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The Chinese Ink Market

By Tim Wright | November 19, 2009

Although the printing and ink markets in China felt the impact of the global recession on exports, there are signs that the economic recovery has begun.

By David Savastano

In recent years, Asia-Pacific has been the fastest-growing region for printing and ink, driven largely by expansion in China. China’s gross domestic product grew at 6.8 percent in 2008, and while that would be the envy of most nations, it was sluggish by China’s standards; the country enjoyed 11 percent growth in 2007.

The Chinese printing industry has enjoyed growth due to a number of factors. As manufacturing has moved into China from the Western nations, so too has packaging. There are also gains being made in terms of consumer goods for the domestic marketplace. On the publication side, there is more domestic interest in newspapers and magazines.

As a result of the gains being made by the printing industry, international and domestic ink manufacturers are also enjoying strong growth. Multinational corporations such as Toyo Ink, DIC Corporation, Sakata INX and T&K Toka all have long-established relationships in China, while Flint Group has made significant inroads in the past 10 years.

Tianjin Toyo Ink Co., Ltd., a joint venture set up by Tianjin Printing Ink Co., Ltd. and Toyo Ink, is considered to be the largest ink manufacturer in China. The company specializes in offset and news ink.

In 1991 T&K Toka, a UV ink specialist, established Hangzhou Toka Ink Chemical Co., Ltd., estimated as the second-largest ink manufacturer in China, as a joint venture with Hangzhou Chemical Industry Controlling Stock (Group) Company and the Bank of China Zhejiang Branch.

DIC Corporation and its sister company, Coates, also have a major presence in the Chinese ink market, starting with ink trading in the 1920s and then restarting in the 1950s. Taiyuan Coates Ink Chemical Co., Ltd. and Shenzhen DIC Ink Co., Ltd. are two of the top ink producers in China, and Shanghai DIC Ink Co., Ltd., Shenzhen Coates Lorilleux Inks Chemical Ltd. and Coates (Guangzhou) PRC Ltd. and are also major ink manufacturers.

Many of the other leading global ink manufacturers are represented as well: Flint Ink (Beijing) Co., Ltd. (news inks), Siegwerk Shanghai Ink Co.,Ltd. (packaging inks) and Sakata INX (Shanghai) Co., Ltd. are among the leaders in the ink industry in China.

In terms of domestically owned manufacturers, Shanghai Peony Printing Ink Co., Ltd., an offset ink specialist, is the largest. Among the other major players are Zhejiang Yongzai Chemical Co. Ltd., a solvent-based ink specialist; Zhaoqing Tianlong Ink Chemical Co Ltd., a water-based ink specialist; and Shanghai Si-Lian Printing Ink Chemical Co., Ltd.

The Chinese Ink Market In the Past Year

Even though the printing industry slowed down due to the global recession, China’s ink industry remains strong, and is showing clear signs of recovery.

“The Chinese ink industry slowed down very much due to sluggish demand from export industries caused by the global recession,” said Koji Akamatsu, public and investor relations department for DIC Corporation. “This adversity continued throughout the first quarter of 2009. After the global recession hit its bottom seemingly some time in February or March, the Chinese ink industry began to see some signs of gradual recovery. And then from the second quarter onward, it is on a recovery trend. We are not so sure about the printing industry of China, but the situation they faced and have been facing are probably the same as that of the ink industry.”

Brent Stephen, president – Print Media Asia Pacific for Flint Group, noted that the global print market faced many challenges during 2008, including increases in raw materials, currency volatility and decreased demand. These all created difficulties for the industry, which the global recession only served to exacerbate, and China could not avoid these problems.

“China, as with all markets, has unfortunately not been immune to these issues, and we have certainly witnessed a downturn in demand that has impacted on volumes over the last year,” Mr. Stephen said. “This was particularly evident within the newspaper sector, with a decrease in circulation numbers, page counts and revised advertising budgets affecting the Chinese market every bit as much as in other global news markets. A reduction in the volume of exports coming out of China over the last 12 months has also severely impacted the packaging markets in the south.

