For the past year, most key ink ingredients have been relatively stable and available, which is good news for ink companies. However, there are always areas of concern ahead. Jan Paul van der Velde, SVP procurement, IT and regulatory at Flint Group, noted that in general, markets have balanced out but are showing some signs of tightening, mostly upstream.
“We are experiencing ongoing challenges in volatile markets due to the global unrest, including security concerns, global trade deals, presidential elections, Brexit, etc.,” van der Velde added.
Jeffrey Shaw, chief supply chain, quality, and business improvement officer, Sun Chemical, reported that the raw material market in 2016 has been favorable in terms of cost stability and sufficient supply.
“Raw materials prices have benefitted from the soft global economy and the continuation of the oversupplied oil market,” Shaw said. “Most raw material markets have reflected adequate supply/demand balances for most of the key raw materials.”
Robert Doerffel, corporate communications Europe for hubergroup, said that the raw material situation hasn’t deviated very much from 2014 and 2015.
“It is all fairly stable in pricing, no real shortages and all regulations are fully under control,” Doerffel reported. “Currently there are no areas of concern. The anticipations are pointing in the same direction.”
“Generally, the raw material market is consistent with pricing being fairly stable,” said Rainer Wiewel, purchasing manager – Braden Sutphin Ink Co. “The only product that I have seen somewhat of an up-tick is in carbon black.”
Rob Callif, president/COO of BCM Inks, agreed that raw material prices are stable.
“No product that we are currently using seems to be in short supply, and we’re not expecting any change in the marketplace on supply and/or pricing,” Callif said. “We will keep a close eye on the Dow/DuPont merger and any other mergers and acquisitions because that might have an effect on raw materials.”
George Varughese, VP of product development for Superior Printing Ink, noted that raw material prices and availability have been steady for the last few years for Superior.
“Currency rates have stabilized, with some weak and some strong,” Varughese said. “This has not changed our strategy regarding raw material purchases yet. However, currency rates have affected our sales strategies/targets.”
Pricing of Raw Materials
In spite of the stability, there are raw materials that are of concern for ink manufacturers. For example, van der Velde reported that TiO2 sellers have announced significant cost increases, and some pigment intermediates remain challenging, mainly due to supply issues for both yellow and red. He added that TiO2 cost increases are being driven by recent mergers and acquisitions, leading to increased selling power from the primary producers.
“The only market experiencing aggressive cost escalation initiatives is titanium dioxide (TiO2),” Shaw added. “The market has been long and producers claim challenges around profitability.”
Rick Westrom, SVP of strategic sourcing and R&D director for INX International Ink Co., reported that TiO2 prices are increasing, as is diketone, a key intermediate material.
“The TiO2 market is showing some signs of become tight and producers are working at improving profitability losses over the past year,” Westrom said. “The two major diketone plants - which is the raw material of intermediates of yellow pigments (AAOA, AAA and AAOT) - have stopped due to exploration and environmental issues.
“The government did not let them re-open the facility due to one of the facilities being close to the G20 conference city of Hangzhou,” Westrom added. “The G20 conference will finish the first week of September, then an analysis of the prices of intermediates of yellow pigments will determine if the price increases or not. I expect the situation to become more clear by the end of September.”
Shaw said that in general, there are raw materials that are of concern for ink manufacturers.
“We continue to see pressure on environmental compliance in China, which has continued to affect the cost of producing some pigment intermediates and fine chemicals,” said Shaw.
“Looking a little further out, we are concerned that the strategies of some raw materials suppliers to acquire their competition, spin off existing operations or exit certain product lines and markets will have a negative impact on future costs and availability,” Shaw added. “There has been a number of these supply base rationalizations that have occurred over the last year in the titanium dioxide, resins and pigments marketplaces.
“Also, carbon black feedstock may feel some pressure due to shifting refinery strategies potentially affecting supply and price, along with specific solvents in Europe due to a limited supply base and vegetable oil related materials where pricing of technical oils is at a historically low level,” Shaw concluded.
Currency fluctuations are having an impact on pricing of key ingredients, with the more than 20% decline of the euro last year remaining a key issue.
Shaw noted that the majority of global commodities are priced based on the US dollar, which means that countries that have seen their currencies weaken against the dollar over the last year have experienced significant cost impacts for globally priced feedstocks and raw materials.
