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    Features

    The 2018 Year in Review

    Raw material supply and cost concerns, consolidations and more headline a busy year for the ink industry.

    The 2018 Year in Review
    INK International Ink Co.’s new digital ink operations in Lebanon, OH. (Photo courtesy of INX International Ink Co.)
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    David Savastano, Editor11.15.18
    Despite growth in the global economy, the ink industry saw a continuation of many of the same issues it was plagued with in 2018. Raw materials were a major concern, although this year was more about photoinitiators than last year’s problems with titanium dioxide. Consolidations continued, primarily on the customer side, with two multi-billion mergers (Amcor buying Bemis, Quad/Graphics acquiring LSC Communications) announced.

    Siegwerk CEO Herbert Forker said that looking at the overall performance, 2018 has been a relatively good year for Siegwerk, even though it was a challenging time for the whole industry.

    “Like all others, we’ve been confronted with significant raw material shortages and cost increases during the last 12 months,” he added. “Nevertheless, we’ve successfully continued with our portfolio transformation by focusing our efforts on the expansion of our core business of packaging printing inks. We’ve achieved solid growth in the packaging segment and outperformed the overall market.”

    John Hrdlick, president and COO for INX International Ink Co., said that this past year has been similar to 2017 in that the industry continues to face raw material increases, strong competition and ongoing customer consolidations.

    “However, it has also brought numerous raw material shortages and the impact of current and proposed tariffs impacting many of our raw materials,” added Hrdlick. “The cost and availability of photoinitiators have dramatically impacted our industry. All in all, we are facing these challenges and our company is doing okay.”

    Felipe Mellado, chief marketing officer, Sun Chemical, said that 2018 has been a good year for Sun Chemical in all markets. “Across all markets and industries, we have continued to make important strides forward that meet the individual needs of our customers by helping them to grow their businesses and succeed.”

    Meanwhile, packaging and digital printing continued to grow, while the publication and commercial side struggles.

    “The markets we serve each pose unique challenges and opportunities,” said Bill Miller, COO for Flint Group’s CPS Inks Division. “Most growth is found in the packaging arenas, which are very competitive as suppliers vie for fewer, larger customers and strive for ongoing innovations. In sectors of decline, mostly news but also heatset, we face the added challenge of managing a business in important but contracting markets.

    “Flint Group is not thwarted by these conditions,” Miller added. “We remain fully committed to printers across the printing and packaging industries. We are developing products, services and ways of conducting business to make sure we create value and opportunities for ourselves and for our customers. We are optimistic about 2019 and are confident that our plans and approach to serving the industry will give us a competitive edge while helping our customers address the challenges they face as well.”

    Highlights in 2018
    The ink industry had a number of highlights during the past year. There continues to be consolidation at all levels of the supply chain. There were some mergers on the ink side during 2018, with the largest being Wikoff Color’s acquisition of Braden Sutphin Ink Co. With an estimated $190 million in sales in 2017, Wikoff Color is the sixth-largest ink manufacturer in North America, according to Ink World Magazine’s annual North American Top Companies Report. 

    Braden Sutphin has been a North American printing ink industry leader for more than a century, dating back to its launch in 1913 by Jim Braden. Al Sutphin, the company’s first employee, acquired 100% ownership of the company in the 1930s, and Braden Sutphin had remained in the family since. The acquisition of Braden Sutphin expands Wikoff Color’s business and service capabilities in the North American market.

    “We believe that Braden Sutphin has an outstanding reputation and legacy in the ink industry,” said Geoff Peters, Wikoff Color’s president and CEO. “We are honored to join up with them to continue that storied tradition. Our combined presence of more than 30 locations affords us the resources to bolster our service-oriented approach and technical support mode.”

    On the printing side, the announcement that Amcor plans to acquire Bemis is shaking up the packaging industry. The combined consumer packaging specialists had $13 billion in revenue in 2017.

