By Richard Stuart-Turner, Monday 05 March 2018
It’s unlikely to have escaped anybody’s attention that consumables costs have been steadily on the up lately.
Pulp price increases and a raft of other upward pressures on costs have forced paper suppliers to impose price rises onto printers, who are feeling the pressure – paper and board prices was the second highest ranked concern of respondents to the BPIF’s latest Printing Outlook study of the health of the industry.
Around a third of respondents also said their ink costs had increased in Q4 2017 while nobody reported that their costs had fallen. Similarly, around a quarter of respondents said they were expecting their ink costs to increase in Q1 2018 while nobody was expecting them to go down.
The latest Raw Material Prices Survey from the British Coatings Federation (BCF) showed that average solvent prices were up by 38% in December compared with a year earlier, with big increases also being seen for resins and related materials as well as some key pigments.
Sharp increases were common for solvents, with nine out of the 14 key materials covered by the survey showing large increases on a year prior and with many prices being up by well over 40%.
“Much of the blame lies with the steep increases in crude oil prices over the last year which have filtered through to several other key indicators of raw material prices,” says BCF chief executive Tom Bowtell.
“Brent Crude increased 25% in 2017 with the average price per barrel at just under $60 (£44) now double the level seen back in early 2016.”
Bowtell adds the sector has also been hit by higher gas and electricity prices, which have increased by well above the level of inflation during the past year, while uncertainty regarding Brexit may mean further volatility in the value of sterling going forward.
Sun Chemical UK, Nordics and South Africa managing director Adam Anderson says a number of other dynamics have also contributed to rising prices.
“With China’s environmental push, they’ve cut down up to 40% of supply and there’s mandated manufacturing shutdown, so there’s a huge effect on the supply of raw materials, a lot of which come from China.
“And the force majeures in place are almost at an all-time high for a lot of our basic raw materials. This has led to severe shortages of all of the basic chemical building blocks in our industry, which is really tough – that’s everything from solvents to pigments, which particularly have gone up hugely.”
He adds: “There are also some geopolitical uncertainties, and last year there were weather-related factors including hurricanes, which had a real effect.”
In the past few weeks alone Sun Chemical has imposed “high single-digit” price increases on all offset inks and coatings across all regions, while Flint Group’s CPS Inks division has implemented a global price increase of up to 9% on offset and publication gravure inks, coatings and pressroom consumables.
Flint Group said larger price increases will be required on some specialty products as well, such as silicones and high-performance coatings. Both suppliers have also recently increased prices for their packaging inks and coatings.
BASF, meanwhile, has increased prices for pigments, dyes and preparations by up to 15% worldwide and also put its Laromer UV resins up by 3% to 10% in EMEA.
BASF head of global business management for printing, specialties and cosmetics Brian Marsicano says tightening with respect to certain raw materials has led to higher costs that affect a large portion of pigment classes, including organic pigments, inorganic pigments and dyes.
“Additionally, product safety and registration costs combined with increasing regulatory requirements are significantly affecting our costs.
“These factors, as well as changing market requirements, make it inevitable to invest in modified or new production lines to secure future product availability.”
Bill Miller, chief operating officer of Flint Group’s CPS Inks division, says there is “no immediate solution” to fully resolve the raw material shortages and cost increases.
“Still, as a part of our continual improvement programmes, Flint Group’s R&D teams regularly investigate the best way we can deliver the performance characteristics customers need while helping to control the total cost of print,” he says.
But despite its best efforts in this respect, Doug Aldred, president of packaging inks at Flint Group, points out that cost pressure has been “utterly relentless”.
“The situation now necessitates that we pass some increases through the supply chain,” he says.
“Product quality and consistency are essential for our customers which is why we will continue to prioritise efficiency improvements.”
While all of the suppliers say they are striving to mitigate the situation as much as possible, this will be of little comfort to printers, many of whom find it difficult to impose the rising costs onto their own clients, often taking a hit on their profit margin to avoid losing a customer to a competitor.
And the situation is showing no sign of letting up any time soon either, with more increases anticipated by suppliers for the foresee-able future.
But there may yet be light at the end of an admittedly long tunnel as suppliers continue to seek out alternatives to the raw materials that are currently proving so problematic.
“We are looking at how we can source more sustainable and renewable products because that’s what the market wants,” says Sun Chemical’s Anderson.
“We’re also looking at how we can source these so that we are not held to account by global raw material movements.”