David Savastano, Editor11.15.18
For the most part, the publication market – newspapers, magazines, catalogs and more – continues to decline, as more people get their news from digital sources.
Newspapers have been hit the hardest. The Pew Research Center reported newspaper industry trends in its recent Newspapers Fact Sheet, published June 13, 2018:
“Newspapers are a critical part of the American news landscape, but they have been hit hard as more and more Americans consume news digitally. The industry’s financial fortunes and subscriber base have been in decline since the early 2000s, even as website audience traffic has grown for many. The estimated total U.S. daily newspaper circulation (print and digital combined) in 2017 was 31 million for weekday and 34 million for Sunday, down 11% and 10%, respectively, from the previous year. Declines were highest in print circulation: Weekday print circulation decreased 11% and Sunday circulation decreased by 10%.”
To put that in context, total weekday circulation of U.S. newspapers reached a high of more than 63 million in 1984, and still was more than 50 million as of 2007, according to the Pew report.
Publication ink manufacturers are seeing similar trends. Bill Miller, COO CPS Inks for Flint Group, said newspaper publishing continues to decline sharply, while heatset end uses are in a slower decline. Still, there are opportunities.
“The continued shift from print to online communications drives these trends, but there is still significant value in these markets,” Miller said. “For example, catalogs continue to drive store purchases, direct mail still garners higher response rates for marketers than online promotions alone, and sheetfed markets are stable, even growing. In addition, the consolidation of many news and heatset printers offers greater share opportunity to suppliers who gain that business.”
“This past year has been most challenging for newspapers, particularly with the newsprint tariffs, tight paper supply and material increases,” said Mike Dodd, president, US Ink (a Division of Sun Chemical). “The market has shown a contraction of high single to low double digits. Overall the large publications have been the most challenged. There are exceptions, but in most of those cases, it has been due to adding publications to their pressrooms that have closed their facilities. Activity over the past year in the heatset market has been more stable. We have not experienced the anticipated mid-single-digit decline forecasted for this market. As with last year, regionally focused printers had growth opportunities. Several have shown significant increases in volume.”
“As reported in the past, the decreasing demand for publication inks also continued this year,” said Joern Bartelheimer, VP publication gravure, EMEA for Siegwerk. “There are no growth segments of note that could be considered as bright spots. The ink market is still shrinking even though slightly less than the years before and there are no significant changes to be expected going forward. Continuing price increases and shortages especially for paper will also adversely affect the further development of publication printing.”
Consolidation is occurring in the heatset and publication gravure printing segment. In a huge move in October, 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
“Even though the trend of consolidation with both printers and ink producers will continue, it only has a very limited impact on Siegwerk’s publication gravure business so far,” Bartelheimer said. “In the end, the fittest companies will survive - or the ones which manage to have their added value funded by customers.”
Raw Materials
The cost of raw materials is also a significant concern, particularly carbon black and pigments.
“Feedstock cost and supply disruptions continue to impact raw materials for publication inks this year,” Jeff Shaw, chief supply chain, quality & business improvement officer, Sun Chemical, said. “Crude oil has increased over 60% from a year ago, applying direct pressure to key raw materials such as distillates, ink oils, and carbon black. As geopolitical tensions increase, crude oil values could escalate to even higher levels going into 2019. Pigment intermediates and finished pigments continue to be under pressure from environmental assessment legislation in China, causing supply disruptions and volatile price increases. It is not anticipated that this will subside in the short term and may continue at least through 2019. Also, the implementation of trade tariffs has already impacted 2018 costs and will escalate further in January 2019.”
Flint Group CPO Michael Podd said crude oil cost increases, which remain at high levels, are a serious concern.
“These affect oils, solvents, vehicles, carbon black, and many other raw materials and feedstocks used by Flint Group, and they also affect fuel costs for transportation, which carriers are no longer willing to absorb,” Podd added. “Freight costs have increased for other reasons as well – specifically a drastic lack of drivers and equipment shortages.
“The U.S. government imposed tariffs on 5,745 imports from China, including many materials used in printing inks, pigments and feedstocks,” Podd said. “The current 10% increase will rise to 25% in January 2019, causing a significant impact on raw materials in the entire printing ink supply chain. REACH regulations have also affected the availability and costs of UV, HUV and LED inks worldwide, which compounds the already short supply of these energy-curing materials.”
“For publication inks, it’s just a very small number of raw materials that need to be monitored in terms of availability and price development,” Bartelheimer said. “Most important are pigments in this context. Due to stricter environmental regulations put in place by Chinese authorities and unexpected plant closures, pigment prices have increased significantly during 2018. Additionally, carbon black prices have risen linked to higher intermediate prices and limited availability. These increases have not only affected publication gravure but also a wide range of other ink industries. So far, we don’t expect any significant relief in availability and price level in the near term.
“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,” said Bartelheimer. “We are constantly looking for new sources for used, as well as alternative materials suitable, to replace existing ones... [and] alternate feedstocks and origins from different parts of the world to ensure our supply chain remains stable.”
