be able to sell them in the European Union.
The number of chemicals which will need to be registered are estimated to total nearly 30,000. At least 5 percent of these which are considered to be hazardous will also have to receive a separate authorization to remain on the market. In many cases, chemicals which have to be authorized will also be subject to compulsory substitution by alternatives considered to be safer.
Chemicals needing to be authorized will include those which are carcinogenic and those which are categorized as being persistent, bioaccumulative and toxic (PBT) and very persistent and very bioacumulative (vPvB). The difficulty for pigments is that regulatory authorities have been classifying them as PBTs or vPvBs.
“Pigments are designed to be persistent because otherwise their colors would fade,” explained a regulatory affairs executive at one pigments manufacturer. “But there are doubts about whether they are also bioaccumulative so that they could be categorized as vPvBs.”
The Ecological and Toxicological Association of Dyes and Organic Pigment Manufacturers (ETAD), Basel, Switzerland, combined with the UK Environment Agency to carry out a study last year on a method for establishing the bioaccumulation potential of pigments. This concluded that the existing testing systems are inaccurate because they fail to take into account the large molecular size of pigments and their insolubility in water.
A report on the study organized by the UK-based consultancy Atkins Environment suggested that pigments should be screened according to their relative bioaccumulative potential. Overall, the conclusions of the study could show that all pigment compounds are non-accumulative.
Nonetheless, REACH is raising anxieties among pigment producers about the possibility they may face difficulties with the registration of their products, with the possibility of having to seek authorization for them. The legislation has become an impetus for some Chinese exporters to establish their own presence in Europe rather than operate in the region through third parties.
“We’ve decided that, mainly because of REACH, that we need to have our own subsidiary in Europe, which we aim to set up by the end of the year in the Netherlands or Belgium,” said Zhi Li, managing director of Trust Chem Co., Zhejiang, China, which exports a large proportion of its output of 13,000 tons a year of pigments to Europe.
In fact, one benefit of REACH is that it will act as a deterrent to those producers outside Europe who want to use it as a means for making a quick profit.
“REACH is now the cost of doing business in Europe,” said Mr. daPonte. “It will only affect those suppliers who are not committed to the market and have the infrastructure to handle the required details of the legislation.”