The beginning of 2010 has been marked by amongst other things, with a slight reverse in industry fortunes and while it is clear that market demand has certainly increased (particularly in Asia were the economy in China grew in the first quarter of 2010 by over 12%) the economic revival has caused a supply / demand imbalance on the raw material markets.
The economic collapse end of 2008 was followed by a significant de-stocking of most raw material supply chains. As a consequence especially costs of base chemicals increased continuously since early 2009. All key raw materials the ink industry relies on, like Benzene, Toluene, Ethylene and Propylene, see double digit price increases. Another factor driving up raw material cost is a number of “force majeure” situations and key base raw material suppliers moving away from the ink industry, like Dow exiting their vinyl resin business.
Reductions in capacity are impacting on all areas of the industry with the packaging and narrow web ink markets also similarly affected by global shortages in key materials such as acrylates or acrylic resins which are derived from acrylic acid. Acrylic acid is facing a global shortage, which started in North America after the production incidents at Dow and Arkema, but has now spread around the world. Shortages have hit China and recently BASF announced it will take out capacity for maintenance. Many suppliers have now put in allocations to customers and clearly prices for acrylates and acrylic resins are now under upward pressure as a consequence - latterly this has also been as a result of the prices for styrene, which is used as a co-monomer in styrene acrylic resins almost returning to the record levels of 2008.
“While acrylic resins are a key raw material for water based inks - acrylates are the material more commonly found in UV inks and the issues described above are now causing significant challenges for water-based and UV based packaging and narrow web ink markets”, explains Jens Zimmermann, Director Global Marketing Flint Group Packaging & Narrow Web. He continues: “To further compound this problem - the situation with the major raw materials for solvent-based inks is also worrying as solvents have also recently started to come under significant price pressure. A prominent example of this is nitro cellulose where price are driven up by high increases in wood-pulp, a key raw materials for NC.”
Following on from the impending situation with solvents it is very clear that most pigment intermediates will also see increased pricing particularly blue and red while, materials like TiO2 and many speciality chemicals will also follow the same trend. Key raw materials the ink industry relies on such as Benzene, Toluene, Ethylene and Propylene have already witnessed a double digit growth in the first quarter 2010.
Jan Paul van der Velde, Senior Vice President Procurement and Executive Management Team member of Flint Group, explains: “This is related to demand and increasing crude costs. A number of solvents have been on allocation, for example vinyl has become very short after Dow decided to exit the business. The recent announcement of Wacker on a capacity extension will not immediately help, and Wacker has already made it clear that they will ask a “market plus price” for their products.”
Jens Zimmermann concludes “We are conscious that our customers are not having an easy time at the moment and many raw materials together with energy and transport will continue to rise. We at Flint Group are not exempt from this phenomenon, and even though our technical team is constantly searching for ways to mitigate these effects, we ourselves are incurring tremendous increases despite our ongoing cost containment programmes. We intend to continue closely monitoring the situation, keeping our customers fully informed of developments.”
*Source: Internal Flint Group data
** Source: Financial Times Monday 12th April
26 May 2010
For more information, contact:
T +43 64 534 2081