David Savastano, Ink World Editor10.10.07
The publication printing industry has faced difficult times in recent years, as overcapacity, competition
with alternative media and higher postal and operational costs have impacted printers.
Meanwhile, the ink industry has also suffered, as rising raw material and operational prices, particularly in petrochemicals and now in pigments, have sliced into already tight margins.
According to the National Association of Printing Ink Manufacturers’ (NAPIM) 2007 State of the Industry Report, the ink industry’s EBITDA in 2006 was a paltry 1.9 percent. As a result, beleaguered publication ink companies implemented price increases, and more increases have recently been announced. While higher prices are much needed by the ink industry, these increases still don’t completely cover the increased costs.
The slight decline in volume of printing and the higher ink prices are confirmed by the 2007 NAPIM report, which shows that the U.S. publication and commercial ink market had 2.3 percent sales growth in 2006, while volume declined 3.2 percent.
There is reason for hope for the publication ink market, as new technologies are driving potential growth in these segments.
In recent years, the heatset and gravure markets have suffered slight declines, and the past year saw similar results.
“In North America, the publication heatset market had another difficult year,” said Mike Green, vice president/general manager, news and publication inks, Flint Group North America. “Raw material cost increases continue to plague this market. There is a limited amount of growth in this market with the exception of the book market, which continues to have many opportunities for growth. Even so, our success rate in the heatset market has been strong, thanks to superior product performance and the services we provide to the customer base.”
“The cost of raw materials in the heatset market worldwide continues to escalate with price pressure in areas such as petroleum-based products, transportation and resins,” said Chris Parrilli, president North American Publication Ink, Sun Chemical. “This is a challenge for the ink industry and there is a need to recover these increased costs. It is also a challenge for newspapers and publications as they battle for circulation and advertising dollars versus alternative media (i.e. television, radio, Internet) at a cost-effective offering.”
Mr. Parrilli said that the heatset market is faring relatively better in Europe.
“The heatset market in North America continued its slight downward trend in the past year. In 2006, the market volume remained flat to down 2 percent. The heatset market in Europe is still seeing modest growth. In 2006 the market grew by 2.6 percent (average), but with most of the growth in the Eastern countries vs. the Western block,” Mr. Parrilli noted.
On the publication gravure side, the market fares best in Europe, although there are challenges due to overcapacity.
“Overall demand decreased by some 3 percent,” said Hans Lauterbach, BU head, Publication Gravure, for Siegwerk. “In particular, the European gravure market shows 20 percent overcapacity, immense end consumer price pressure and high demand for further consolidation as mail order companies and retailers cut print budgets.” As an example, Mr. Lauterbach pointed to Quelle, which once printed 12 million catalogs annually, but has reduced that figure to 4.5 million.
Mr. Parrilli said that gravure is losing share in the European market.
“Publication gravure in Europe is shrinking,” Mr. Parrilli said. “The only exception is in the UK, where a new gravure printer has opened a facility. The total European market has shrunk by 3 percent.”
The publication gravure industry in North America consists of three major printers: R.R. Donnelley & Sons, Quebecor World and Quad Graphics. Typically, publication gravure fares best on long run magazines, which are being impacted by higher postal rates.
“In North America, the publication gravure market grew slightly before the postal increase in April 2007,” Mr. Green said. “Increasing raw material costs continue to impact this market.”
The newspaper market also continues to struggle, as circulation numbers are significantly off in recent years.
“In North America, the news ink market continues to struggle with declining readership and circulation numbers,” Mr. Green said. “Increasing raw material costs continue to affect this market as well. A limited amount of growth in color pages has helped offset the declining black ink volumes. Increases in competition for advertising dollars have contributed to the decline in this market.”
“Newspapers in North America face an advertising environment that continues to be difficult,” said Todd Wheeler, marketing manager, US Ink “To remain competitive, the strategic focus of newspapers involve cost reduction, boosting efficiency, increasing color availability, developing new revenue streams and finding better ways to attract readers. Sun Chemical is using innovation to help its customers deal with continuing challenges in the news market.
