Tremendous Increases in Raw Material Prices and Leadtimes
Brussels, 2010-12-16 – Gum Rosin tops the list with a 400% price increase in only 18 months, but other raw materials for the printing inks manufacturers follow close behind. Especially resins but also pigments are causing major problems through the supply chain with respect to lead-times and prices, declared the European Printing Ink Association (EuPIA) in Brussels.
Gum rosin is an extreme example of what is happening in the supply chain right now. The cost of this renewable raw material remains volatile, currently trading at about $3,000/tonne, and the trend is still upwards. The availability of this material is extremely tight due to the poor harvests in China which are well below average. The same is true for nitrocellulose binders which are based on the key ingredient of cotton. Cotton prices have been increasing sharply due to crop failures in Pakistan, caused by flooding and generally lower yields in other parts of the world.
Organic pigments for the printing ink industry are sourced from China and India where a surge in domestic demand has put limits on the material available for export. Commodities like titanium dioxide and carbon blacks are also very tight, as a consequence of plant closures and significant increases in demand of these materials. Printing Ink manufacturers report a daily struggle to secure supplies and of price increases in the region of 10% to 15% in 2010, with further rises of 10% to 15% expected in 2011.
“The global availability of raw materials for printing inks continues to be of major concern to our member companies”, says Martin Kanert, Executive Manager of EuPIA. “There is little or no clear outlook as to how long the shortages and product allocations are likely to last”, he says. Following the economic downturn in 2008 many of the commodity suppliers reduced operating capacity, laid off personal and moth-balled or even went as far as permanently shutting plants down. Inventories were reduced dramatically in 2009 and with the resurgence in demand starting late 2009 and continuing through 2010, many industries were not in the best position to adequately supply their customers.
The supply of pigments has been knocked by mounting environmental challenges and increasing intermediate costs. “Recently China and India have both announced more stringent environmental rules for the production of pigments”, says Kanert. “On top of this, the energy saving program in China has affected many pigment and pigment intermediate suppliers. In the end we have to face the situation where ink manufacturers only have minimal control over the cost and supply of the raw materials they need to manufacture their products.”
In some industries new technical developments work against a smooth and trouble-free raw material supply pipeline. Mineral oils, base oils and several solvents are under considerable pressure due to production optimisation and a drive by the refineries for higher margins. These basic chemicals are capacity filler products for the major crude oil companies and were traditionally sold off at low margins. Many of the older refineries which produced them have now been closed down. “And the modern refineries don’t tend to produce these low volume specials for our printing ink industry”, says Kanert.
As a consequence of these market and supply developments all raw material costs for the printing ink manufacturers are, without exception, under extreme upward pressure. Most significant increases are to be found with the resins of between 10% and 400%, followed by pigments with 10% to 40% increases.
Dr. Martin Kanert
Executive Manager of EuPIA
Tel.: +32 (0)2 676 74 84
Fax: +32 (0)2 676 74 90