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    Features

    China’s Ink Market Recovers from Impact of COVID-19

    Packaging ink market has returned to close to pre-pandemic levels, while publication and commercial ink sales are still lower.

    China’s Ink Market Recovers from Impact of COVID-19
    David Savastano, Editor09.21.20
    China is perhaps the fastest-growing nation in terms of ink production. The country’s ink industry is a mix of international ink manufacturers, led by a pair of joint ventures (Hangzhou Toka Ink Co., Ltd., with T&K Toka, and Toyo Ink’s Tianjin Toyo) and domestic ink producers, the largest of which is Yip’s Chemical Holdings Limited.

    China was the first to feel the wrath of COVID-19, and the Chinese government essentially shut down the country in early 2020. As a result of these actions, China’s ink industry has come out of the pandemic relatively well.

    Masamichi Sota, executive officer, GM, Printing Material Products Division, DIC Corporation, noted that China’s stay-at-home orders led to the shutdown of most industries, including ink.

    “Just after the Chinese New Year at the end of January, China implemented ‘Moving Control,’ a stay-at-home order that caused the Chinese ink market to shut down because of the novel coronavirus (COVID-19) between the last week of January into March,” said Sota. “Fortunately, the pandemic slowed in March in the Chinese region. With this in mind, we’ve seen that the Chinese packaging market has resumed 90% of its level from before-COVID-19 in April, while the commercial and publication markets have remained quiet.

    “With the impact of COVID-19 slowing in the Chinese region at the end of March, we can resume the production for packaging inks with the support from local government,” Sota added. “We expect that China’s market will recover quickly following the COVID-19 pandemic, and plan to put more resources in the region, specifically in packaging inks.”

    Tatsuya Miwa, GM of Hangzhou Toka Ink Co., Ltd., observed that due to COVID-19’s domestic and international effects, printing demand in China has declined.

    “Even after China overcame COVID-19, the pandemic is still greatly affecting the export industry and China’s position as the world’s factory,” Miwa pointed out. “It is impossible to control the effects of this pandemic; however, we will actively collect information in order to react with sensitivity and respond with flexibility to structural changes of the collapsing printing industry, and participate in the construction of the new industrial structure.”

    Yoshirou Nishikawa, GM, Business Strategy Department of Toyo Ink Co., Ltd., noted that during the first quarter of 2020, the global economy was dealt a severe blow by COVID-19.

    “China was hit hard with the initial outbreak of the virus that resulted in a partial or complete lockdown of our factories of our customers and our own,” Nishikawa said. “Packaging sales in the country weakened due to the suspension of operations.

    “By mid-April, operations had largely returned to normal levels,” added Nishikawa. “The rebound involved engaging in frequent communication with our customers to help bring their operations back to normal. In addition, we are closely managing our supply chain not only in China but also in the other parts of the world, and are working with our suppliers to minimize any potential issues that may impact our operations and those of our customers.”

    “In February, production and sales were largely affected by the shutdown of plants and logistics turmoil due to travel restrictions,” Katsuya Tanaka, GM – International Operations Department of the Corporate Planning Division of Sakata INX Group, said. “The economy has gradually recovered since April and domestic printing demand has been recovering along with it. However, export has been in a tough situation because of the US-China trade dispute. We will further enhance sales of packaging ink that has high environmental performance, and is safe and steady in domestic demand.”

    Ashish Pradhan, president India and Greater China for Siegwerk, reported that Siegwerk saw a fall in demand in February and March this year during the peak phase of the COVID-19 crisis in China.

    “Since April, we see a steady recovery in domestic consumer demand,” Pradhan noted. “This has increased the need for packaging and hence packaging inks.”

    Pradhan added that Siegwerk has worked closely with local authorities to ensure high levels of safety in its factories and offices.

    “We have been able to keep operations running since we got permission to restart operations from the government authorities,” said Pradhan. “We are continuing to invest in the right projects and also recruit new employees. We still see the Chinese market to be a market that will continue to grow for us and remain our growth track.”

    Before COVID-19, the ink industry continued to grow in China.

    “The UV printing market in China keeps growing steadily, however, the competition in the industry is getting more and more intense,” Miwa said. “Regarding UV inks, we have the highest market share among the China-based companies. Overall, our business performance is favorable, which is supported by the steady growth of UV printing in China.”