“Since newsprint is one of the biggest expenses for newspapers, there has been a growing trend of using lighter weight newsprint to save cost,” Mr. Wheeler noted. “There can be disadvantages to lightweight newsprint involving show-through, curling, back-to-back color and set-off in high coverage areas. Sun Chemical’s US Ink Division has developed solutions to help customers maintain high quality printing on lightweight paper. US Ink has a line of inks, called Spectra, specifically geared to lighter weight newsprint.”
“Declines in circulation have caused some shrinkage in ink volumes for newspapers,” Mr. Wheeler added. “Sun Chemical continues to see opportunities to help newspapers compete. To help newspapers attract more advertisers, US Ink introduced in 2007 a new scented ink product line utilizing the latest in microencapsulated technology. To help newspapers with their press training needs, US Ink launched USEIT this year to exclusively deliver online simulator training.”
Rising raw materials have been a recurring story for publication ink manufacturers, as petrochemical-based feedstocks have dramatically increased in price. However, pigment prices have remained stable until recently, but as pigment prices soar due to actions in China, ink prices will likely have to follow suit. In particular, Sun Chemical and Flint Group each announced price increases in recent months.
“The Chinese government has recently closed chemical operations that are believed to contribute to air and water pollution,” Mr. Green noted. “These closures include manufacturers of pigment intermediates which will affect the pigment products’ global availability.
“China has also reduced or eliminated refunds of the Chinese VAT (value added tax) on more than 2,000 categories of products including chemicals that contribute to pollution, have high energy consumption or are resource-intensive,” Mr. Green added. “Affected materials include pigments, pigment intermediates, rosins and other chemicals that are exported from China to North America for use in printing inks, either by direct purchase or through domestic suppliers.”
“The Chinese have recently taken two actions which severely impact supplies and prices of pigments for ink,” said Bradley Schrader, chief marketing officer, Sun Chemical. “First, by eliminating the refund of VAT for exported pigments, costs (and prices) of pigments from China are rising dramatically. Second, by adopting tighter environmental restrictions, the Chinese have closed many plants producing pigment intermediates – causing severe shortages of some pigment colors. Since roughly half of the pigment used in ink is sourced from China, these actions have a major impact on Western ink production, reducing supply and raising costs. Pigment price increases in China, however, may create opportunities elsewhere for alternative sources for pigments. India, for example, may become a major source of supply in the future.”
Chinese pigments and intermediates aren’t the only area of concern, as petroleum remains a major challenge.
“Increased global consumption of petroleum and petroleum derivatives, coupled with limited refinery capacity, also affects the printing ink industry,” Mr. Green said. “Rising petroleum costs continue to be an issue for us. Flint Group has incurred many significant price increases in raw materials, supplies, energy and freight. We continue to look for alternative sources for these materials, but the simple fact is that globalization and environmental issues are changing the economics of specialty chemicals like ink.”
“There are constant raw material price increases and more and more quality issues with raw material suppliers due to worse intermediates,” Mr. Lauterbach said. “The full impact of VAT will come in the beginning 2008. We are awaiting up to 10 percent increase in raw material prices and shortages and more quality issues.
“There is pressure on prices, demand for higher flexibility regarding lead times but we overall managed to increase prices by more than 3 percent despite tough negotiations,” Mr. Lauterbach said.
Consolidation continues to be a critical force in the publication printing marketplace. For example, in 2007, R.R. Donnelley and Sons acquired Von Hoffmann, a printer of books and other products that serves primarily the education, trade and business-to-business catalog segments, for $412.5 million. R.R. Donnelley also completed the purchases of Perry-Judd’s Holdings, Inc., a printer of magazines and catalogs, for $176 million, and Banta Corporation, a provider of printing, supply chain management and related services, for $1.3 billion, in early January. Other printers have also been actively merging companies.
“Consolidation in the publication and newspaper industries has been both a threat and an opportunity,” Mr. Green said. “It has reduced the overall volume of production, which is not what we’d like to see, but as a supplier to many of the larger producers, we have gained some new opportunities.”
Mr. Lauterbach said where customer consolidation is taking place, there are harmonized ink formulations and price pressure and efficiency programs.
As for the publication ink industry, a major wave of consolidations occurred in 2005, which transformed the heatset ink business.
“Consolidation continues and is an important issue for the industry,” said Mr. Schrader. “However, to a large extent, the ink industry has already consolidated with two or three large suppliers in major markets in North America and Europe for both heatset and coldest.
