Last week's news that ink company Flint Group was increasing prices may not have been welcome, but it was hardly a surprise. The sector, along with the print industry in general, is under enormous price pressure and it was only a matter of time before something had to give.

Raw material price increases and problems with balancing supply and demand have begun to take their toll and, as things
stand, it seems unlikely that the situation will improve any time soon.

The British Coatings Federation (BCF) says its members have reported a number of factors, chief among them is the rising price of oil, which has affected the cost of many products used by the ink, varnish and coatings industries.
According to BCF chief executive Tony Mash, strong demand from South East Asia and the impact of production constraints on raw material suppliers are also causing "great concern to many printing ink, varnish and coatings manufacturers".

Mash says: "The economic recovery being experienced by South East Asia has stimulated sales of print ink, varnishes and coatings, and with that, the demand for the raw materials."

Supply issues
However, the key issue, ac­­cording to Mash, is that the chemical industry de-stocked during the recession, which led to a reduced capability to supply the recovering market.

"BCF members have repor­ted serious supply shor­tages in the supply of pigments, ac­­rylic acid, titanium dioxide and vinyl resins," he says, adding that some plants have had to reduce production as a result.

"At a time when many sectors are starting to come out of recession in the UK and elsewhere, it is disappointing to learn that this recovery may be constrained by both supply difficulties upstream and cost inflation."

Materials shortages
In Flint's price announcement last week, the company confirmed that supply chain shortages were having "an astonishing impact" on key raw material costs. It said that the outlook was for the price volatility to continue, and for there to be ongoing pressure on costs for the foreseeable future.

Indeed, ink price increases are being mirrored through the rest of the market. Sun Chemical will increase the price of its products in its publications portfolio by 10%-20% from 1 July. Chief marketing officer Felipe Mellado says this is the first time the company has needed to make any increases since July 2008.

Mellado argues that the rises have become necessary because of rising raw materials costs and shortages. He adds that, while the efficiency of its manufacturing site has helped offset some of the increases, the company continues to face external challenges.

"In order that our publications division continues to deliver value and remains competitive, we have needed to take action with this price increase," he says.

Elsewhere, Arets director of UV Colin McKenzie says that, with regards to its UV products, the company is discussing the current difficulties with its customers.

"First under pressure are UV varnishes, which, dependant on specification and container size, will increase by around 15p per kg," he says. "Inks will also be reviewed, but we want to be certain that we do not come back to customers for a second tranche in a few months, so we are trying to get assured prices from our suppliers to then offer some stability."
McKenzie adds that Arets, like Sun, has not had a general price increase in UV since 2008.

"But we are unable to avoid these current raw material increases as our suppliers are active in markets other than ink and they can achieve their prices from industries with bigger demands and margins," he says. "If we refuse to pay increases, our supplies may be interrupted."

However, Grant Penfield, managing director of UK ink manufacturer Druckfarben, says the company does not need to take any "knee-jerk decision on pricing or react to competitors".

Blanket impact
"[But we have to] make day to day decisions: our strategy is about rapid response, especially on pricing," says Penfield.
"Unfortunately though, the entire sector is suffering with shortages and increased raw materials costs, so we will be following the market with increases in the region of 5%-8% minimum from 1 August."

Grant adds that he expects raw material availability and costs to continue to put pressure on the market, which will lead to increases again before the end of the year.

He says that, over the past 10 years, the industry has struggled to pass on price increases to the market successfully, meaning that major redundancies and plant closures continue to be the only option.

"The industry is in serious trouble this time due to such a large decline in the volume across all markets and catastrophic raw material increases," he says. "We will no doubt see blood on the streets again."