    Pradhan noted that Siegwerk entered the Chinese market in 2005 and since then has made significant investments in infrastructure and people to capture the growth in one of the largest packaging markets in the world.

    “Siegwerk China has a dominant position in some of the business units that we operate in, while in others we are growing at faster than the market,” added Pradhan. “Overall, Siegwerk is positive about the development of packaging in China and will continue to focus on this market and invest appropriately.”

    “In 2019, the Chinese market was affected by the US-China trade dispute and its momentum has declined. However, with consideration of its population and economic scale, it remains an important location. We continue to promote sales and capital investment after assessing the situation. Sales of water- or plant-based, environmentally friendly packaging ink has increased. The sales of offset ink for publication/advertisement or paper containers were also favorable. Unfortunately, it’s recently been largely affected by COVID-19,” Tanaka said.

    “In 2019, the Group saw growth in China, although the pace of growth slowed,” Nishikawa said. “The strongest area of growth came from sales of eco-friendly inks for flexible packaging, in particular for middle grades.

    Market conditions for offset inks remained stagnant, reflecting the downturn in the local economy and impact from tightening environmental regulations. Despite these circumstances, we managed to see growth for lower VOC offset inks in addition to eco-friendly packaging systems such as toluene- and MEK-free gravure inks. Demand for inkjet inks for on-demand printing has also remained robust.”

    Environmental Regulations in China

    The environment is becoming ever more important in China, and regulations such as the Blue Sky initiative are impacting the ink industry.

    A spokesperson for Yip’s Chemical Holdings Limited noted that environmental laws and regulations of the local governments in Mainland China are becoming more stringent.

    “Throughout the years, we have ensured environmental compliance, and installed or retrofitted our devices to minimize the negative impact from our production in accordance with the government standards, “Yip’s spokesperson said. “We have always been careful in dealing with volatile organic compounds (VOC) emissions. Large VOC treatment facilities were fully operational in our ink plants in Zhongshan and Tongxiang. Our R&D department is also equipped and would innovate more environmentally friendly and safe products to cater to the market.”

    “As a global company, DIC has always respected and followed the guidance from the Chinese government and has taken the steps to put a proper back-up plan in place,” said Sota. “Having excellent technology developed in Europe, the United States, and Japan—countries with highly controlled environmental requirements—DIC/Sun Chemical Corporation has also been installing new technology and products in the Chinese market in a proactive manner.”

    “In the printing industry, gravure ink that mainly uses organic solvent is subject to strict regulations,” Tanaka noted. “We have installed the VOC recovery system, developed water-based ink that has little VOC emission, and aggressively promoted its sale. From the point-of-view on carbon-neutral, we are also dedicated to the deployment of plant-based ink.”

    “Improvement on air pollution issues is progressing, especially in metropolitan areas,” said Miwa. “In order to continue our economic activity, we are working on energy-saving measures, waste reduction and other policies to increase energy efficiency.”

    “Siegwerk China as an ink manufacturer may need to comply with the national GB39824-2019 emission standard for air pollutants for paint, ink and adhesive industry as well as the local Shanghai VOC emission standard for our Shanghai facility,” Pradhan reported. “We have converters visiting us to learn about our VOC emission control facilities. For printing ink products, Siegwerk China will need to comply with the national standard GB38507-2020, which limits VOCs in printing ink. It will be effective for implementation on April 1, 2021.”

    New Facilities in China

    With further growth expected in China, companies are adding new operations in the country. For example, Tanaka noted that Sakata INX’s second offset ink plant is being built in Maoming City, Guangdong Province, China. Meanwhile, Nishikawa reported that in the wake of the pandemic, Toyo Ink’s expansion plans have been placed on hold.

    DIC is also expanding in the country. “To expand business in the northern and northeastern markets in China, we established DIC Graphics Shenyang in May,” Sota said.

    Pradhan noted that Siegwerk has a modern facility just outside of Shanghai and a new facility that has recently been put up in Zhu Hai, and at this point in time these two facilities are equipped to manage the demand of the Chinese market.

    “Siegwerk remains ready to invest in new facilities as and when the opportunity arises,” added Pradhan.

    Digital Printing in China

    As digital printing grows worldwide, it is also making significant headway in China.

