Like practically every company in the printing ink supply chain, resin manufacturers faced significant challenges in recent years. Higher raw material costs, driven by higher crude oil costs, made life difficult for resin suppliers. The global recession led to a dramatic decrease in printing, particularly on the already troubled publication side of the business, which led to cutbacks from ink companies.
Even though printing has not recovered to pre-recession levels, there have been signs of economic improvement, and resin companies are seeing a rise in demand.
Joncryl resin. (Photo courtesy of BASF Corporation)
There has been some major changes as a result of consolidation in the resin market. After Hydrite’s April 1, 2009 acquisition from Rohm & Haas of the rights to manufacture, market and sell the Lucidene and Morcryl product lines to the graphic arts and overprint varnish markets in North America, the company has settled into the market quite nicely.
“Hydrite Chemical is ending a very successful first year with the Lucidene and Morcryl product lines,” said Holly Anderson, graphic arts commercial manager at Hydrite Chemical “Over 30 products have been successfully integrated into our manufacturing facilities with full commercial and technical support for all graphic arts customers. Over the coming months, Hydrite Chemical will be focusing on new product development that addresses market needs and high performance applications.”
Packaging fared much better than the publication/commercial side of the printing and ink businesses, and this translated to resins as well.
“DSM faced a decline in demand in the first half of 2009,” said Ivo Lansbergen, business director adhesives and graphic arts for DSM NeoResins. “Throughout the ‘crisis,’ DSM took adequate measures to counter the short-term effects. Actions were primarily focused on reduction of operating working capital without jeopardizing supply performance. DSM decided to retain all people relevant for production, sales and R&T, to be able to respond adequately when demand would pick and to keep all factories open.
“This decision was based on an extensive study done towards the end of 2008, beginning of 2009,” added Mr. Lansbergen. “The results predicted recovery for most markets supplied by DSM. From this model, one can learn that the strong decline towards end of 2008, beginning 2009 was triggered by de-stocking triggered by a temporary shortage of cash in the global economy and not so much a strong reduction of end-market demand (except for a few end markets not directly linked to the graphic arts market).”
Mr. Lansbergen noted that ink manufacturers are simplifying their supply chain.
“An important trend we have experienced is that customers are adopting strategies to minimize risk and maintain continuity by cutting down on the number of single source suppliers and switching business to more stable and financially sound suppliers like DSM,” Mr. Lansbergen noted.
Signs of Recovery
For resin manufacturers, there has been some good news on the economic front, as the global economic recovery has led to improving sales.
“Since Q2 2009, recovery started and DSM experienced a steady increase month by month,” Mr. Lansbergen noted. “Temporary reduction of output has been fully reversed and plants are operating at normal levels again.”
“We saw signs of sales and volume improvement beginning in mid-2009,” Mr. Krause reported. “Improvement has been steady and gradual, but many companies do not expect to return to 2007-2008 levels until 2011-2012. Unfortunately, there have been significant pressures on raw material feedstock costs and spot shortages of some materials.”
“We have seen some improvement in our offset resin business in recent months and this can be attributed to some improvement with total ad pages,” Mr. Halvorsen said. “Resins for packaging inks have also shown signs of improvement.”
Key Properties for Resins
What are the key properties ink manufacturers are seeking when it comes to resins? Mr. Krause said that cost-effectiveness and value are important considerations.
“Our customers tell us that cost-effectiveness with value-in-use performance is a particularly high priority in today’s business environment,” Mr. Krause said. “BASF continues to invest in advancements to water-based, energy curable and dispersion technology that bring value to the printer, converter, ink manufacturer and overprint varnish manufacturer.
“Resins and polymers are the binding force that holds an ink or coating together,” Mr. Krause added. “They are critical ingredients that enhance the color, stability, gloss, drying speed, resolubility and resistance properties of an ink or coating. Ink and coating companies capitalize on their formulating expertise to achieve the right balance of properties and applied cost based upon the portfolio of polymer and resin products we offer.”
“Ink water balance and rheological stability in offset applications are very important properties,” said Mr. Halvorsen “Solubility, compatibility and film forming properties are fundamental requirements. In addition to the performance properties is the desired increase in bio-renewability and advancement in greener chemistries.”
“Demand for resins suitable for food applications, including tobacco, is showing strong growth,” Mr. Lansbergen noted. “Another area where we see an increased interest is in environmentally friendly resins. Examples are resins made of renewable monomers or resins which require less energy to dry/cure as well as resins with higher solids, reducing transportation footprint and lowering the disposal need. To add to this, we are developing cost effective resin systems lowering the total cost of ownership in the value chain. Examples are ink systems using reduced resin quantities and/or pigments.”
