In the last year Gum Rosin, a critical base material for Phenolic Resin used in print media inks (Heatset, Publication Gravure, Coldset and Sheetfed) has been under constant upward price pressure. Despite this trend, availability of the crop in general has not been too much of an issue, although there has been some shortages in crop yield in China due to weather related challenges; it has predominantly been demand (at any price level) and market mechanics that have driven prices to a 20+year record high.

“We have encountered some very difficult circumstances” says Jan Paul van der Velde, Senior Vice President Procurement Flint Group, in relation to the challenges that the industry is experiencing in the sourcing and pricing of Gum Rosin. Jan Paul continued, “The market has been very volatile, but now it seems to be stabilising albeit at a high level compared to the last decade.

In the last 30 years there have been higher peaks than the current $2,500* (€1,920)/ tonne, currently being experienced. However, in the past decade the market has seen prices more or less stable at around the $800* (€615)/tonne region, with a small peak in 2004. The current high prices do though appear to be robust - resulting in a defining a new market level. For buyers it’s a difficult call; when to buy forward on the one hand, and on the other, we need to secure material to ensure supply for our customers.”

“Initial increases which started in 2009 were slow, but have since accelerated significantly” adds Wang Peow Tan, Flint Group’s Vice President Procurement and Asian Sourcing. “Even though we have a base in China and are close to the market, nobody could have anticipated the price explosion as no fundamental reason for the price increase was evident. However, market dynamics allowed it to happen. Namely healthy demand, low stocks in the supply chain and well organised traders and producers. And there is no sign of relief yet! Despite users outside the ink market, such as adhesives manufacturers who have more flexibility around the choice of materials they use, moving out of Gum Rosin based products, the market has remained high. The only conclusion is that the market has adopted a new equilibrium and is now used to these high returns and we would not expect a return to previous levels any time soon. Particularly given that the bottom limit of RMB 10,000 (approx € 1,400) has been tested but not broken. The reality was that it just took a few days and the market went straight back up again. Even if you wanted to buy, hardly any volumes were physically available.”

The recent price increases will hit materials arriving in Europe later this year (on average the transfer time is around 60 days from China) and will effect late Q4 and Q1 2011 Phenolic Resin costs. “Phenolic Resins are a serious cost driver in Print Media Inks” says Nick Brannan, VP Product Management, Print Media Europe. “Earlier this year, after the first cost increases started to take effect, we had to raise our ink prices. We had hoped, based on historic trends, that the Gum Rosin prices would fall and that customers would only see a short term peak in their ink prices. Unfortunately it does not look like that is the case and these further increases, and the market robustness at the new levels, will be with us for a while, significantly affecting the cost of our inks. I’m therefore not surprised to see daily price increase announcements of major ink manufacturers.”


What is Gum Rosin?
Gum Rosin is a natural product harvested mainly from pine trees. The world market is dominated by China, with approx. 60% of the volume. Brazil is the 2nd source with 20% of the market, followed by a number of other countries. After the trees are planted, it takes several years before they start to deliver product. The harvest is similar to that of natural rubber; the tree is cut, starts bleeding and the product collected.

Small “farmers” harvest the material and sell it to collectors who pool volumes together and sell it to traders. The traders then either sell it to a distillery, or process it themselves. The Gum Rosin is then sold, mostly through oversees agents, to be used in the making of Phenolic Resins (for inks) or for many other applications (ranging from Perfumes to Road Marking and Adhesives).

Flint Group is well placed to manage this challenging supply chain. Our advantage is that we have the capability to source directly within China, in addition to significant global demand and direct contact with both the major players and global traders resulting in well established relations with all the major Phenolic Resin suppliers.


What is a Phenolic Resin in an ink?
Phenolic Resins provide crucial printed film properties like gloss, rub and setting, and together with Hydro Carbon Resins (resins based on oil fractions), provide the carrier for pigments.

Phenolic Resin is a further evolutionary development of Gum Rosin where it is reacted with phenols to provide a high performance resin to suit the latest press, consumable and market demand. For offset printing Phenolic Resin is the engine that drives the technological excellence to provide the performance at the highest press speeds and most challenging quality demands. The usage of both phenolic and hydrocarbon resin are essential and optimised to deliver the required performance for the printing process.

Another alternative for Gum Rosin based Phenolic Resins are Tall Oil based Phenolic Resins. Flint Group is very experienced in using Phenolic Resins based on Tall Oil which is produced during paper production. In North America inks are traditionally based on Tall-Oil Phenolic Resin, but unfortunately Tall Oil is also in short supply due the current reduction in paper making capacity, specifically in North America, and therefore does not form a good alternative for Gum Rosin based products.

Rosin free technologies, as yet, do not offer an equivalent performance and have also mirrored a comparable dramatic rise due to increased demand from non-publication industries. Flint Group continues to develop non-rosin based technologies to meet the more challenging demands of the printing industry.

*FOB Huangpo

Legal Notice – Forward Looking Statements
This bulletin contains a number of forward looking statements. Forward looking statements reflect our current views about future events and are based on currently available financial, economic and competitive data and on our current business plans and therefore include a level of risk and uncertainty.

8 October 2010

For more information, contact:

Flint Group
Peter Baird
T +44 (0) 161 776 6865
peter.baird@flintgrp.com

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