The Additives Market

By David Savastano, Ink World Editor | 05.31.12

Additives manufacturers are reporting that 2012 is going quite well, particularly on the packaging side

Additives are critical to the ink manufacturer. They run the gamut from waxes and defoamers to the ingredients that impart critical performance characteristics to the finished inks.

As a result, additives manufacturers see all aspects of the ink industry, and have a good feel for what is occurring. Interestingly, leaders at major additives manufacturers are reporting that 2012 is going quite well, particularly on the packaging side, although they also note that raw materials could continue to create problems.

“We continue to see improvement in many areas of graphic arts, particularly in packaging inks, where the market is more dynamic and offers unique opportunity,” said Chris Halvorsen, global marketing manager, Lawter, Inc.

“Our results reflect healthier business conditions in 2012,” said Shauna McAuliffe, marketing specialist – specialty additives 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 continued growth going forward in the graphic arts segment. Declining demand for publications inks will continue to be offset by growth in packaging inks and digital print.”

“The packaging ink business is clearly the stronger market place versus commercial and publication printing these days,” said Alan Kalmikoff, president of Keim Additec Surface USA LLC. “We did not see that end of the business drop off in the past year.”

“Our sales numbers into the ink and coating sector were outstanding for the last two years, so we never really felt the economic downturn,” said Rich Czarnecki, technical director for Micro Powders. “We were able to secure a significant amount of new business, especially in applications for waterborne paper packaging and energy curable systems.”

“We have seen a nice recovery in this side of the business,” said Pat Heraty, market segment manager, graphic arts at Evonik Goldschmidt Corporation. “Packaging inks continue to grow. Inks that help our ink partners’ customers differentiate their products are also a major driver in the rebound we are experiencing.”

“Business remains steady as ink companies appear to be holding their own,” said Craig Baudendistel, director of sales for Shamrock Technologies. “At Shamrock Technologies, we continue to emphasize new product development based on our customers’ needs. Our strong customer focus has helped us remain committed to developing products that deliver value-added performance advantages, which in turn, provides us with increased business opportunities.”

Material Supply and Cost Concerns

The supply of some key raw materials remains a major issue for the ink industry, and additives manufacturers see a wide variety of raw materials that are concerns going forward. For example, Mr. Kalmikoff noted that a number of waxes are in short supply.

“Carnauba wax is suffering through a shortage due to the poorer than usual crop of palm leaves harvested in Brazil,” Mr. Kalmikoff said. “Montan wax has been in short supply due to the lack of material found in the veins of coal from which they were being extracted. The most current veins seem to be mitigating that situation a bit. PTFE has been in short supply this past year as well.”

“Fischer Tropsch wax continues to be tight in supply, while petroleum-based materials remain volatile,” Mr. Baudendistel noted. “The supply of PTFE feedstock is stabilizing and most grades are available. With the poor carnauba crop last year due to poor weather conditions in Brazil, we have seen significant cost increases for carnauba-based products. PTFE feedstock prices have stabilized.”

“From an additives perspective, the raw material demand can be quite small on a relative basis, so care must be taken to assure the source of material is available,” Mr. Halvorsen said. “The challenge is to manage the supply chain and control inventory. We are experiencing some significant price increases, mainly those materials derived from oil.”

“Pigments and resins will most likely remain a concern from a pricing and availability perspective,” Ms. McAuliffe noted. “This is especially true for many Chinese-produced raw materials and intermediates that are supplied to the industry. Many of our customers are spending technical resources on qualifying and finding alternatives to pigment and resin products in light of ongoing price increases and availability issues.”

Working closely with suppliers and customers alike is critical to additives manufacturers.

“The availability of certain raw materials for the printing ink industry can be cyclic in nature,” said Jennifer Turner, marketing manager for Evonik Goldschmidt Corporation. “We are doing our best to keep an eye on the situation and to work with our customers to mitigate any shortfalls. Evonik Tego is focused on resource efficiency, and we develop products for coatings and inks manufacturers that prolong functionality and help protect natural resources and reduce consumption of raw materials.”

“Almost every one of our raw materials is harder to get today than a year ago, and we expect to continue to wrestle with supply and demand,” Mr. Czarnecki said. “Fortunately, our position with key supply partners is strong. We will not disappoint our existing customers, although we may have to decline new high-volume opportunities that are simply not practical with the current tight supply chain. Several major suppliers are already moving to expand capacity, so we are optimistic that raw material availability will improve over the next few years.”

With supply being somewhat constrained, prices on key ingredients are rising.

“Raw material prices continue to increase, but not at the same level or frequency seen over the past few years,” Ms. McAuliffe said. “Raw materials continue to increase, partially due to material shortages, exchange rate fluctuations and the consolidation and rationalization of raw material supply. Base chemicals, resins, solvents and especially pigments are all up in terms of pricing.”

“Raw material costs continue to rise, with naturally derived materials being hit the hardest,” Mr. Czarnecki noted. “PTFE nearly doubled in price last year. And the cost of doing business, from something as simple as the cost of electricity to run a manufacturing plant, impacts our overall cost.”

