“We have seen a complete recovery in graphic arts compared to the depth of recession,” said Shauna McAuliffe, marketing specialist for Air Products. “Recovery has been seen in all segments, including ink, print sales, packaging and digital print. The industry seems to have put the worst behind it and we are seeing positive indicators for growth going forward in the graphic arts segment.”
“We have experienced a recovery in much of the business, but there is no doubt that in certain print markets the recovery is not going to be as strong as we would like to see,” said Chris Halvorsen, global marketing manager, Lawter, Inc.
“After a slow period in 2009 and early 2010, we have seen business recover very nicely,” said Patrick Heraty Jr., market segment manager, graphic arts coating additives, Evonik Goldschmidt Corporation. “There has especially been a significant increase in additives and co-binders for packaging inks. Publication inks and their required additives have also rebounded better than expected.”
“Volumes are still low compared to what we would like to see. However, the general impression is that business is picking up and we are hopeful for a strong 2011,” David Seline, Americas marketing manager - graphic arts, Lubrizol Advanced Materials, said.
“Overall, the graphic arts business has not had consistent growth,” said Mike Riggs, product and marketing manager at Munzing. “Various parts are trending upwards but others are languishing.”
“The water-based packaging side of the business, which is the primary area of attention for our company, held up well in 2010,” said Alan Kalmikoff, president of Keim-Additec Surface USA LLC. “That was true not only in the U.S. but globally as well.”
Craig Baudendistel, North American sales manager, Shamrock Technologies, said that 2010 was a recovery year in the graphic arts business for Shamrock.
“We saw the turnaround actually begin in the second half of 2009,” Mr. Baudendistel added. “Volumes were up. However, due to higher raw material costs, margins have been squeezed. Overall, we experienced nice growth year on year, and expect similar increases for 2011.”
The supply of some key raw materials is a major issue for the ink industry, and additive makers across the board are seeing the same problems in their materials. Resins and a wide assortment of waxes are just a few of the concerns.
Mr. Seline said that Lubrizol Advanced Materials is keeping an eye on the supply of PTFE, Fischer-Tropsch wax and rosin-based resin.
“Supply of these materials is a big concern,” Mr. Seline said. “However, our procurement team is working diligently to maintain and/or secure supply so we can continue to service our customers in the manner in which they have become accustomed.”
“PTFE is a concern at this time,” Mr. Baudendistel said. “For the past 50 years, supply and demand of PTFE has been in reasonable balance, with only occasional periods of supply-side shortages. The severity of the recent recession, combined with the strong global rebound in PTFE demand, have caused the current supply-side imbalance. We understand that some PTFE producers believe that PTFE supplies will remain tight for the remainder of this calendar year, with the potential for improvement in 2012. Though hopeful, we are not convinced that these predictions are accurate.
“Like many other suppliers of coatings, additives and PTFE micropowders, Shamrock has implemented price increases in 2010-2011 due to the dramatic escalation in raw material costs,” Mr. Baudendistel added. “However, we have not passed on the full amount of these cost increases to our customers, and as a result, have experienced margin erosion in some of our product lines.”
“From the wax perspective, all wax types, whether derived directly from oil such as paraffin and microcrystalline, or polymerized from ethylene or propylene such as PEs, saw tremendous pressure from basic providers across the board in terms of prices” Mr. Kalmikoff said. “In some cases, availability also came into question. In my opinion, these combinations have not been seen in this magnitude since the shortages of 1973 and 1974. Dispersant and/or emulsifier chemistries have not been spared either.”
Dan DeLegge, vice president at Inksolutions, noted that rosin resin is in short supply. “The suppliers have moved to other industries,” Mr. DeLegge said, adding that petroleum oil increases on what seems like a daily basis.
Mr. Heraty said that raw materials generated as by-products of petroleum distillation or other chemical processes are a concern. “As manufacturers evaluate these products' BTU values versus their market prices, we could see some supply reduction as manufacturers begin to use these products as fuel sources in their plants,” Mr. Heraty added.
Ms. McAuliffe said that discovering alternatives to certain products is becoming increasing important.
“Pigments and resins will most likely remain a concern from a supply chain, pricing and availability perspective,” Ms. McAuliffe noted. “Many of our customers are spending technical resources on qualifying and finding alternatives to these types of products in light of ongoing supply and availability issues.”
Higher Costs Of Raw Materials
Availability is one issue; higher prices is another major topic throughout the printing ink supply chain.
“Prices of raw materials have been very erratic,” Mr. Seline noted. “Even when or if they stabilize, raw material prices will not return to where they were before the large increases we are currently experiencing.”
“We have experienced higher raw material costs, and expect that they will continue to escalate this year,” said Mr. Baudendistel. “This condition is predicated based on increased energy costs, and on the ongoing tight and even short market for many feedstocks including PTFE, polyethylene and Fischer-Tropsch waxes.”
“We are experiencing raw material increases in almost all segments of the specialty chemicals market,” Mr. Halvorsen said. “Whether it is due to shortages or simply the cost of selling small volume items, we have taken raw material cost increases.”
“Raw materials across the board are increasing partially due to material shortages, capacity constraints and the consolidation and rationalization of raw material supply,” said Ms. McAuliffe. “Base chemicals, resins, solvents and pigments are all up in terms of pricing.”
The improving economy has created increased demand from ink and other major industries for key ingredients.
“A rebounding economy created strong demand with limited capacity, which will continue to push up raw material pricing,” Mr. Riggs noted.
