The European market for standard organic printing ink pigments and their raw materials is dominated by Asian producers, mostly in China and India. This has created a long supply chain that is highly vulnerable to disruptions.
The security of pigment supplies into Europe – and also North America – has thus become dependent on economic and commercial developments in the regional markets of East and Southeast Asia. However, ink producers in Europe and pigment manufacturers in the region who are also relying considerably on Asian raw materials seem to have little alternative but to continue to depend on these existing supply routes.
“We’ve just got to put up with constant interruptions in supplies,” said a sales manager at one European pigments distributor. “It’s usually been something related to what has been happening within the Chinese or Indian economies, but sometimes it’s an event outside the two countries like the recent tsunami in Japan.”
The Japanese earthquake temporarily halted some trade flows in the Far East, which has affected raw materials for pigments. One of these was acetoacet-meta-xylidide (AAMX), an intermediate in the production of organic yellow pigments.
“A meta-xylidide plant in Japan was closed by the earthquake just when a plant in China which accounts for a large proportion of AAMX capacity in the country was shut down for maintenance purposes,” explained Robert-Paul Wielinga, director of Trust Chem Europe, Deventer, Netherlands, the European subsidiary of Trust Chem, one of China’s largest pigment producers.
“This has resulted in big price rises for AAMX and severe shortages of certain yellow pigments,” he explained. “We’ve tried our utmost to guarantee the supply to our customers.”
Most standard organic pigments for printing inks sold in Europe are sourcing their supplies from Asia, mainly from their own or joint venture production operations.
Ink producers in Europe have also had to withstand the effects of an imbalance between supply and demand for TiO2.
TiO2 prices in Europe have gone up by around 50 percent since early 2008 and by 25 to 30 percent since late 2009. During the second quarter of this year, TiO2 producers were still pushing for 5 to 10 percent rises after gaining similar increases earlier in the year.
Even carbon black prices have risen relatively steeply – by around 15 percent last year and 10 percent already in 2011.
The biggest price increases and shortages have continued to be in the bulk organic pigments market. Ink producers have had little option but to pass on these additional costs to their customers, who are themselves under financial pressure because of a slow post-recession recovery in the European printing market.
For example, late last year, Sun Chemical announced an immediate 25 percent price rise for all its inks containing Violet 23, following a 70 percent jump in the cost of the pigment mainly because of shortages in China of carbazole, its key raw material.
Pigments are not the only ingredients in printing inks whose costs have been soaring over the last year. There have also been steep increases in the costs of solvents, gum rosin, phenolic resins and acrylic resins.
Scarcities of Raw Materials
The current scarcities of pigments has perhaps more than any other products focused the attention of the inks sector on the issue of raw materials supplies, possibly because pigment shortages have tended to affect all the mainstream ink segments.
With pigments and the other affected raw materials, the root cause of the shortages and high prices does not seem to be usual factors like hikes in crude oil prices, but the inability of suppliers to match demand.
“Many ink companies still show a crude oil chart as their first explanation for the rising costs, and indeed while crude has been under constant inflation in the last two years, the real background of the increases (in raw material costs) is supply and demand imbalances,” Jan Paul van der Velde, senior vice president of Flint Group, told the National Association of Printing Ink Manufacturers (NAPIM) conference in Florida in April.
Generally, post-recession restructuring of industries has left fewer players on both the supply and demand sides. As a result, suppliers tend to give priority to looking after the needs of customers in sectors much larger than that of printing inks.
“(The reorganization) does now allow producers to be more focused on which markets to serve and also to serve only those markets where they make good margin return,” said Mr. van der Velde. “The ink industry is, in general, not known for its margin generation.”
In Asia, due to fast growth, materials that were previously exported are being diverted into home markets to satisfy domestic demand. Furthermore, in the eyes of Asian governments, pigments and inks have been losing economic status so that they are no longer given preferential status. Instead of being given fiscal incentives to encourage exports, they are being burdened with extra taxes.
“Many raw materials, which were previously in the favored industries in the past in China, are now viewed differently, which can mean moving from export subsidies to additional taxes,” said Mr. van der Velde.
Consequently, the attraction of Asia as a source of pigments and other raw materials such as gum rosin is changing dramatically.
“Some people believe that there will always be the availability of low cost sourced materials from Asia – forget it,” said Mr. van der Velde. “Many materials are in shortage and Asia is moving more and more to added value materials. Therefore, looking forward, shortage is a real challenge and the security of supplies has increased on the agenda of many buyers and is likely to stay there for a while. This will have consequences for the ink industry as a result.”
In addition to putting pressure on producers of pigments and raw materials through tax changes, the Chinese government has been tightening up its environmental regulations, which has forced some operators out of business.
Stricter pollution controls has led to the closure of plants making phthalocyanine and phthalo blue in China. Instead production of the copper-based pigments is being concentrated in India, where the environmental rules on its production are more relaxed. India now accounts for around two-thirds of global output of phthalo pigments.
Consequently, China and India’s production of standard organic pigments for printing inks is split between two groups of basic colors. Blues and green mainly come from India and yellows and reds from China, where they are mostly based on derivatives from the base petrochemicals toluene and benzene.
Shortages from China often arise when production of pigment intermediates along the benzene and toluene value chains is halted in favor of other intermediates wanted by larger industrial sectors.
Carbazole, shortages of which in China have tripled its price, is mainly made from coal tar or as a by-product of steel production. There are alternative technologies for making carbazole synthetically, and are new emerging outlets for its production, which may make it more widely available. The solar energy sector has, for example, discovered that its relatively high level of photoconductivity makes it suitable as a material in photovoltaics.
The large Chinese pigment manufacturers who now have their own infrastructures for marketing and delivering printing ink and other pigments in Europe rather than relying entirely on European distributors are expecting a big reorganization of Chinese pigment exports. As a result of financial pressure and health and environmental regulations, not only in China itself but also in major export markets, a growing number of Chinese SME pigment producers are predicted to pull out of the business or to stop selling pigments abroad.
The European Union’s REACH legislation, which requires the registration with safety dossiers of pigments and all other commercial-scale chemicals, is becoming another financial burden for small Chinese exporters because of the expense of drawing up safety profile of their products.
“There will be a big shake-out among pigment exporters from China and also India,” said Mr. Wielinga. “REACH registrations are expensive. Only those exporters with a certain level of turnover will be able to afford REACH compliance.”
Leading Chinese pigment producers, like Trust Chem and Longyu Pigment and Chemicals Corp., are intent on establishing themselves as global players.
There is a similar ambition among Indian producers of printing ink and other pigments, such as Sudarshan Chemical Industries and Meghmani Group, a specialist in phthalo blue pigments.
Through its European subsidiary Union Colours, Longyu has an alliance with Rolfes Colour Pigments International of South Africa. Longyu’s higher end products are made in South Africa for the global market, while its Chinese manufacturing capacity is devoted mainly to making bulk pigments.
“Our European sales grew by 70 percent last year and we expect they will continue to increase at a fast rate,” said Phillip Myles, Union Colour’s operation director.
As Chinese and Indian pigments producers consolidate and increase their share of the European market, one outcome should be greater security in supplies of printing ink pigments.