The packaging ink market: higher raw material costs and the weakening economy have impacted the packaging market, although there are also opportunities for growth

Ink World, Oct, 2008 by David Savastano

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Traditionally, when the economy has suffered downturns, the packaging ink market has been more resistant to economic pressures. However, in the past year, even the packaging market is being impacted by the economy, as ink manufacturers also cope with the added pressures from higher raw materials costs.

"We see the packaging market globally and in North America continuing to show growth, but given the current economic climate, we expect the impact on future growth rates in packaging to be affected," said Michelle Hearn, director of marketing, Packaging, North American Inks, Sun Chemical. "Growth in the packaging market is spurred primarily in the flexible packaging market segment. However, imports are outpacing exports and because business is being moved off shore to Asia and South America, the packaging ink market in North America is relatively flat."

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"This past year has been a difficult year relative to the historical performance of the packaging market," said Michael Impastato, vice president, business development, Packaging Division for Flint Group. "Early in 2007, there were signs of strong growth and improved performance for companies involved in packaging. And it is true that packaging is somewhat more resilient than some other printing segments. But, beginning in mid-2007 and continuing through 2008, we have seen the package printing market slow down. The unprecedented cost increases for materials has everyone concerned and the resulting slow down in the general economy has impacted the market."

Enno Urbeinz, manager external communications, corporate communications for Siegwerk, said that Siegwerk enjoyed growth in all regions, although North America and Europe were not as strong.

In both Europe and North America the economy is weak," Mr. Urbeinz said. "That is why the European market is difficult. Siegwerk NAFTA has managed to grow organically mainly due to very good products for packaging applications including flexible packaging, labels, tobacco, paper and board and sheetfed UV. In addition, growth has come from our continued dedication to providing a quality product coupled with outstanding point-of-use service and technical support."

For Siegwerk, Asia and Latin America were particularly strong markets.

"We especially experienced a strong increase in UV ink systems as well as interesting and promising results with water-based in Asia," Mr. Urbeinz said. "The flexible packaging market has also shown positive development in Asia recently. All countries in the region have seen a growth that is slightly above the country GDP.

"For Siegwerk in South America, during 2007 the flexible packaging and self adhesive labels markets were the stars," Mr. Urbeinz added. "Both segments received relevant amount of investments in presses and additional facilities, mainly in countries like Brazil, Argentina and Chile."

"Siegwerk's core competence lies especially in the high end packaging segments (food, pharma and luxury packaging). Despite all negative economical impacts, we believe that these segments are less touched by overall economic ups and downs," Mr. Urbeinz added.

Ms. Hearn said that Sun Chemical expects the majority of the growth in packaging inks to occur primarily in the Asian market.

"We see more and more global converters moving into Asia and South America by building a presence to support the needs of global consumer packaged goods (CPGs) companies," she said.

Joerg-O Seeger, president of Hostmann-Steinberg USA, also noted stronger growth in Asia. "The offset printing has seen very little growth while flexo and gravure printing market continued to grow 4 to 5 percent in North America and seen much higher growth in Asia," said Mr. Seeger.

David Callif, president of BCM Inks U.S.A. Inc., a specialist in the corrugated market, focusing on high graphics packaging and POP displays, noted that BCM Inks has enjoyed growth this year, driven by such environmentally friendly products as its Eekoflex inks and varnishes. These inks and varnishes are made from paper residue.

"In terms of the packaging market, North America has been extremely challenging, while in Latin America, we are seeing our business improve," said Mr. Callif.

"We have been able to grow our business by developing innovative products. You've always got to look at the future to see what the needs of the marketplace are, especially in terms of sustainability and green chemistries," Mr. Callif said. "We've been going in that direction since day one, when we first modeled our plant, and we have continued to improve over the years. We were the only ink company invited to participate at Wal-Mart's Sustainability Expo."

Impact of Raw Materials

The dramatically higher costs of raw materials, which ink companies can no longer completely cover, are a source of concern for customers. Sun Chemical, Flint Group, Siegwerk, hubergroup and other ink industry leaders issued significant price increases to try to cover the higher costs they are getting from their own suppliers.