    Both companies are strong in flexible as well as rigid packaging. Headquartered in Neenah, WI, Bemis reported 2017 net sales of $4 billion and employs approximately 16,000 individuals worldwide. Amcor reported the fiscal year 2017 sales of $9.1 billion and has approximately 35,000 employees.

    “Amcor identified flexible packaging in the Americas as a key growth priority and this transaction delivers a step change in that region,” Amcor CEO Ron Delia said.

    Mellado said that consolidation has increased the competitive activity in the market. “This has a direct effect on prices, which has therefore compressed margins at the converting and the ink level,” he added. “This increase in competition puts more emphasis on technology and product differentiation. Product differentiation is becoming increasingly difficult as the supply chain consolidates since the selection of options in raw materials decreases.

    “The consolidation in the packaging industry will follow the same path as the publication or commercial markets, with a few key differences in the process,” Mellado noted. “The first is that the packaging industry is growing, while the publication market is not. That lack of growth has accelerated the consolidation in the publication marketplace. The second difference is the variety of packaging subsegments and applications. This makes the packaging market much more fragmented. So, while consolidation may follow the same pace as the publication industry, the subsegments in the packaging market will behave differently.”

    “We are managing fairly well through these changes, although the customer mergers are creating significant challenges for all ink companies as we work hard to hold onto and grow our positions,” Hrdlick said. “The next few years will continue to be interesting in that area.”

    The publication side is getting even more compacted with the announcement that Quad/Graphics, Inc. and LSC Communications approved a definitive agreement in which Quad/Graphics will acquire LSC Communications in an all-stock transaction valued at approximately $1.4 billion. As of Sept. 30, 2018, the combined company would have had annual revenue of approximately $8 billion. The transaction is expected to close in mid-2019.

    “This is a defining moment in Quad’s 47-year journey,” Joel Quadracci, chairman, president and CEO of Quad/Graphics, said. “We have grown from a printer with a single facility to a global marketing solutions provider with a seamless, integrated offering that creates more value for all our stakeholders at a time of significant media disruption.”

    Sun Chemical is marking a major milestone as it reached its 200th anniversary.

    “It was a year marked by a significant milestone – our 200th anniversary,” Mellado said. “For 200 years, Sun Chemical has provided its customers with innovative solutions that help their business meet important goals and objectives. We’re proud of that legacy and continue to achieve it by working closely with our customers every day as a partner that continually improves its performance on the essentials of our business—quality, service and innovation.”

    Hrdlick noted that INX continued its facility expansion projects this year with work on its West Chicago, IL R&D operations.

    “We expect the expanded area of the facility to be completed in November, and then we will update and modify portions of the existing building,” Hrdlick said. “That work should be completed in December or in early 2019. The end result will be a very impressive facility that doubles the size of our R&D facility. It will be the development home in North America for all of our various product lines, including digital.

    “The transfer of our digital manufacturing from California to our Lebanon, OH facility was completed earlier this year,” Hrdlick added. “Due to growth in our digital business, we are also involving our Dunkirk NY facility in digital manufacturing. This gives us flexibility as our business grows, and for the first time we now have manufacturing back-up as needed for digital manufacturing in North America.”

    In 2018, Siegwerk completed further complementary acquisitions to enhance its product and service portfolio, especially for the packaging printing market.

    “We’ve expanded our presence in Latin America by acquiring Tupahue Tintas, one of the Brazilian market leaders for flexo and gravure printing inks and varnishes for flexible packaging applications,” Forker noted. “With the purchase of Ultra Inks Inc., we’ve not only strengthened our local footprint in the Canadian market but also further expanded our product portfolio by adding well-established, high-quality, water-based flexo inks for narrow web and paper & board applications. Furthermore, we’ve taken over AGFA’s UV inkjet subsection for packaging and label inks. With this business transfer, AGFA has freed up resources to further focus its future UV inkjet activities on industrial printing inks and we’ve been able to support our partners and customers, the equipment integrators, with specific application expertise and a broader market access based on the solid and reliable AGFA ink technology. This purchase is clearly strengthening our footprint in digital printing.”

