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Competition for European Pigment Market Continues to Increase



By Sean MIlmo, European Editor



Published May 1, 2013
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It is a difficult time for many manufacturers and distributors of pigments to printing ink producers in Europe, not only because of poor demand due to an economic slowdown in the region but also increasing regulatory pressures.

At the same time, ink producers want higher and more consistent standards in pigments because they themselves are having to meet tougher requirements from their customers for improved quality controls.
Some pigment suppliers in Europe – ost of them based in China and India or with production capacity in the two countries – are now facing the dilemma of whether to adapt to harsher trading and regulatory conditions in Europe or to pull out of the market altogether.

As a result, there is likely to be restructuring and more consolidation within the European printing inks pigments sector – mainly in its commodity section.

The difficulties among suppliers were evident at the recent European Coatings Show (ECS) at Nuremberg, Germany, at which printing ink pigment producers and distributors were participants.
What was noticeable, however, was that a relatively large number of Chinese and Indian producers are determined to stay in the Europe’s printing ink pigments sector despite the region’s current economic troubles. Ironically, at a time of static growth in demand, this has made the market for commodity-type products even more stressful.

“Sales are going down, yet the competition is getting even more intense,” said one distributor of Chinese printing ink pigments at the exhibition. “Only a few years ago, it used to be a comparatively easy market – at least at the commodity end. Now it has gotten much harder. A sizeable proportion of Asian exporters want to stick it out. But they realize low prices are not sufficient and are trying to improve reliability and back up services.”

However, there also seems to be a number of Asian suppliers, particularly those based in China, whose resolve is weakening under the strain. They are looking to the option of concentrating on their fast growing domestic sector and to the rapidly expanding regional markets in Southeast Asia and the Far East.

“You get the sense that changes in the structure of the European market are imminent,” said Samarjit Sathe, head of marketing of Heubach Colour Pvt. Ltd., Baroda, India, a subsidiary of Heubach GmbH. “In the next five years, a number of smaller Asian players in commodity pigments will pull out of the region or merge with bigger producers.”

Reacting to Market Changes

Restructuring moves are already being made by European players. BASF announced in April that it is reorganizing its pigments and resins business unit, which produces printing ink pigments, mainly high performance grades.

The company is scaling down some of its printing ink pigment activities in Europe, particularly those based in Basel, Switzerland, so that management of pigment product quality and safety in Europe can be concentrated in BASF’s headquarters at Ludwigshafen, Germany.

European producers are making their operations leaner in response to a static domestic market. Demand in Europe has been showing little or no growth for the last few years, and is unlikely to pick up significantly in the near future.

“The printing ink pigments market in Europe was pretty flat last year, and looks likely to continue to be flat through to at least next year,” said Philippe Verhelle, product and marketing manager at Cappelle. “There has been some small temporary increases in demand over the last few months when customers can no longer rely on their own stocks and have to buy again.”

There have also been some segments where there has been underlying growth, like inks for digital printing and packaging, especially food packaging.

These are segments where customers require high performance, often innovative, pigments, which have been manufactured in conditions of rigorous quality control. But even these have been subject to fluctuations in demand.

Clariant reported that its pigment sales plummeted last year to levels below those of 2008-09. There was even a decrease in its sales of its pigments for digital inks, which the company has pinpointed as a niche with a potential for growth due to high technological barriers. Sales had been “depressed by weak demand and stock reductions among key customers,” it said.

Nonetheless, even in a year of relatively frail demand, Clariant’s pigments operation was one of the company’s most profitable businesses, with a sales margin of close to 17% last year against 22% in 2011, based on earnings before interest, taxes, depreciation and amortization (EBITDA).

BASF, another leading player in the upper end of the printing ink pigments segment, has been continuing to focus its R&D on high performance ink pigments, despite slimming down some of its printing ink pigments operations, “The development of printing ink pigments will remain interesting for us,” said Stephan Suetterlin, head of BASF’s pigments business in Europe. “The requirements regarding purity, color strength and particle size distribution of pigments for digital printing are constantly increasing. For new packaging technologies, heat resistance is becoming more important. Therefore we believe that high-performance pigments are gaining share from classical pigments.”