Newspapers have been hit the hardest. The Pew Research Center reported newspaper industry trends in its recent Newspapers Fact Sheet, published June 13, 2018:
“Newspapers are a critical part of the American news landscape, but they have been hit hard as more and more Americans consume news digitally. The industry’s financial fortunes and subscriber base have been in decline since the early 2000s, even as website audience traffic has grown for many. The estimated total U.S. daily newspaper circulation (print and digital combined) in 2017 was 31 million for weekday and 34 million for Sunday, down 11% and 10%, respectively, from the previous year. Declines were highest in print circulation: Weekday print circulation decreased 11% and Sunday circulation decreased by 10%.”
To put that in context, total weekday circulation of U.S. newspapers reached a high of more than 63 million in 1984, and still was more than 50 million as of 2007, according to the Pew report.
Publication ink manufacturers are seeing similar trends. Bill Miller, COO CPS Inks for Flint Group, said newspaper publishing continues to decline sharply, while heatset end uses are in a slower decline. Still, there are opportunities.
“The continued shift from print to online communications drives these trends, but there is still significant value in these markets,” Miller said. “For example, catalogs continue to drive store purchases, direct mail still garners higher response rates for marketers than online promotions alone, and sheetfed markets are stable, even growing. In addition, the consolidation of many news and heatset printers offers greater share opportunity to suppliers who gain that business.”
“This past year has been most challenging for newspapers, particularly with the newsprint tariffs, tight paper supply and material increases,” said Mike Dodd, president, US Ink (a Division of Sun Chemical). “The market has shown a contraction of high single to low double digits. Overall the large publications have been the most challenged. There are exceptions, but in most of those cases, it has been due to adding publications to their pressrooms that have closed their facilities. Activity over the past year in the heatset market has been more stable. We have not experienced the anticipated mid-single-digit decline forecasted for this market. As with last year, regionally focused printers had growth opportunities. Several have shown significant increases in volume.”
“As reported in the past, the decreasing demand for publication inks also continued this year,” said Joern Bartelheimer, VP publication gravure, EMEA for Siegwerk. “There are no growth segments of note that could be considered as bright spots. The ink market is still shrinking even though slightly less than the years before and there are no significant changes to be expected going forward. Continuing price increases and shortages especially for paper will also adversely affect the further development of publication printing.”
Consolidation is occurring in the heatset and publication gravure printing segment. In a huge move in October, 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
“Even though the trend of consolidation with both printers and ink producers will continue, it only has a very limited impact on Siegwerk’s publication gravure business so far,” Bartelheimer said. “In the end, the fittest companies will survive - or the ones which manage to have their added value funded by customers.”
Raw Materials
The cost of raw materials is also a significant concern, particularly carbon black and pigments.
“Feedstock cost and supply disruptions continue to impact raw materials for publication inks this year,” Jeff Shaw, chief supply chain, quality & business improvement officer, Sun Chemical, said. “Crude oil has increased over 60% from a year ago, applying direct pressure to key raw materials such as distillates, ink oils, and carbon black. As geopolitical tensions increase, crude oil values could escalate to even higher levels going into 2019. Pigment intermediates and finished pigments continue to be under pressure from environmental assessment legislation in China, causing supply disruptions and volatile price increases. It is not anticipated that this will subside in the short term and may continue at least through 2019. Also, the implementation of trade tariffs has already impacted 2018 costs and will escalate further in January 2019.”
Flint Group CPO Michael Podd said crude oil cost increases, which remain at high levels, are a serious concern.
“These affect oils, solvents, vehicles, carbon black, and many other raw materials and feedstocks used by Flint Group, and they also affect fuel costs for transportation, which carriers are no longer willing to absorb,” Podd added. “Freight costs have increased for other reasons as well – specifically a drastic lack of drivers and equipment shortages.
“The U.S. government imposed tariffs on 5,745 imports from China, including many materials used in printing inks, pigments and feedstocks,” Podd said. “The current 10% increase will rise to 25% in January 2019, causing a significant impact on raw materials in the entire printing ink supply chain. REACH regulations have also affected the availability and costs of UV, HUV and LED inks worldwide, which compounds the already short supply of these energy-curing materials.”
“For publication inks, it’s just a very small number of raw materials that need to be monitored in terms of availability and price development,” Bartelheimer said. “Most important are pigments in this context. Due to stricter environmental regulations put in place by Chinese authorities and unexpected plant closures, pigment prices have increased significantly during 2018. Additionally, carbon black prices have risen linked to higher intermediate prices and limited availability. These increases have not only affected publication gravure but also a wide range of other ink industries. So far, we don’t expect any significant relief in availability and price level in the near term.
“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,” said Bartelheimer. “We are constantly looking for new sources for used, as well as alternative materials suitable, to replace existing ones... [and] alternate feedstocks and origins from different parts of the world to ensure our supply chain remains stable.”