“PE waxes, in particular are, once again feeling the heavy pressure from basic suppliers in terms of increased cost to obtain sufficient supply of raw materials,” Mr. Kalmikoff said. “This situation tends to be linear in terms of going up, and not nearly so when crude costs come down. This seems to be the way of special chemicals these days.”

Meeting Challenges

There are plenty of challenges for additives companies. As noted above, juggling the supply and cost of raw materials is difficult enough. Add to that the overall economic conditions, new requirements from customers and regulatory initiatives, and additive suppliers are keeping extremely busy.

“Our customers are looking for products that can maintain or improve current performance at lower usage levels or at a more economical cost,” Mr. Baudendistel said. “Shamrock’s Product Technical Center constantly strives to develop new products and new technologies in line with customer needs. Shamrock is also investing in our manufacturing facilities in order to meet growing demand expected now and in the future.”

“Most of our additives are developed to address specific technical priorities for specific customers,” Mr. Halvorsen said. “In many situations, the desire is to enable the use of standard resins for specialty applications by developing additives that provide the uniqueness to the final formulation.”

“The major challenge for wax additive suppliers is to maintain the ability to obtain raw materials and keeping customers happy with regards to price and service at the same time,” Mr. Kalmikoff said. “Keim Additec Surface has developed several new and innovative wax products to provide value and differentiation for customers in need. Some customers have cut their resource budget down to such an extent that having time to look at any new developments is a challenge as well.”

“Other than the supply situation, we continue to deal with the never-ending deluge of regulatory restrictions, guidelines, lists, and, in some instances, paranoia that slow the process of qualifying products, especially at larger accounts,” Mr. Czarnecki said.

“Rising raw material costs and availability will continue to be major challenges for the industry,” Ms. McAuliffe said. “In order to help customers meet these challenges, Air Products offers many products that are versatile in terms of use and that work across a variety of different pigments and resins. Increasing regulatory requirements and more demanding applications are also presenting challenges, and driving formulators to look for new raw materials options to expand their formulating toolboxes.

“Another challenge facing the industry includes finding suitable products with indirect food contact compliance, particularly in global formulations,” Ms. McAuliffe noted. “Air Products’ Specialty Additives offer a variety of products that are FDA compliant and compliant with the Swiss Ordinance on articles and materials.”

Mr. Heraty said that as with the last several years, there are three main challenges.

“The first, of course, is the economy in general,” Mr. Heraty said. “A significant economic setback would severely impact the industry. It potentially could result in supply issues due to cutbacks in production. We are working closely with our supplier base to guarantee adequate supply of critical raw materials.

“The second major challenge is the changing state of the market,” Mr. Heraty added. “With the demands for higher-performing inks that provide differentiation to the product, the old solutions do not always work anymore. Evonik Tego is constantly working with our ink partners to determine what their customers want. We continue to introduce new products designed to help our partners meet the performance criteria of their customers.

“The third major challenge is the continually-evolving environmental and legislative landscape,” Mr. Heraty added. “From REACh to Swiss Ordnance to FDA to individual customer demands, this area becomes more complicated every day. Evonik Tego has dedicated significant manpower resources to evaluate these regulations, determine where our products fit within them and answer customer questions quickly and efficiently as they formulate new products. All major development work takes into account the current and the predicted environmental requirements. In this manner, as we bring new products to our customers, they are designed not only to solve a customer’s issue, but to fit within the environmental framework in which they are used.”

Expectations for the Coming Year

With their business continuing to improve, leading additives suppliers say they are optimistic moving forward, although they add that economic problems could change all of that.

“We expect to see continued recovery in the area,” Mr. Heraty said. “As long as no severe economic challenges hit us, we are optimistic that we will maintain this nice upswing in many of the ink markets. Publication and offset will still probably have a rough time, but we are hopeful that the flexo markets, especially packaging, will stay strong.”

“We expect 2012 to be a year of stabilization, in terms of raw material availability and prices,” Mr. Baudendistel said. “The initial outlook seems to indicate a slowing economy, given the ongoing debt situation with Greece weighing down on Europe, the high unemployment in the U.S., and the forecasted slower growth in China. Global production output is expected to be lower than in 2011, with continued shifts in some market segments, in particular from the conventional offset inks towards digital.”

“For Lawter, the coming year will include the commercialization of several new products, both additives and interesting new resins for water-based inks and coatings,” Mr. Halvorsen said.

“This is an election year and the economy is slowly heading for recovery, and that translates into positive expectations for 2012,” Mr. Kalmikoff said.

“We expect moderate, high single-digit growth in 2012, which considering the success we’ve had over the last two years in the inks and coatings market is a healthy situation for our business,” Mr. Czarnecki said.

“Results continue to reflect healthier business conditions in 2012,” Ms. McAuliffe said. “We have expectations for an upbeat year within the graphic arts segment, with the caveat that raw material supply and pricing issues could constrain growth and provide continued challenges to the industry going forward.”

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