“The decline in the commercial sheetfed market is leading to some consolidation, which is reducing capacity,” Mr. Schrader said. “Small printers are merging or being bought out. Long term, we don’t see a strong incentive for sheetfed ink companies to merge. There is still a strong regional component in the market, driven by relationships with small and medium-sized printers, based on trust and service, as well as the higher costs of shipping and service.
“As consolidation among customers continues to occur, they are looking for ways to cut costs and waste. As a major supplier to many of these printers, Sun Chemical continues to invest millions of dollars in research to develop new inks, pigments and solutions which help printers to reduce downtime and waste on printing presses,” Mr. Schrader concluded.
For publication printers to move ahead, new technologies will have to improve productivity. Ink manufacturers are collaborating with press manufacturers to ensure success.
“The principal driving forces behind innovation in the publication marketplace are the quests for greater productivity and flexibility, as well as enhanced environmental acceptability,” said Cynthia Arnold, chief technology officer, Sun Chemical. “The same digital revolution that presents competitive challenges to traditional printing technologies has also enabled significant advances in offset and gravure. One example of this is a press and ink technology developed by KBA and Sun Chemical.”
“Flint Group continues to work with the major press manufactures in optimizing the runnability of our inks and insuring that printers can take full advantage of the maximum press speeds on the new generation of presses,” Mr. Green noted. “Our success rate has been very good in assisting in getting new presses to go line on time.”
Overall, ink suppliers anticipate that the coming year will bring more challenges as well as opportunities.
“We see limited growth, with continuing significant raw material price increases due the global market,” Mr. Green said. “We will continue to rely on superior product performance and service to retain current customers and capture new business opportunities for Flint Group.”
“There is a continuing trend to higher concentrated inks, and continuing efficiency programs at publishers and printers for reduced ink consumption leading to another overall reduction of ink consumption by 2 percent,” Mr. Lauterbach said. “It will be another tough price negotiation year. Ink suppliers need to be prepared to lose quantities or reduce output if prices stay unsatisfactory.”
“We’re optimistic that Sun Chemical’s investments in innovation and commitment to sustainability will help our customers succeed,” Mr. Parrilli said. “In the current challenging market conditions, our solutions are designed to help customers operate more efficiently without sacrificing quality or service to their customers. We’re also making it easier for customers to improve environmental performance. That positions the industry – and Sun Chemical – well for 2008.”
National Geographic, printed by Quad Graphics, Inc., received the Gravure Association of America’s (GAA) 2007 Golden Cylinder Award for Publication, Coated. |
Meanwhile, the ink industry has also suffered, as rising raw material and operational prices, particularly in petrochemicals and now in pigments, have sliced into already tight margins.
According to the National Association of Printing Ink Manufacturers’ (NAPIM) 2007 State of the Industry Report, the ink industry’s EBITDA in 2006 was a paltry 1.9 percent. As a result, beleaguered publication ink companies implemented price increases, and more increases have recently been announced. While higher prices are much needed by the ink industry, these increases still don’t completely cover the increased costs.
The slight decline in volume of printing and the higher ink prices are confirmed by the 2007 NAPIM report, which shows that the U.S. publication and commercial ink market had 2.3 percent sales growth in 2006, while volume declined 3.2 percent.
There is reason for hope for the publication ink market, as new technologies are driving potential growth in these segments.
Heatset and Publication Gravure
In recent years, the heatset and gravure markets have suffered slight declines, and the past year saw similar results.
“In North America, the publication heatset market had another difficult year,” said Mike Green, vice president/general manager, news and publication inks, Flint Group North America. “Raw material cost increases continue to plague this market. There is a limited amount of growth in this market with the exception of the book market, which continues to have many opportunities for growth. Even so, our success rate in the heatset market has been strong, thanks to superior product performance and the services we provide to the customer base.”
“The cost of raw materials in the heatset market worldwide continues to escalate with price pressure in areas such as petroleum-based products, transportation and resins,” said Chris Parrilli, president North American Publication Ink, Sun Chemical. “This is a challenge for the ink industry and there is a need to recover these increased costs. It is also a challenge for newspapers and publications as they battle for circulation and advertising dollars versus alternative media (i.e. television, radio, Internet) at a cost-effective offering.”
Mr. Parrilli said that the heatset market is faring relatively better in Europe.