“Despite these difficult market conditions, Flint Group’s Print Media Division performed well in China in 2008,” Mr. Stephen added. “We have worked hard and have met our objectives over the last 12 months and continue to develop and grow our markets, while our business units continue to work together to serve our customers better than ever before.”

“In China, where demand had been strong especially for printing inks, Toyo Ink rode the boom brought about by the 2008 Beijing Olympics Games,” said Yu Adachi, corporate communications for Toyo Ink Mfg. Co., Ltd. “Both domestic demand and exports, however, declined overall due to the impact of the global recession, the appreciation of the Chinese currency and issues related to food safety. Profits were further squeezed by soaring raw material prices and rising labor costs.”

According to Sakata INX officials, the Chinese printing and ink industries have grown very much in recent years. However, growth stopped in 2008, and due to lower market demand, raw material price and labor cost increases, it remains sluggish.

Sakata INX suggested that packaging was showing the best results, while Mr. Adachi noted that inkjet inks and eco-friendly technologies are good growth areas.

“Despite the current economic climate, packaging still remains as the greatest potential sector for growth within China,” Mr. Stephen said. “We expect to see some positive gains in these areas as confidence grows in an economic recovery and export orders return to the Chinese factories. Our recent investments to establish manufacturing operations in China ensure that we are positioned well to capitalize upon these future opportunities as they present themselves.”

“Gravure inks for package uses are showing the most growth,” Mr. Akamatsu said. “However, we expect that offset inks and news inks still have chances to grow as well because readers of printed matters such as magazines and newspapers are still increasing in China.”

The Recession’s Impact

The global recession has been the major cause of the sluggish ink industry in China. The international financial crisis affected China’s printing industry, particularly exports. Still, the industry is starting to show signs of recovery, Sakata INX officials said.

“The effect of the current economic climate has been witnessed across all of the major Chinese printing and ink sectors,” Mr. Stephen said. “China’s aim was to be the world’s factory and the global economy has had a significant impact on the GDP. Exports all use printed products, whether it is a pair of jeans or electrical goods, and the demand for print has therefore followed the drop in demand on export items.”

Still, Mr. Stephen noted that there is a quiet feeling of confidence returning to the market. “This has been reflected in the August demand on Flint Group sites,” Mr. Stephen said. “However, at this point we still need to see some consistent monthly trend that demonstrates the validity of that confidence.”

“The global recession led to a decrease of demand from export industries and it had a major impact on Chinese ink industry,” Mr. Akamatsu said. “And now the Chinese ink industry appears to be recovering in line with the gradual recovery of global economy. In July, sales recovered to a level of about 90 percent of that of previous year. The toughest month for sales was January. The sales of that month was a level of about 65 percent of that of previous year though the month of ’09 had several holidays for Chinese new year, whereas the month of the previous year had none.”

Leading Printing Processes

In terms of printing in China, offset maintains a roughly 50 percent share. Sakata INX officials reported that offset printing accounts for the majority of the overall marketing share, and gravure, flexographic and other printing share the rest.

“Offset printing and relief printing are dominant,” Mr. Akamatsu added.

Mr. Adachi pointed to offset and gravure printing still being the leading processes.

“Offset and flexography continue to remain as the dominant printing processes in China,” Mr. Stephen said. “General commercial printing, catalogs, magazines and newspapers are all produced by offset presses, while packaging utilizes a combination of offset, flexography and gravure processes.”

Setting Up Strong Positions in China

International ink manufacturers have developed a long history in China, and with it extensive networks in the nation. DIC Corporation alone has nearly 40 operations in China, including nine printing ink manufacturing sites.

