Ink makers are facing what Flint Group calls a series of raw materials challenges and what will become price rise for printers. It amounts to a complete swing in the three months.
In mid December, the company’s SVP procurement, IT and regulatory officer Jan Paul van der Velde explains that Flint projected only relatively small upward price pressures for 2017. “Now two months later we look at a completely different picture,” he says.
That picture comprises a steep increase in crude oil prices; rises in the costs of intermediary chemicals driven by primary materials costs in 2016; the loss of titanium dioxide production capacity following a fire at its the Huntsman plant and other unplanned maintenance issues.
This is also taking place against a background of geo political change he points out, so far increasing uncertainty that trade barriers and costs will increase. Currencies have also suffered greater fluctuations.
He adds: “Next to the significantly higher average crude price versus 2016, we also see that the major building blocks in the chemical industry, the so called BTX complex and Styrene, have gone up. Further, the number of force majeure notices seem to have risen significantly, leaving some major areas in supply / demand shortages. All of these issues have caused double-digit cost increases that have produced higher prices downstream.
“In addition, the stronger enforcement of the existing environmental rules in China, specifically relative to air pollution, have resulted in production limitations or even full shutdowns of various industrial parks. This has caused major supply shortages for base raw materials required to make ink raw materials.”
This is affecting all styles of printing ink and the related consumables that Flint, and other manufacturers, produce. “Costs of many solvents have also increased, which affects the cost of manufacturing many pressroom chemicals and solvent based inks. Hydrocarbon costs increased by 25%, and ethyl acetate (Etac) costs started to increase earlier this year by double digits. Glycols, glycol esters, and isopropanol are on allocation, we have seen cost increases in the range of 4%, and we expect further cost increases in the future.”
Litho inks depend on a mix of oils, pigments and resins. The increase in oil prices leaves Flint facing a 10% increase in carbon black, 5% on hydrocarbon resins and 20% on mineral oils over the levels of 12 months ago.
Blanket production faces increased cost as the price of butadine, a key compound for blankets and for flexo plates, has tripled since the autumn and is increasing again. Water based ink prices are hit by the 35% rise in cost of styrene and a 12% increase in acrylic acid prices.
As if this were not enough, van der Velde continues, the loss of titanic dioxide, a key ingredient in white ink and paint has caused a 30% demand gap in the market, and companies like Flint scrambling for supplies.
“Last but not least, in the area of UV, the impact of the Chinese production limitations has resulted in cost increases between 8 and 10% for photoinitiators, monomers, and oligomers,” he adds.
The oil price has also increased shipping costs where capacity reductions following the bankruptcy of Hanjin Shipping are affecting a number of routes and security of supply. It adds up to a series of headaches for the industry’s consumables producers, which they must attempt to mitigate or face loss of market share through increased pricing.
Van der Velde recognises the danger. “While we cannot disassociate ourselves from raw material movements in terms of cost and availability, I’m confident that Flint will be in a good position to ensure supply to our customers at prices that are still competitive in this environment,” he says.
“The global sourcing ability of our company, the close cooperation with our key partners and very senior contacts with the key manufactures, puts Flint in a relatively good position. However, these challenges will not abate quickly. Flint will work closely with our suppliers and customers to plan for and mitigate the volatile raw material trends we face.”
Flint Group has warned it is facing all round pressure on prices as oil producers are increasing prices, as some raw materials are in short supply and government policies are adding to turbulence.
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