“The heatset market in North America continued its slight downward trend in the past year. In 2006, the market volume remained flat to down 2 percent. The heatset market in Europe is still seeing modest growth. In 2006 the market grew by 2.6 percent (average), but with most of the growth in the Eastern countries vs. the Western block,” Mr. Parrilli noted.
On the publication gravure side, the market fares best in Europe, although there are challenges due to overcapacity.
“Overall demand decreased by some 3 percent,” said Hans Lauterbach, BU head, Publication Gravure, for Siegwerk. “In particular, the European gravure market shows 20 percent overcapacity, immense end consumer price pressure and high demand for further consolidation as mail order companies and retailers cut print budgets.” As an example, Mr. Lauterbach pointed to Quelle, which once printed 12 million catalogs annually, but has reduced that figure to 4.5 million.
Mr. Parrilli said that gravure is losing share in the European market.
Parade, printed by Quebecor World, received the GAA’s (GAA) 2007 Golden Cylinder Award for Publication, Newsprint. |
The publication gravure industry in North America consists of three major printers: R.R. Donnelley & Sons, Quebecor World and Quad Graphics. Typically, publication gravure fares best on long run magazines, which are being impacted by higher postal rates.
“In North America, the publication gravure market grew slightly before the postal increase in April 2007,” Mr. Green said. “Increasing raw material costs continue to impact this market.”
News Ink
The newspaper market also continues to struggle, as circulation numbers are significantly off in recent years.
“In North America, the news ink market continues to struggle with declining readership and circulation numbers,” Mr. Green said. “Increasing raw material costs continue to affect this market as well. A limited amount of growth in color pages has helped offset the declining black ink volumes. Increases in competition for advertising dollars have contributed to the decline in this market.”
“Newspapers in North America face an advertising environment that continues to be difficult,” said Todd Wheeler, marketing manager, US Ink “To remain competitive, the strategic focus of newspapers involve cost reduction, boosting efficiency, increasing color availability, developing new revenue streams and finding better ways to attract readers. Sun Chemical is using innovation to help its customers deal with continuing challenges in the news market.
“Since newsprint is one of the biggest expenses for newspapers, there has been a growing trend of using lighter weight newsprint to save cost,” Mr. Wheeler noted. “There can be disadvantages to lightweight newsprint involving show-through, curling, back-to-back color and set-off in high coverage areas. Sun Chemical’s US Ink Division has developed solutions to help customers maintain high quality printing on lightweight paper. US Ink has a line of inks, called Spectra, specifically geared to lighter weight newsprint.”
“Declines in circulation have caused some shrinkage in ink volumes for newspapers,” Mr. Wheeler added. “Sun Chemical continues to see opportunities to help newspapers compete. To help newspapers attract more advertisers, US Ink introduced in 2007 a new scented ink product line utilizing the latest in microencapsulated technology. To help newspapers with their press training needs, US Ink launched USEIT this year to exclusively deliver online simulator training.”
Rising Raw Material Prices
Rising raw materials have been a recurring story for publication ink manufacturers, as petrochemical-based feedstocks have dramatically increased in price. However, pigment prices have remained stable until recently, but as pigment prices soar due to actions in China, ink prices will likely have to follow suit. In particular, Sun Chemical and Flint Group each announced price increases in recent months.
“The Chinese government has recently closed chemical operations that are believed to contribute to air and water pollution,” Mr. Green noted. “These closures include manufacturers of pigment intermediates which will affect the pigment products’ global availability.
“China has also reduced or eliminated refunds of the Chinese VAT (value added tax) on more than 2,000 categories of products including chemicals that contribute to pollution, have high energy consumption or are resource-intensive,” Mr. Green added. “Affected materials include pigments, pigment intermediates, rosins and other chemicals that are exported from China to North America for use in printing inks, either by direct purchase or through domestic suppliers.”
“The Chinese have recently taken two actions which severely impact supplies and prices of pigments for ink,” said Bradley Schrader, chief marketing officer, Sun Chemical. “First, by eliminating the refund of VAT for exported pigments, costs (and prices) of pigments from China are rising dramatically. Second, by adopting tighter environmental restrictions, the Chinese have closed many plants producing pigment intermediates – causing severe shortages of some pigment colors. Since roughly half of the pigment used in ink is sourced from China, these actions have a major impact on Western ink production, reducing supply and raising costs. Pigment price increases in China, however, may create opportunities elsewhere for alternative sources for pigments. India, for example, may become a major source of supply in the future.”