    “DIC began producing inkjet inks in China and we strongly believe that the digital ink market will continue to grow in the region,” said Sota.

    “Digital printing gradually replaces traditional printing as it is relatively more time and cost-effective,” Yip’s spokesperson noted. “With the national government’s increasingly stringent requirements on emissions, digital printing is more favorable because it facilitates clean production. In recent years, digital printing has developed rapidly in the domestic market, while the industry is currently exploring different practices to make the best use of technology.”

    Siegwerk’s Pradhan said that China is a flexible packaging market, and there are opportunities for digital printing in that space.

    “Usually Chinese converters focus on large B2B orders, with a minimum of 10,000 meters per run, e.g. 10,000 units for smaller converters,” added Pradhan. “For larger converters, it can be 30k-50k meters minimum per run. This means that the attractive market for digital inkjet printing is where demand stays under 10,000 pack units and where tailor-made designs are required.”

    “Digitalization is partially seen in some products for environmental measures or wide-variety, small-lot production,” Tanaka said. “However, many improvements still need to be made in quality, cost and productivity. To replace traditional packaging - advertisement or publication printing - with digital printing, it is necessary to take advantage of its value-added strengths.”

    Nishikawa said that China is an important market for Toyo Ink as it has a large inkjet market for the textiles, ceramic tiles/building materials and signage and graphics segments. Nishikawa noted that manufacturers of wide-format printers who export a large percentage of their products to overseas markets have been deeply impacted by the coronavirus outbreak. Exports to Asia, Europe and North and South America are on the decline, although domestic demand remains strong thus far.

    “Continuous feed, single-pass inkjet printing is expected to replace conventional printing methods and continually grow in the above fields as well as in the publishing, commercial printing, labels and corrugated sectors. We aim to expand our position in China by using our unique technology platform to formulate UV and water-based inkjet inks for the signage and single-pass printing markets,” added Nishikawa.

    In line with the growth of the Chinese digital printing market, Nishikawa added that Toyo Ink plans to raise its UV ink production capacity at Tianjin Toyo Ink as well as water-based systems at Zhuhai Toyocolor in Guangdong province.

    Outlook for the Ink Industry in China

    Nishikawa noted that the economic data continues to indicate the Chinese economy is showing signs of recovery.

    “Although production has visibly picked up, uncertainty over the coronavirus’ impact remains,” Nishikawa pointed out. “In addition, a renewed trade rift with the US presents a risk to China’s outlook. China’s domestic demand is on the rebound, although consumer spending is likely to be softer than usual. The packaging sector is expected to remain resilient as the demand for improved product safety and hygiene, in particular in the food sector, results in increased flexible packaging use. Looking ahead, we expect to see demand for low-carbon-footprint products grow as the Chinese government continues its development plan towards a green economy in the post-COVID-19 world. Toyo Ink will also continue our focus on water-based ink development.”

    “Although performance was down in Q1 due to the COVID-19 pandemic, we were happy to see that April has had a 90% comeback. We are hopeful that the outlook for the remainder of 2020 will remain strong,” Sota reported.

    “In 2020, our business has been largely affected by the adverse economic effects due to COVID-19,” Tanaka reported. “The situation in the future all depends on how much the Chinese domestic economy or export to overseas is improved over time. On the other hand, environmental regulations, the reduction of CO2 emissions, food safety and safer alternatives will continue to be priorities. We will further enhance the development and sale of environmentally friendly ink - that is one of our strengths - and expand the sales of high-end products that represent our group’s technical capabilities.”

    Pradhan said that China remains a strategic market for Siegwerk.

    “We expect the China growth rates to be higher than in most parts of the world,” added Pradhan. “Consumer preferences in China are also changing rapidly, more in terms of product safety and sustainability. The market is also moving towards digitalization. These are the big trends that Siegwerk would like to leverage in order to grow faster than the market in China. All in all, China is an important market for Siegwerk and plays a pivotal role in the development of the company in Asia. China also remains a strategic sourcing location for Siegwerk globally and we intend to invest in resources in China. This will help us ensure that Siegwerk can purchase the best quality raw material at the most reasonable prices.”

    “We are aiming for the development in China’s market by expanding and improving quality for the growing UV market, and also the huge oil-based ink market,” Miwa concluded. 
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