“The purchasing of pigments from Asia is a good example of where an ink company would feel the negative impact of a weaker currency,” Shaw added. “Although it is selectively possible to increase local sourcing to avoid some currency impact, the scope of commodities and raw materials that are priced in US dollars is so pervasive to the chemical supply chain that radically new purchasing strategies are difficult to develop.
“The euro has been relatively stable against the US dollar compared to last year at the same lower value; however, other significant currencies such as the UK pound and Russian ruble have been impacted by the unfavorable currency movement,” Shaw added.
“Currencies have not stabilized,” added van der Velde. “With the uncertainty in the political landscape, the different quantitative easing policies around the world, and other central bank activities, it is unrealistic to assume that currency volatility will disappear. Fast change is the new constant.”
Ingredients in Short Supply
For the most part, important ink ingredients are readily available, but environmental pressures have put some raw materials at risk.
“Diketene and, therefore, arylides are in short supply for pigment production,” van der Velde said. “This has been driven by force majeure in the supply chain. Bon acid supply for red pigments remains a major concern, driven by environmental challenges.”
“In 2016, we have experienced relatively few raw material supply issues due to adequately supplied markets and modest levels of economic activity,” Shaw said. “Any supply issues were very short term and usually driven by Asian environmental legislation or geopolitical events.”
Shaw noted that environmental regulations impact Sun Chemical’s purchasing efforts in several ways.
“As a company strongly committed to corporate social responsibility, we want to preferentially do business with producers that are compliant with environmental regulations and are also committed to the ideals of corporate social responsibility,” Shaw said. “Secondly, the drive in developing countries, such as China and India, to enforce tighter environmental regulations has resulted in periodic disruptions and dislocations for suppliers and we have had to develop contingencies to deal with this sourcing challenge.”
US regulatory changes also impact ink manufacturers.
“We have had to make some changes in the resins being used in our offset vehicles for web and sheetfed to address California Prop 65 restrictions on Bis-Phenol A and formaldehyde,” said Marc Castillo, technical director for Braden Sutphin Ink. “These resins are slightly higher in price.”
“Our formulas have been environmentally safe and user friendly in our view, provided they are used properly,” said Varughese. “However, the new domestic and international regulations reinforce the need to revisit and use ‘cleaner’ ingredients. Superior’s products reflect this in our products.”
Outlook for Raw Materials
The ink executives anticipate further stability for the next year, although that can change quickly. Westrom expects that the market will be fairly stable with some slight increasing, while Wiewel said that Braden Sutphin does not expect much change going forward.
“All indicators show crude oil costs will rise marginally, despite high stocks and sufficient supply,” van der Velde said. “This will have some impacts in the chain. Further, many suppliers in the raw material and intermediate markets struggle with their financial results; as a result, it is fair to assume that we will continue to see steady product rationalization and the potential for ongoing mergers and acquisitions. We do not foresee an upward spiral of costs, unless a major event occurs, but instead a slow, steady inflation level across the board over a wide range of materials.”
“From Sun Chemical’s perspective, we do not anticipate any major changes in the raw material marketplace over the next six months from a cost and supply perspective,”
Shaw said. “Undoubtedly there will be some unexpected pressures that emerge due to supply issues we are not aware of today. However, key raw materials are in generally good supply, global growth continues to be at a modest pace, and the oil market is expected to be somewhat stable.
“There is always risk around speculative market behaviors and unexpected geopolitical events that could impact current cost structures,” Shaw added. “The risk of supplier market strategies realigning toward more attractive alternate use values continues to be a concern as they look to maximize profitability through market segmentation initiatives. We expect increased pressure on ink raw material costs due to (a) lower demand in some areas such as publication inks and (b) some suppliers looking to increase their own profitability, as previously mentioned regarding TiO2.”
“Everything is deemed to be staying like it is for the coming months,” said Doerffel. “Generally speaking, we like how boring it is right now. It makes forecasting simple and – even more important – very precise. The pressure in the ink market is still high, due to competition related profit structures – good for our customers, hard for our business.”
For more information on the raw material market, including how ink manufacturers are coping with any supply changes, see the online version at ww.inkworldmagazine.com.