Chinese pigments and intermediates aren’t the only area of concern, as petroleum remains a major challenge.
“Increased global consumption of petroleum and petroleum derivatives, coupled with limited refinery capacity, also affects the printing ink industry,” Mr. Green said. “Rising petroleum costs continue to be an issue for us. Flint Group has incurred many significant price increases in raw materials, supplies, energy and freight. We continue to look for alternative sources for these materials, but the simple fact is that globalization and environmental issues are changing the economics of specialty chemicals like ink.”
“There are constant raw material price increases and more and more quality issues with raw material suppliers due to worse intermediates,” Mr. Lauterbach said. “The full impact of VAT will come in the beginning 2008. We are awaiting up to 10 percent increase in raw material prices and shortages and more quality issues.
“There is pressure on prices, demand for higher flexibility regarding lead times but we overall managed to increase prices by more than 3 percent despite tough negotiations,” Mr. Lauterbach said.
Consolidation
Consolidation continues to be a critical force in the publication printing marketplace. For example, in 2007, R.R. Donnelley and Sons acquired Von Hoffmann, a printer of books and other products that serves primarily the education, trade and business-to-business catalog segments, for $412.5 million. R.R. Donnelley also completed the purchases of Perry-Judd’s Holdings, Inc., a printer of magazines and catalogs, for $176 million, and Banta Corporation, a provider of printing, supply chain management and related services, for $1.3 billion, in early January. Other printers have also been actively merging companies.
“Consolidation in the publication and newspaper industries has been both a threat and an opportunity,” Mr. Green said. “It has reduced the overall volume of production, which is not what we’d like to see, but as a supplier to many of the larger producers, we have gained some new opportunities.”
Mr. Lauterbach said where customer consolidation is taking place, there are harmonized ink formulations and price pressure and efficiency programs.
As for the publication ink industry, a major wave of consolidations occurred in 2005, which transformed the heatset ink business.
“Consolidation continues and is an important issue for the industry,” said Mr. Schrader. “However, to a large extent, the ink industry has already consolidated with two or three large suppliers in major markets in North America and Europe for both heatset and coldest.
“The decline in the commercial sheetfed market is leading to some consolidation, which is reducing capacity,” Mr. Schrader said. “Small printers are merging or being bought out. Long term, we don’t see a strong incentive for sheetfed ink companies to merge. There is still a strong regional component in the market, driven by relationships with small and medium-sized printers, based on trust and service, as well as the higher costs of shipping and service.
“As consolidation among customers continues to occur, they are looking for ways to cut costs and waste. As a major supplier to many of these printers, Sun Chemical continues to invest millions of dollars in research to develop new inks, pigments and solutions which help printers to reduce downtime and waste on printing presses,” Mr. Schrader concluded.
Outlook for
The Coming Year
For publication printers to move ahead, new technologies will have to improve productivity. Ink manufacturers are collaborating with press manufacturers to ensure success.
“The principal driving forces behind innovation in the publication marketplace are the quests for greater productivity and flexibility, as well as enhanced environmental acceptability,” said Cynthia Arnold, chief technology officer, Sun Chemical. “The same digital revolution that presents competitive challenges to traditional printing technologies has also enabled significant advances in offset and gravure. One example of this is a press and ink technology developed by KBA and Sun Chemical.”
“Flint Group continues to work with the major press manufactures in optimizing the runnability of our inks and insuring that printers can take full advantage of the maximum press speeds on the new generation of presses,” Mr. Green noted. “Our success rate has been very good in assisting in getting new presses to go line on time.”
Overall, ink suppliers anticipate that the coming year will bring more challenges as well as opportunities.
“We see limited growth, with continuing significant raw material price increases due the global market,” Mr. Green said. “We will continue to rely on superior product performance and service to retain current customers and capture new business opportunities for Flint Group.”
“There is a continuing trend to higher concentrated inks, and continuing efficiency programs at publishers and printers for reduced ink consumption leading to another overall reduction of ink consumption by 2 percent,” Mr. Lauterbach said. “It will be another tough price negotiation year. Ink suppliers need to be prepared to lose quantities or reduce output if prices stay unsatisfactory.”
