After a few years of relative stability, the raw material market took a turn for the worse in 2017, and any hope for improvement during 2018 was quickly extinguished. Ink manufacturers find themselves battling headwinds throughout their supply chain, with key ingredients for photoinitiators for UV LED inks in short supply and pigments and other ingredients following suit.

Add to this the inevitable higher prices that come with short supply as well as concerns over the potential of a tariff war, and it is understandable why ink industry purchasing executives are worried, to put it mildly. Many ink manufacturers are putting out their own price increases, but even with these, they are feeling the squeeze.

Jeffrey Shaw, chief supply chain, quality, and business improvement officer, Sun Chemical, reported that the raw material market in 2018 continues to experience a record number of force majeure situations and random supply disruptions in many categories.

“Chinese environmental assessments have also been a significant contributor to unprecedented supply curtailment,” Shaw added. “Exacerbating the situation is the elevated pressure on key feedstocks year over year. Generally speaking, most raw material markets are seeing moderate to significant price increases.”

Shaw also noted that currency rates are impacting raw materials.

“Since many global commodities are priced based on the US dollar, countries who have seen their currencies weaken over the last year have also experienced significant cost impacts for those globally priced feedstocks and raw materials,” Shaw observed. “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 Turkish lira have been impacted by the unfavorable currency movement.”

Michael Podd, Flint Group’s chief procurement officer, said that Flint Group is most concerned about raw materials sourced from China. 

“Photoinitiators are certainly among these,” Podd added. “Finished pigments are also a challenge in today’s raw material supply chain.”

“Among other raw materials, the entire ink industry (but also the paints and coatings industry) is struggling with key products for azo pigments and photoinitiators, as well as with the very important white pigment TiO2,” said hubergroup CEO Heiner Klokkers.

Jyoti Gidvani, purchasing manager for Toyo Ink America, LLC, noted that raw material cost increases and supply issues continue. “Supply of photoinitiators has been a concern since 1Q of this year,” Gidvani added. “We are seeing an increase in demand from LED and UV printing market. Azo pigments lead times and prices are also impacted along with photoinitiators.”

“We are experiencing price pressures from our customers and suppliers,” said Darl Jones, BCM Inks’ R&D chemist. “We are navigating through this as well as we can.”

Photoinitiators in Short Supply

In May 2018, word began to spread about a shortage of key photoinitiators for inks and coatings. On May 4, the European Printing Ink Association (EuPIA) warned of a “potential shortage of photoinitiators,” and during RadTech 2018, held a few days later, ink companies discussed then problems they were seeing.

In particular, TPO and TPO-L, important photoinitiators for inkjet inks, UV LED inks, automotive coatings, and wood coatings and flooring, are in short supply due to the shutdown of a key precursor produced by the Chinese government.

There are only a handful of companies that produce this precursor. Materials are scarce, leading to manufacturing challenges. Prices have risen dramatically for what remains in the market, and efforts to reformulate ink formulas aren’t simple.

So, what caused the shortage of the precursor that is critical to certain photoinitiators? One driver is China’s government enforcing its environmental laws. As a result, factories making the precursor for many photoinitiators have been shut down as a result of the Blue Sky initiative. If anything, the situation is escalating.

Shaw observed that the trends that existed in 2017 still exist today but are more severe.

“Government-led environmental assessments have caused many suppliers of photoinitiators to either cease or reduce production for extended periods of time,” Shaw said.

“Additionally, photoinitiator supply has also been impacted by major incidents, including explosions, fire, unforeseeable events, low inventory levels, unplanned turnarounds, and various production outages.”

Carsten Zoelzer, hubergroup’s director of product management for sheetfed inks and energy curing inks, said a confluence of events triggered the photoinitiator shortage.

“A shutdown of a major PI precursor supplier by the Chinese government broadly contributed to the particular issue,” Zoelzer added. “But it was also force majeure and other unforeseeable production outages that added on top.”

Ken Klug, Wikoff Color’s purchasing director, said that photoinitiators used within UV curing products continue to be the most challenging raw materials to source.

“China is the main source for several key intermediates used to make selected photoinitiators,” Klug added. “In addition to the environmental regulations being administered within the Chinese industrial zones, recent warehouse fires and plant closures have further constrained an already short supply of raw materials.”

“There have been recent announcements related to the shortage of feedstock to produce TPO,” Gidvani noted. “Photoinitiators are predominantly produced in China. We are more frequently updated with what is going on in China. Supply of TPO remains a concern.”

Pigments and Other Ingredients

Plant closures aren’t limited to intermediates for photoinitiators. Pigment, additives and feedstock manufacturing has also been disrupted.

“Key raw materials like azo and phthalocyanine pigments, carbon black and the largest part of our additive portfolio (all ink product lines), MMA-based acrylate resins (water-based varnishes), UV monomers and oligomers, photoinitiators (all UV product lines) have seen increasing prices especially during the fourth quarter of 2017 and the first quarter of 2018, and this rise in prices will have a significant impact on our raw material costs,” said Dirk Aulbert, head of the Business Unit Europe within hubergroup.

Shaw noted that there are numerous raw materials that have Sun Chemical concerned, including pigments and intermediates, photoinitiators and feedstocks.

“Prices of pigments and intermediates continue to increase quarterly/monthly in many markets,” Shaw said. “Many of these products are sourced from China and have been subjected to supply shortages and escalating feedstocks. Managing supply and formulating agility have been critical to meet customer requirements and ensure an uninterrupted supply of product. Our supply chain team has established contingencies such as safety stock management, inventory positioning and sourcing more volume from a broader global supply base. There is a delicate balance in maintaining consistent quality in a supply constrained environment.

“Many photoinitiators or their intermediates are sourced from China,” added Shaw. “There have been numerous and reoccurring issues around supply disruptions either due to environmental assessments and/or explosions and fires. Supply continues to be in a crisis mode while prices are increasing at double-digit rates. Raw materials directly derived from crude oil, ethylene and propylene have increased relative to feedstock escalation, such as distillates, carbon black and various solvents.” 

Ink manufacturers do see possibilities for improvement in some areas such as feedstocks while keeping a wary eye on the raw material situation.

“Unfortunately, we expect current supply chain challenges to continue for some time to come,” Podd said. “We will continue to monitor the situation carefully around the world.”

“We are expecting the 25% tariff from China to be mitigated, and expecting feedstock for photoinitiators and azo pigments to become available at a reasonable price,” Gidvani said.

“We are working with our suppliers when possible but seeking out alternatives if possible or necessary,” said Jones. “Customers experienced multiple paper price increases in 2018 and therefore are seeking lower-priced alternatives from their other suppliers.”

“The unprecedented pressure around supply and price will continue into 2019, driven by force majeure situations, environmental and various other disruptions,” Shaw concluded. “However, primary feedstocks should remain somewhat stable barring any unforeseen events impacting supply or price. There is always a potential risk around speculative market dynamics and volatile geopolitical events. Suppliers continue to realign growth strategies toward more attractive alternate use values and maximize profitability through market segmentation initiatives.”