Early in 2008, global raw material markets for the print industry were thrown into turmoil as oil prices soared. Then suddenly in July of that year everything changed. The bottom fell out of the commodities markets as the recession started to hit. Oil dropped from $145/barrel to $40/barrel in just 6 months. Those buyers who had bought forward stocks of their raw materials to try to smoothen out the price increases, suddenly found themselves sitting on high stocks, which were rapidly depreciating in value. Massive de-stocking of supply chains kicked-in which only served to enforce closures of key suppliers, or at best made them take action to limit capacity.

Meanwhile the ink manufacturing industry became vulnerable to traditional suppliers moving volumes into more lucrative industries and to speculative actions by traders bent on maximizing profit.

The current and most harmful illustration of this is gum rosin. Ink producers find themselves in a totally unique situation. A small group of speculators has cornered the gum rosin market by buying up stocks and sitting on them. The availability of gum rosin and gum rosin derivatives is minimal, and forecasters say that early crops this year will be swallowed up by the avaricious Chinese domestic market, from where most of the global supplies originate. Current prices lie around the $2400/tonne level, whereas nine months ago, the price was at $900/tonne, a 170% increase!

Dr Matthias Schuetz, Flint Group’s Director of Product Management, Publication Gravure Inks, Print Media Europe, explains the impact of this unfolding scenario:

“Gum rosin, and its derivatives, is a key raw material for publication gravure inks, so the current high pricing has a significant effect on our product cost. We have no economic alternatives either, since the only replacement raw materials we might consider are oil based, which are much more expensive and also rising.”

“It is not only gum rosin that threatens our price stability, pigment prices are also on the increase” Dr Schuetz continues. “The dilemma with this key raw material group is that most of our suppliers are no longer in Europe, but in China, due to the migration towards a lower cost production base”.

“Now Chinese environmental regulations are being tightened up which will require capital investment by the producers. This means that there is little prospect for the upward trend in pigment prices to reverse”.

“Despite our cost containment activities, we are now at the point where we can no longer absorb these increases. Therefore with immediate effect, we are increasing the price of our publication gravure inks by €0.30/kg. Going forward, our objective is to have frequent and regular pricing discussions with our customers, so that we can be very transparent in explaining the impact on our cost structure.” concluded Dr Schuetz.

12 May 2010

For more information, contact:

Flint Group
Peter Baird
T +44 (0) 161 776 6868
peter.baird@flintgrp.com

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