    On the personnel side, there were some major announcements at the top of companies.

    Rick Clendenning, longtime president and CEO of INX International Ink Co., will be stepping down after this year, with Hrdlick taking over those roles.

    “As most people in our industry know, Rick Clendenning announced this past April that he would begin the succession planning process by stepping down as president of INX after 19 years. He will remain as CEO until April 2019,” Hrdlick said. “Rick has impacted all of us at INX and others throughout the industry and is highly respected by all. He has been a strong source of guidance for me over the years and during the current transition. When the time comes Rick will be missed, but his mark on INX will continue moving forward.”

    Sun Chemical named Myron Petruch as its president and CEO, effective Jan. 1, 2019. He succeeds Rudi Lenz, who will transition to the new role of vice chairman of the board at Sun Chemical. Petruch previously served as president of Sun Chemical Performance Pigments and GM of the Pigments Products Division since 2008.

    “Myron’s background and track record of success make him the outstanding individual for this very important position at Sun Chemical,” said Masayuki Saito, chairman of the board, Sun Chemical.

    “On behalf of DIC and Sun Chemical, we are grateful to Rudi for his accomplishments and fine work as president and CEO and we wish Myron every success in the future leading Sun Chemical.”

    At hubergroup, Ursula Borgmann, who chaired the company’s Management Board and headed the technology division, handed over her responsibilities to her successors at the beginning of 2018 after more than 30 years in a leadership position, with Heiner Klokkers taking over as chairman of the Management Board.

    “Heiner Klokkers knows the strengths of hubergroup and the market for printing inks like no one else,” said Klaus Greger, chairman of the advisory board of the printing ink manufacturer.

    Raw Materials
    Raw materials are a concern throughout the supply chain, with photoinitiators the biggest problem. 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.”

    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. The material is scarce, leading to manufacturing challenges. Prices have risen dramatically for what remains in the market, and efforts to reformulate ink formulas aren’t simple. Meanwhile, pigments, intermediates and other materials remain a challenge.

    “All areas of raw materials are a concern in regards to some additives, solvents, pigments and obviously photoinitiators,” Hrdlick said. “The Chinese government’s Blue Sky Initiative is impacting all Chinese suppliers and the current situation is likely to continue for the next two to three years. The initiative has caused factories to be shut down for periods of time, causing shortages and increased prices of raw materials.”

    “The initiatives in developing countries, such as China and India, to enforce tighter environmental regulations has resulted in continued periodic supply disruptions,” Mellado said. “This means that Sun Chemical must remain committed to developing supply contingencies to deal with these sourcing challenges. Risk management remains a priority for our integrated supply chain organization.

    These challenges will continue to be a threat to cost and supply until governmental agencies in these countries achieve their goals. This means that our greatest challenge right now resolves around photoinitiators and pigments since many of these raw materials are sourced from China. There have been numerous and reoccurring issues around supply disruptions with photoinitiators, 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.

    “Prices of pigments and intermediates also continue to increase quarterly/monthly in many markets,” Mellado added. “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.”

    “The cost of quality raw materials has continued to rise throughout the last year,” said Forker. “Prices have been at noticeably higher levels throughout 2018 and we don’t expect any significant relief in the near term. The whole industry is still suffering from the critical supply situation and the corresponding price hikes of various raw materials. For titanium dioxide, the supply situation remains more than tight. Due to stricter environmental regulations put in place by Chinese authorities and unexpected plant closures, prices for pigments relating intermediates, photoinitiators as well as other additives, have also increased significantly during 2018, negating positive foreign currency effects to European markets. The outlook for chemical feedstocks remains tight at elevated levels.

    Those most affected include MMA, styrenes and acrylic acid, which directly raise the input costs to produce resins used for inks and varnishes. At Siegwerk it is always our objective to minimize the risk to our customers due to potential supply shortages by having sufficient alternative suppliers and materials for the manufacture of our products and solutions. We are leveraging our global supply network across the world to maintain a competitive advantage and secure a supply as stable as possible.” 
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