Printing ink manufacturers are under intense pressure due to multiple cost drivers according to the European Printing Ink Association (EuPIA). It said that while its members continue to work to minimise risks to customers, various pressures are likely to impact the printing inks market.
The EuPIA cites the increased cost of pigment raw materials, tightening upstream petrochemical supply chains, cost increases for vegetable oil derivatives and dramatically increased freight costs due to the reduced availability of containers as destabilising factors across the supply chain.
Early in the first quarter of 2021, global pigment raw material costs (including Titanium Dioxide [TiO2]) have already seen sharp increases. Key drivers for the increases include: high demand across all industries, greater domestic supply requirements in producing countries, generic supply vs. demand imbalances and higher pigment component costs. While the actual costs vary widely from region to region, higher than average per ton costs have been aggravated by significantly higher freight costs.
This early in the year, TiO2 supply is already restrained, with limited supply flexibility beyond regular volumes. This has resulted in significantly extended lead times to secure supply and further forecasting instability.
For coloured pigments, petrochemical feedstock cost increases as well as increased logistics costs have coalesced to drive up finished pigment costs.
In parallel to pigments, petrochemical raw materials (including UV resins, polyurethane resins, solvents and acrylic resins) have experienced higher costs. In Q2 2020, costs across the majority of petrochemical segments increased. Shortages of epoxy resins, high demand for polypropylene glycols utilised in the production of flexible foams and increases in acrylic acids have all been witnessed, dependent on location. In addition, due to ongoing freight constraints, manufacturers are experiencing longer delivery times and prolonged inflation of shipping container costs. All this volatility has led to additional complexity in logistical planning and difficulty in accurately predicting longer-term forecasts.
From Q4 2020 and continuing into 2021, there has been an astounding vegetable oil price rally to six- year highs due to several developments compounding together. Palm oil production is at a three year low while palm oil stocks worldwide are at low levels; soybean oil complex turned from a surplus to deficit with unfavourable weather conditions in the US and drought damage in Latin America reducing both production and supplies - in addition Chinese imports and consumption has risen more sharply than expected. All these factors have impacted the cost of vegetable oils and their derivatives such as alkyd resins and esters, which are the main backbone of paste ink used in both packaging and publication printing.
The underlying issue affecting the majority of global commerce is a huge disruption in the world’s shipping trade - the catalyst being Covid-19. For perspective, prices of containers between China and Europe have risen more than 400% since Q4 2020.
In summary, the EuPIA said raw materials and freight comprise the majority of the overall cost to produce printing inks. It is therefore inevitable that these higher material costs coupled to limited availability will have a major impact on the efficiency and resilience of producing companies. Exponentially higher freight costs will further exacerbate the current situation. It added that members seek to mitigate higher costs via internal process optimisation measures, alternate sourcing and increasing efficiencies.