Raw Material Costs and Supply
Even with the good news that the economy is improving, there is a serious concern that higher raw material prices could impact the recovery, as price increases would have to be passed on. In a way, the recovery is leading to increased demand, which is putting pressure on supply.
“Feedstock costs and availability will remain uncertain – and continue to be a focus – as our industry struggles to improve profitability,” said Mr. Krause. “Ironically, the economic improvement we are seeing is generating higher demand beyond available capacity and is adding to specific raw material and feedstock cost pressures.”
“Challenges continue for the industry as rising raw material costs and shortages of key ingredients continue to squeeze profitability and hamper growth,” said Ms. Anderson. “We continue to work diligently to ensure consistent and reliable sourcing of raw materials, while maximizing production utilization in servicing our customer base.”
Mr. Halvorsen said that the pricing and supply of rosin, a critical raw material for resin producers, are particulalry volatile.
“We believe the industry has learned to live with volatility related to most petroleum-derived raw materials,” Mr. Halvorsen noted. “Swings in key petroleum-based products, while not predictable, are at least understood throughout the industry. However rosin, whether tall oil- or gum-derived, has become extremely unpredictable in terms of both cost and availability. Rosin is probably the most important raw material used in the production of resins used in lithographic printing inks.”
Major Challenges for The Resin Industry
Aside from raw materials, there are other challenges ahead for resin suppliers, including consolidation.
“Global consolidation of resin manufacturers and raw material suppliers will likely continue, given the growing trend to global sourcing, continued emphasis on cost-effective products and the necessary economies of scale, and the need for long-term adequate reinvestment returns to remain in business,” Mr. Krause said. “BASF continues to grow its presence in North America and globally; the recent acquisition and integration of Ciba demonstrates our desire to be a long-term solution provider for our customers and their respective industries.
“We began 2010 by achieving a major milestone in the start-up and qualification of our new Joncryl polymer plant in Wyandotte, MI, the culmination of a transition that began in 2007,” Mr. Krause added. “All North American Joncryl products are now manufactured in Wyandotte or Seaford, DE. The Wyandotte plant represents a significant investment and commitment by BASF to the printing and packaging and industrial coatings industries, enhancing our position and demonstrating our dedication to these industries.”
Mr. Lansbergen pointed to innovation as critical for resin producers.
“The major challenge for tomorrow lies in product innovation,” Mr. Lansbergen said. “DSM is a firm believer in product innovation and is convinced that in order to be successful, new products for new/emerging markets will need to be developed. Over the last couple of years, DSM has become n UV player with a very complete portfolio of UV curable resins, especially after the capacity expansion in our Meppen plant in Germany, and our extensive product development. DSM’s market conform UV resins have already proven to be much appreciated by our customers and we continue to work on new and improved resins for the UV market.”
Having the ability to expand into more profitable regions, such as Brazil, Russia, India and China (BRIC), is also important.
“The industry needs to expand investment in BRIC regions to capture the growth,” Mr. Halvorsen noted. “We are fortunate to have significant infrastructure in place in these regions but continue to challenge ourselves on speed and focus addressing the market needs.”
Expectations for The Next 12 Months
In discussing the coming year with resin executives, there definitiely is a sense that changes in the market are ahead.
“DSM expects further consolidation in the ink market, continuous pressure of regulations and more demanding requirements for resins used in food applications,” Mr. Lansbergen said. “As a global resins supplier, active in multiple resin technologies, DSM is well positioned to respond to the market needs of tomorrow. DSM is focused and dedicated to the graphic arts market, working hard to understand the customers’ needs and the end markets.”
“We anticipate volatility in the rosin markets affecting both price and short-term availability,” Mr. Halvorsen said. “Although this is a challenge, we are in position to take advantage of our flexibility and many sources of rosin.”
“The economy and our industry can be compared to a long freight train that, after grinding to a halt in 2009, is struggling to get back to speed smoothly and steadily without creating stress and friction between railcars,” Mr. Krause said. “While it may be a bumpy ride in the next few months, we remain optimistic about the return to long-term growth in printing and packaging.
“Short-term, however, we expect that feedstock costs and availability will remain uncertain and continue to be a focus as our industry struggles to improve profitability, Mr. Krause said. “Industry consolidation amongst printers, converters, ink companies and their suppliers will continue as the value chain re-equilibrates to post-recession demand and capacity, and packaging ink growth will return in 2010.”