While the printing ink industry felt the impact of higher raw material prices as well as the economic recession that struck in the latter part of 2008, the flexo ink market was somewhat insulated from the worst of the impact at the packaging industry fared relatively better than the publication and commercial side.
Photo courtesy of Color Resolutions International.
“The flexographic ink market, like other ink segments, faced dramatic cost increases during the last year that drove ink prices up,” said Mike Impastato, vice president – strategic marketing, Packaging & Narrow Web at Flint Group. “In addition, like other industries, the flexographic market was significantly impacted by the market-wide downturn in the final half of the year which resulted in flat growth, when compared to 2007.
“We believe this trend will continue into 2009 and that there will be challenges to be faced throughout the industry,” Mr. Impastato added. “We do not anticipate an increase in market demand; however Flint Group has identified a number of specific opportunities for growth which we will focus on in 2009.”
“Overall, flexo did well in 2008 and despite the economy, the only sign of weakness was felt in the last quarter,” said Joe Kelly, vice president – technical director, INX International Ink Co. “Given the current economic situation, we think that weakness will exist for most of 2009.”
“Overall, the flexo market showed signs similar to that seen in the overall economy,” said Tony Renzi, vice president of product management for liquid inks, North American Inks, Sun Chemical. “It slowed down significantly in 2008, beginning with the rapid rise in raw material costs and ending with the economic recession. Sun Chemical took several measures to offset the raw material costs through price increases and the restructuring of our overall business model. These actions helped mitigate the impact; however, as is the case with most companies in our industry, volumes in the fourth quarter fell off dramatically demanding that we take further measures including additional cost reduction. Due to the ongoing recession, we expect the market to remain slow throughout 2009.”
“The packaging market segment is where we see the most growth for flexo, especially as the trend in the market continues to move towards functional and sensory packaging,” noted Michelle Hearn, director of marketing, North American Inks, Sun Chemical. “Source reduction, a smaller number of packaging layers, along with a decrease in packaging size continue to be ways consumer packaged goods companies are looking for support in their sustainability efforts. Sun Chemical anticipates further growth opportunities from these key areas related to sustainability.”
Mr. Kelly noted that consumers are tending to watch their spending, meaning less dining out and more cooking at home.
“Packaging continues relatively strong as consumers are dining out less and having more meals at home, or are ‘dining down’ as the fast food sector is doing well,” Mr. Kelly said. “The consumer has moved to more economical packaging options with their purchases. For example, when buying soft drinks, they are now choosing two-liter bottles rather than 12 ounce cans.”
“The first part of 2008 was fairly strong, but as the economic situation worsened, ink sales were affected in the last quarter dramatically,” said Paul Schroeder, president and CEO of Environmental Inks & Coatings. “Sales were down both domestically and abroad as companies tried to lower inventories and adjust to the economic uncertainty.”
Mr. Baker said that any shifts to flexo from other printing processes will likely be delayed due to capital constraints.
“We do not anticipate the flexographic process to overtake the other viable printing processes where entrenched, due to obvious capital restraints in 2009,” Mr. Baker said.
Flexible packaging and shrink wraps are strong areas of growth for flexo.
“The most growth in packaging printing in general is in the area of flexible packaging,” Mr. Baker said. “This has been one of the few if not the only growth area in packaging printing. This market predominantly uses flexographic printing as the process of choice. As that industry grows, the use and growth of flexographic printing will continue to increase.In the past few years we have seen packaging gravure come back into favor in specific applications but flexo remains predominant.
“In the area of packaging, flexible and paper, which is the only marketplace we serve, the design and structure of new and innovative packaging is almost totally in the flexible packaging portion of the industry,” Mr. Baker added. “As job runs get smaller and graphic designs get even more sophisticated, flexo will remain the process of choice.As more and more packaging structures move from paper and board to non-porous substrates, flexographic printing will grow in share but perhaps not necessarily in volume due to the penetration of offshore competitors. Offshore printers appear to be using primarily gravure printing.”
Mr. Kelly pointed to shrink film applications as the biggest growth segment in flexo. “Packaging designers are running with the highest graphics that have been made possible for stylized shaped containers that are wrapped in shrink films,” Mr. Kelly said. “For the foreseeable future, it presents limitless possibilities.”
“The effect of the current economic climate has been witnessed across all areas of the flexographic market,” M.r Impastato said. “Actual market growth over what was a flat 2008 could again be difficult, although some areas will have been affected less than others. Demand for folding carton may continue to be soft while we expect an over-proportionate growth in high performance laminates. Labels and flexible packaging in general continue to remain relatively strong, as this market sector is predominately driven by food-related end uses which should suffer less during the downturn.
“With respect to products and product technologies for flexographic printing, we expect that the trend from conventional to digital polymer printing plates will continue as the digital workflow offers significant process benefits and less overall cost,” Mr. Impastato added. “We also see strong growth opportunities for us in the move from flat printing plates to in-the-round flexo printing forms. This segment continues to witness steady growth due to the significant benefits provided in both efficiency and profitability.”
“Product differentiation is crucial for converters, so the specialty inks market continues to show signs of increased health,” Mr. Schroeder said.
The Impact on Customers
It is said that the packaging market is fairly recession-proof, but the full effects of the present recession is testing that theory. Already, leading converters such as Smurfit-Stone have filed for Chapter 11, and it is likely other companies that are haviliy in debt may face a similiar fate.
“The majority of our customers have felt the pains of the crisis,” Mr. Schroeder said. “Many have cut employees, shifts hours and salaries to compensate for lost sales. Many feel that the current situation could last well into the better half of 2009 but are bracing themselves for survival and eventual prosperity.”
“The economic downturn has impacted everyone across the board, some due to an actual drop in business demand, while others have been impacted due to a concern regarding the future direction the market will take,” Mr. Impastato noted. “Everyone is being cautious. Well-managed businesses are certainly watching their inventories and preemptively cutting costs where ever possible, and this has obviously driven down the overall consumption of materials into the flexographic market.
“Investment in pressroom equipment has also been affected drastically in the current downturn, with many printers postponing or even cancelling non-essential expenditure,” Mr. Impastato added. “We also expect to see an increase in the number of bankruptcies during 2009.”
Mr. Renzi said that the economic downturn has clearly impacted Sun Chemical’s customers.
“Many of our customers have looked to flex their manufacturing by shifting man hours and the number of days that they are working,” Mr. Renzi said. “In today’s economy, our customers want to be more efficient and are increasingly turning to faster presses to help them operationally realize this efficiency. We are focusing on the customer in this and other areas.”
All in all, the outlook for the flexographic market in 2009 remains a concern for all, as downturns in volume seem fairly certain.
“We have seen some dramatic effects in certain areas and minimal impact in others,” Mr. Baker concluded. “However, all are projecting a downturn in volumes in 2009. Cash flows seem to be stressed in virtually every area of packaging companies. If the economy continues to retreat, our customers will be even more stressed and will certainly revisit the past reorganizations and reductions in overhead. In general, there is some optimism expressed concerning 2009, but that is not universal.”