“The key to changing the cycle and momentum to the present price problems for the wax market seems to be in balancing capacities to demand,” Mr. Kalmikoff added. “In other words, the comeback and further growth we are all looking forward to is contributing to the current supply and pricing dilemma from the basic wax producers. So, until there is excess capacity in the system, I expect prices will go up, even if crude oil prices stabilize.”
“As a result of the recession, many suppliers cut their inventories and idled production,” Mr. Heraty said. “As demand increases ahead of the ability to supply, there is significant upward pressure on pricing. The use of raw materials as a fuel source also reduces supply adding price pressure. We continue to work with our suppliers to deflect this pressure, but we expect raw material prices to continue to increase.”
Mr. Halvorsen noted that some suppliers are focusing their attention away from the ink market.
“We are seeing that certain suppliers are choosing to focus on other markets and not maintaining the same level of recourses for the ink markets,” Mr. Halvorsen said. “While there does seem to be a reduction in the number of dedicated suppliers, this may benefit the ones who remain determined to adjust and modify their strategies.”
Preparing for Challenges
The manufacturers of additives are facing plenty of challenges, not the least of which of raw materials. Mr. DeLegge said that pricing, supply and cash flow remain challenges, adding, “This is going to be a difficult year.”
“Raw material availability and pricing continues to be a major issue for our industry,” Mr. Baudendistel noted. “Customer conversations frequently revolve around raw material shortages for PFTE polymers, TiO2, resins, carbon black and wax. Shamrock is also presently experiencing shortages in a number of key raw material feedstocks including PTFE, Fisher Tropsch and some polyethylene wax products. Shamrock is working closely with our customers to help mitigate the impact of these shortage situations. Tighter inventory management, strategic purchasing, and improved forecasting practices have become imperative to make sure we have the products available when and where our customers need them.”
“The major challenge has been and is to be in synch with customers in terms of the seriousness and depth of the problem and the focus on qualifying long term sources of supply,” Mr. Kalmikoff said.
“Two key challenges the industry is facing are raw material availability and the unpredictability in raw material pricing.”Mr. Seline said.
“Reluctance from suppliers to increase domestic capacity will continue to create supply shortages, which potentially could be compounded by geopolitical factors,” Mr. Riggs noted.
However, there are other issues that are raising concerns. Tighter regulations are having an impact on additives suppliers as well as ink manufacturers.
“Other challenges include finding suitable products with direct and indirect food contact compliance particularly in global formulations,” Ms. McAuliffe noted. “Air Products’ Specialty Additives offer a variety of products that are FDA complaint, as well as compliance with the Swiss Ordinance on articles and materials and with the German BfR regulations.”
“The major challenge continues to be the changing regulatory environment,” Mr. Heraty said. “From REACh to the Swiss List to the EU Plastics Directive to the varying definitions of "green,” ink manufacturers and their suppliers are facing an increasingly complex and confusing array of regulations. The long-term success of ink manufacturers and their suppliers will be directly related to how well they can meet these requirements across the globe.
“Tego is committed to supporting our customers by developing next generation products that meet all major regulations,” Mr. Heraty added. “Tego's Product Stewardship Program provides our customers with the regulatory information necessary to meet their obligations. We have streamlined this process so that the R&D chemists have the necessary regulatory information at their fingertips. This saves valuable time and prevents the need to re-formulate because the chemists know their additive package will meet the required regulations regardless of the region.”
Overall, additives are critical for ink, and developing new technologies remains important.
“The necessity for additives in all printing ink markets will be an opportunity,” Mr. Halvorsen said. “Additives are used to solve nagging application problems, and more recently they are used to define a base platform as something unique. We continue to formulate new additives that provide differentiated value in all ink applications.”
Additive manufacturers say they remain optimistic about the coming year, as new technologies come on line, but raw materials are very much on their mind.
“We are very optimistic,” Mr. Baudendistel said. “The beginning of the year started off strong. We have a number of new products that have been introduced, and an even greater number in our pipeline. And we have placed a strategic focus on business growth through product and technology development in line with market and customer needs.”
Mr. Halvorsen said that keeping up with rising costs will be difficult but very necessary in order to remain reliable,
“Our customers look to us to formulate alternatives that provide assurance that they can moderate the impact of the inflation and shortages of raw materials,” Mr. Halvorsen said. “With new product platforms being developed to address a broader range, additives are needed to complete the application requirements.”
“Recovery will continue modestly in the U.S. and more aggressively in the emerging markets, which will create continued demand pressure and result in price increases,” Mr. Riggs said.
“We are hopeful that 2011 will prove to a positive, albeit challenging, year for Lubrizol in the graphic arts market,” Mr. Seline said. “We are excited about our prospects. Based on Lubrizol’s commitment to our customers, we are continuously investing in R&D to find new and alternative technologies to fulfill our customers’ needs. In addition, we are working with our supply partners to maintain the best possible supply of raw materials during these difficult times.”
Mr. Kalmikoff said that 2011 has started with a bang in terms of the same issues that existed in 2010.
“Our company continues to position itself in the most strategic ways to assure our customers the products they want when they want them, ” Mr. Kalmikoff added. “We are trying to hold the line on prices where we can by use of creative methods such as becoming basic in some waxes ourselves. New capacities of key raw materials in 2011 are anticipated for waxes.”
“We are cautiously optimistic about the remainder of this year,” Mr. Heraty said. “With our well-established portfolio of environmentally-friendly products and our new developments, we expect to maintain our position as an industry leader in innovative solutions for our customers.“
Essentially, additives manufacturers believe that the coming year could be a good one, provided that the raw materials market can be steadier.
“Within the graphic arts segment, we have expectations for an upbeat year with the caveat that raw material supply and pricing issues could constrain growth and provide continued challenges to the industry,” Ms. McAuliffe concluded.