“We’re optimistic that Sun Chemical’s investments in innovation and commitment to sustainability will help our customers succeed,” Mr. Parrilli said. “In the current challenging market conditions, our solutions are designed to help customers operate more efficiently without sacrificing quality or service to their customers. We’re also making it easier for customers to improve environmental performance. That positions the industry – and Sun Chemical – well for 2008.”
New TechnologiesFor publication printers to move ahead, new technologies will have to improve productivity. Ink manufacturers are collaborating with press manufacturers to ensure success. “Flint Group continues to work with the major press manufactures in optimizing the runnability of our inks and insuring that printers can take full advantage of the maximum press speeds on the new generation of presses,” Mr. Green noted. “Our success rate has been very good in assisting in getting new presses to go line on time.” “The principal driving forces behind innovation in the publication marketplace are the quests for greater productivity and flexibility, as well as enhanced environmental acceptability,” said Cynthia Arnold, chief technology officer, Sun Chemical. “The same digital revolution that presents competitive challenges to traditional printing technologies has also enabled significant advances in offset and gravure. “One example of this is a press and ink technology developed by KBA and Sun Chemical,” Ms. Arnold said. “The KBA Cortina waterless offset press incorporates many of the features initially developed for the Karat sheetfed press, including waterless CTP plates and a keyless inking system. The shorter ink train combined with the elimination of the dampening system permits a compact unit design. Overall space requirement is further compressed by a reduction in the number of satellite units due to the absence of water-induced fanout. “Sun Chemical has worked closely with KBA engineers to develop the Shark W ink system which not only meets the printing ability requirements of this sophisticated machine but also provides the option of cleanup with water instead of petroleum-based solvents,” Ms. Arnold noted. “This innovation offers the potential for a totally VOC-free coldset pressroom.” “Although the Cortina was first positioned as a newspaper press, the technology has now been extended to heatset printing,” Ms. Arnold said. “It delivers the benefits of faster makeready and lower paper waste to this market.” “Heatset presses are also being designed with wider web widths and higher maximum speeds,” Ms. Arnold said. “These features place increased demands on the performance of lithographic inks and fountain solutions. Sun Chemical has worked with press manufacturers to design both inks and fountain solutions with the ability to print consistently at speeds in excess of 17 meters/second and reduce the misting often associated with high rates of roller revolution.” The increased interest in lower basis weight papers is another area for ink manufacturers to develop new products. “Another long-term trend in the publication market is the move toward lower basis weight papers,” Ms. Arnold said. “In heatset printing the combination of lightweight paper structure and exposure to intense drying conditions can lead to undesirable print defects such as fluting. Sun Chemical is collaborating with a global forest products group to develop an ink and paper combination which will eliminate the problem.” Aside from working together with press and paper supplies, ink manufacturers are developing their own new technologies. “UV and Rub’n’Smell are two news ink technologies that are providing value to our customer base and increasing advertising opportunities,” Mr. Green said. Sustainability is an area of increasing importance. “Sun Chemical’s commitment to innovation and sustainability is the driving force behind many of the inks and solutions we offer today, and are working on for the future,” said Mr. Parrilli. “The intent is to use materials and processes of higher sustainability; i.e. vegetable-oil bases, lower VOC products, and lower-energy drying processes, to support our customers’ “green” objectives. Sun Chemical is also offering a robust system of sheeted inks under the World Series label which is based on high levels of renewable resources. These inks emerged from a detailed statistical experimental design and are balanced to provide long-term run ability on a broad spectrum of substrates together with optimum printability.” UV continues to be an opportunity for printers. “A growing number of printers are pursuing new market opportunities and seeking greater utilization of press capacity by adding UV drying units to existing coldset web equipment,” Mr. Parrilli said. “These modifications allow newspaper printers, for example, to print inserts on lightweight coated stock that would normally be outsourced to heatset printers. Sun Chemical has developed special hybrid inks which dry upon exposure to UV light at the high speeds required in publication printing. During recent tests at a customer site in Austria, these Sunray inks were printed at speeds up to 10 meters/second (or approximately 2000 feet/minute) delivering excellent print quality.” |