Ink industry purchasing executives have a difficult job as it is, as they try to plan for potential cost increases and supply crunches while making sure that manufacturing is running smoothly. For these purchasing executives, 2020 is a year they won’t forget, as the COVID-19 pandemic ravaged the globe.

In speaking with industry leaders, they noted that delays and price increases have become the new normal. For example, Jeffrey Shaw, chief supply chain officer, Sun Chemical, said that the pandemic caused significant disruption in global supply chains as well as price volatility in some key raw material categories.

“Shifting demand away from industrial applications to healthcare use exerted pressure on solvents,” he pointed out. “Additionally, the global supply of pigments, pigment intermediates, and various specialty chemicals were threatened by compromised distribution channels and limited available labor.”

Arno de Groot, VP Flint Group Packaging procurement, noted that COVID-19 impacted both the demand as well as the supply side in the ink industry.

“In particular, in March and April we experienced much higher demand due to panic shopping in the supermarkets as well as the tendency to increase stocks at our customers,” said de Groot. “On the other hand, on the supply side, operations and suppliers were confronted with a higher absence rate in combination with tighter border controls, lockdowns and availability of transport (sea and air particular) that resulted in less reliability and predictability.”

Arash Babai, director of global purchasing for Siegwerk, noted that the global impact of the COVID-19 pandemic presented supply chains with unpredictable challenges.

“The flow of goods transport got strongly disrupted and supply chains came to an almost complete standstill,” Babai added. “This resulted in a need for immediate mitigation by means of careful inventory management and a strong operational focus on inbound logistics. Siegwerk’s entire inbound supply chain is geared towards efficiency, also taking into account certain risk factors and volatility. But systemic risks, like weeks of a complete shutdown, are usually not calculated in the medium-term business and risk planning.”

Rick Westrom, SVP of strategic sourcing for INX International Ink Co., reported that in the beginning there was a delay in receiving materials from China, but after a month the situation improved.

“Many of our raw material suppliers hold inventory for us in the US, which has been a tremendous benefit,” added John Hrdlick, INX International Ink’s president and CEO. “As soon as the COVID-19 supply situation was becoming evident, they increased those stocks as well for our facilities.”

Shaw noted that as far as a supply chain impact in general, all regions around the world were and are still impacted.

“Areas in Asia have been a primary focus for us as many materials are sourced from regions such as China, India, etc. Although we monitor these regions regularly, COVID-19 has triggered us to monitor purchase orders and supply positions daily, especially as the situation was changing rapidly,” Shaw added.

“The COVID-19 impact also affected all players in the global supply chain, including over-the-road carriers, ocean freight carriers, and warehouse and distribution center providers, among others,” Shaw noted. “Frequent communication and data sharing remain critical, even at this time, in order for our fully integrated supply chain to be effective to meet customer demand, volumes and requirements.”

Key Materials Under Siege

The impacts on key raw materials occurred for different reasons. For example, some solvents like isopropyl alcohol (IPA) were rerouted to important health supplies such as hand sanitizers. Pigments, pigment intermediates and other specialty chemicals that typically came from China and Asia were limited as plants were shuttered.

Shortages also brought with them cost increases, and even if products could be located, transportation was disrupted.

“Generally, all categories from pigments and resins to solvents and additives were of concern at some point in time, closely correlating with the global evolution of the pandemic’s footprint and affected supply markets,” Siegwerk’s Babai reported. “While overseas supplies mostly came along with transportation interruptions causing an increase of costs to manage alternative supply sources, domestic bottlenecks arose from competing demand of raw materials in other sectors, such as solvents for disinfectants.”

Shaw said that the primary areas of concern have been pigments and pigment intermediates sourced from China and India. A few issues around specialty chemicals were also a concern.