“Though the country is very large, we have successfully covered the most demanding markets such as Guangzhou, Shanghai and Beijing by establishing major production sites in those areas,” Mr. Akamatsu said. “The acquisition of Coates, the printing inks division of France’s Totalfina S.A., in 1999 made the operations in China more successful since it brought some more major production sites to the operation of DIC in China. In 2001, we constructed a so-called ‘mother plant’ in Nantong city in Jiangsu province. The plant provides base inks to our production sites in China for efficient production group-wide. Also, we have heeded the voices from our local customers well and made the best effort to modify our products to their needs.”

Toyo Ink has a long history in China, opening its first branch office in Shanghai in 1926. Toyo Ink established Tianjin Toyo Ink Co., Ltd. in Tianjin-city in 1994 and Shanghai Toyo Ink Mfg. Co., Ltd. in 2003, and has more than 10 facilities in China.

“Toyo Ink is committed to a ‘people-oriented’ management philosophy,” Mr. Adachi said. “From the beginning of our operations in China, we have respected the culture and customs of the region. We have also hired local people in management positions and cooperated with local staff to build business. For any enterprise to survive and sustain growth, there must be mutual respect and trust among its people.”

Sakata INX has three manufacturing sites in China, and company officials said the company plans to keep supplying environmentally friendly printing inks while providing excellent quality and timely after-sales services to help customers.

Flint Group manufactures coldset and heatset inks in Beijing, liquid packaging inks in Guangzhou, and has a blending facility for liquid packaging inks in Dalian.

“Flint Group has invested significant resources in establishing a network of facilities to effectively serve the Chinese market,” Mr. Stephen said. “These sites are now well established and trading profitably with good volume growth and we are confident of seeing this continue, despite the economic downturn that has impacted on demand over the last 12 months. Flint Group’s global brands are well known in the market and our Chinese footprint enables us to hold a leading position through the combined efforts of our sales and technical staff, a strong distribution network and innovative products that add value.”

Mr. Stephen said that the drive to align Flint Group’s operations and simplify the way it does business has been pivotal to the company’s success this year.

“Integrating our business and driving efficiencies have already provided a number of significant opportunities to Flint Group, and we continue to benefit from the breadth of our product portfolio,” Mr. Stephen said. “Growth in flexographic plates, printing blankets and pressroom chemicals have been important to our business, and we still see lots of opportunity with this to develop sales in the future.”

Key Trends in China

There is every reason to believe that there is plenty of growth ahead in China’s ink market, and the key is determining which areas are most ripe for expansion. Mr. Akamatsu noted that environmentally friendly products will likely prosper.

“We are focusing more on environmentally friendly products, such as environmentally friendly gravure inks, energy curing inks and so on,” Mr. Akamatsu said. “Also, we are exploring to catch up with advanced technologies by providing new application like jet inks.”

Mr. Adachi agreed that the environment is a driver, and looks also at the inkjet field as a growth opportunity.

“We saw growth in wide format inkjet inks last year and expect this trend to continue into the future,” Mr. Adachi reported. “We also expect demand for eco-friendly products for offset and gravure printing to grow as consumers and end-users become more conscious about green issues.”

“While there has been some interest in ‘green products’ within the Chinese market, it is fair to say that the demand for these types of products is still some way behind the level seen in the more mature markets of Europe, North America and Australia,” Mr. Stephen said. “Interest continues to grow in alcohol-free fountain solutions, and Flint Group chemists have long been at the forefront in developing market leading, proven products to meet the demand for this new technology. The trend towards energy curable inks is also becoming increasingly more popular within the Chinese market as the requirement to meet export quality standards continues to rise.”

Sakata INX plans to focus on digital printing in China for the next decade. The requirement of environmentally friendly products, such as soybean oil type offset printing ink or non-MEK type of solvent-based inks, is increasing because of the demand from both domestic sources and overseas, according to Sakata INX.

As the global economy begins to show signs of recovery and consumer confidence starts to rebound, printing and ink manufacturers worldwide should begin to enjoy some growth. It is likely that China will play a leading role in that expansion, and international and domestic ink companies alike are well positioned to share in these opportunities.