Some leading players have also been expanding in the effect pigments sector, where there have been shifts in demand due to changes in consumer taste. There has, for example, been a swing away from the glittering, shimmering appearances to a more muted, matte look, which requires changes in the shape and size of metallic pigments.

Sun Chemical and its parent company DIC of Japan last year acquired Benda-Lutz Werke GmbH of Austria. With production plants in Austria, Poland, Russia as well as the U.S., the acquisition considerably strengthens Sun Chemical’s global position in effect pigments in the graphics markets.

“This acquisition gives us more opportunities to differentiate our printing ink pigments, which is even more important in a flat market,” said Mehran Yazdani, vice president and general manager, Sun Chemical Performance Pigments, Electronic Materials, and DIC International, at the ECS exhibition. “We have more flexibility in our ability to meet customers’ requirements for tailor-made solutions and to respond to changes in demand, like the need for matte finishes.”

Except in some niche, high performance segments, printing ink pigment prices have been softening in the face of weak demand. At the same time, however, profitability has been further squeezed by a continued rise in raw materials costs.

Many of these increases stem from economic and environmental trends in China, which has a virtual monopoly on the supply of some key intermediates for production of bulk organic pigments. Market conditions in India, also a major producer of some raw materials, also have had an impact on costs.

In its latest raw materials outlook, Flint Group warned that stricter environmental laws, particularly those on treatment of wastewater effluent, were pushing up raw material costs in China and India.

Closure of capacity due to stricter environmental rules was also causing shortages of key intermediates, like beta naphthol for red pigments. The cost of intermediates for yellow pigments was being pushed up by a combination of feedstock shortages and the higher cost of basic raw materials like benzene and toluene.

Hikes in raw material costs are also affecting producers of bulk inorganic pigments like titanium dioxide (TiO2), whose prices, until last year, had been rising steeply in Europe and in much of the rest of the world.

For a while, higher TiO2 prices have been giving producers of the pigments their highest profits for many years. But these have steadily been eroded over the last two years by rising prices for the raw materials like titanium and ilmenite, mainly because of a lack of adequate investment by mining companies in their extraction.

Around the middle of last year, TiO2 prices began to flatten, and even in the last months of 2012 started declining. But costs of raw materials for the white pigment continued to go up.

Faced with the prospect of weakening selling prices and persistent rises in raw material costs, some producers have been deciding to pull out of the business.

Sachtleben, Europe’s leading producer of specialty TiO2 for printing inks and other niche sectors, which has been a joint venture between Rockwood Holdings and Kemira, has effectively been put up for sale. Rockwood last year bought Kemira’s minority stake in the company, although it had previously announced that TiO2 was now a non-core business.

Rockwell last year recorded a 4% drop in TiO2 sales at Sachtleben from €784 million in 2011 to €731.5 million, but the shrinking margins were reflected in a 36% dive in EBITDA from €258 million to €165 million. By the fourth quarter, the margins contraction had accelerated, with EBITDA profits plunging by 90% despite a 14% rise in sales.

REACH on the Horizon

In addition to rising raw material costs, pigment producers and suppliers are also having to face higher costs of compliance with tighter regulations in Europe.

The most prominent of these is REACH, the EU’s legislation on the registration, evaluation and authorization of chemicals, under which pigments and other substances or, if they are compounds, their individual ingredients, have to be registered with dossiers detailing their safety profiles. If chemicals fail to be registered, they have to be taken off the market.

A large number of pigment chemicals have had to be registered over the last few months to meet a deadline at the end of May for the submission of dossiers. This is the second of three registration deadlines, based on the total tonnages of chemicals sold on the European market, with the last in mid-2018 for chemicals with the lowest volumes.

“Registration is expensive for us but even more expensive for the smaller companies,” said Mr. Yazdani. “A lot of producers, particularly Asian pigment exporters, will probably be walking away from the European market by not registering their products because of the high costs.”

European Editor Sean Milmo is an Essex, UK-based writer specializing in coverage of the chemical industry.


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