“Alcohol-based solvents used in sanitizing applications were also affected as demand in the health care industry significantly escalated and supply priorities shifted away from industrial use,” Shaw noted. “Propanol became very tight as it was being approved for use in sanitizing applications in other continents, in addition to IPA and ethanol. This has applied sustained pressure on prices and is forecasted to continue, but not at the same levels reached during the peak of demand.”

Westrom observed that IPA demand and pricing has increased dramatically due to the increased usage of sanitizers and cleaners.

“The demand and pricing for ethanol have also increased since it and denatured alcohols were following the same path as isopropyl alcohol (IPA),” said Westrom. “Those customers who could not get IPA formulas switched over to ethanol and led to the higher demand. The demand for propyl became tighter because N-propyl alcohol has been approved for use in hand sanitizers, and N-propyl acetate is made from N-propyl alcohol.”

“Materials with extended lead times as well as N-propanol, ethanol and isopropanol - all being used for hand sanitation products - were of most concern,” de Groot said.

Even as the initial pandemic abated somewhat, supply remained tight.

“I think our vendors and INX have reacted very well,” said Hrdlick. “By taking proactive measures in the beginning, it continues to carry us through these difficult times.”

“The same raw materials have been our primary focus during the pandemic. There will always be secondary issues with respect to our extended supply chain that occur downstream with our suppliers. As we encounter delays in these areas, we are able to qualify or use alternate sources previously approved through our global supply chain efforts and diversify our raw material portfolio,” Shaw observed.

“I would say that the challenges we have seen at the start of the pandemic became manageable and business runs as it did before the COVID-19 crisis,” said de Groot.

“There have not been any further supply challenges,” Babai noted. “All in all, we have seen an increased demand for inks and coatings during the pandemic as they are essential for the manufacturing of packaging ensuring access to critical supplies for system relevant food, pharma and hygiene products.”

The Concept of Nearshoring

With an eye on what is occurring with raw material supply globally, including political concerns such as tariffs, some companies are looking at the concept of “nearshoring,” or transferring operations closer to home. That comes with investment costs, which can hinder such decisions.

“Some suppliers have conveyed success in geographically consolidating their sourcing and reducing their activity in China,” Sun Chemical's Shaw said. “This was driven by a number of issues starting with tariff concerns, and is now further motivated by COVID-19 driven supply chain challenges.”

“Chemical markets have been truly global for quite some time now and the entire supply chain is based on comparative advantage, scale and also innovation in manufacturing process design,” Babai said. “As production capacities are still in place and running in our dominant supply markets, we believe that market mechanisms will prevent nearshoring to a large extent. Strategy-wise, Siegwerk sees more value in sufficient supply-portfolio diversification, also geographically, which also proved to be the right and only working concept in Q2-2020; nearshoring to a large extent would only pool the risk in one’s home country but not on a global base.”

Flint Group's de Groot noted that there are discussions but, so far, there is little evidence of suppliers moving production closer to home.

“We should also understand this requires investments and with the future uncertainty, it is not likely to happen soon,” de Groot said. “I believe that political tensions might be a bigger driver for moving production and supply chains.”

Changes in the Era of COVID-19

The world of business has seen dramatic changes during 2020, and as companies have evolved, many of these changes are likely to continue during the coming years.

“These are very challenging and unprecedented times,” Shaw said. “Global supply chains continue to get tested repeatedly. Our goal is to make sure our supply chain is well-positioned to respond to any upcoming hurdles, whether it is a COVID-19 wave two, potential panic buying wave two, or an increase in potential trade wars, along with any other geopolitical events. Also, the potential challenges introduced with United States-Mexico-Canada Agreement (USMCA) compliance versus The North American Free Trade Agreement (NAFTA) have driven more effort toward domestic sourcing and regional manufacturing strategies.”

“The COVID-19 pandemic has certainly created changes in how we do business, and I think some of these changes will carry forward,” Hrdlick concluded. “We are rethinking our plans for business travel, meeting formats and additional activities that we’ve learned to handle in dramatically different ways, all without any negative impact on our business.”