For the most part, the raw material market has remained stable for ink manufacturers. Yes, prices have been at a higher level, but at least it has leveled out.
In July, ink manufacturers found out that stability in pricing was not happening with azo pigments and intermediates. As a result, both Sun Chemical Performance Pigments and Flint Group Pigments were forced to raise prices on azo pigments.
Both companies cited continuing cost increases in azo intermediates and raw materials. Sun Chemical Performance Pigments will raise global prices on azo pigments, specialty pigments and their pigment preparations effective Sept. 1, 2014. Flint Group Pigments will raise prices as of Sept. 2, 2014 on azo pigments, specialty pigments, flush colors and water dispersions.
“The cost of azo intermediates and pigments have significantly impacted the pigment industry and there is no short-term relief in sight for these rising costs—forcing us to increase prices,” said Mehran Yazdani, vice president, marketing, Sun Chemical Performance Pigments, in announcing the increase. “We regret needing to take this action, but current market conditions demand we adjust our prices. We will continue to look for cost reduction and productivity gains to offset the rising costs of raw materials.”
“We continue to mitigate raw material cost increases as much as we can, but, unfortunately, these current trends make this price increase necessary,” said Ronald Gallas, global director of sales for Flint Group Pigments.
What is behind this increase? Simply put, public discontent with increasing pollution levels in China is leading the government to become more strict in its enforcement of environmental regulations. Azo pigments are primarily produced in China (by contrast, phthalocyanine pigments are largely centered in India). The economic growth in China has come with a darker side, as the air in the major manufacturing cities in China is heavily polluted. The country’s reliance on coal, heavy industries and increasing use of cars is frequently cited as the main causes.
For years, China has been facing increasing levels of pollution, but now the public there is growing more concerned. To cope with this issue, China is putting pressure on businesses and local officials to literally clean up their acts; Li Keqiang, the Chinese premier, officially declared a “war on pollution” in March 2014.
The pigment and intermediate industries have been one of the businesses targeted by Chinese officials. This, in turn, is leading to a few developments. There have been a number of pigment and intermediate operations that have been shut down or have gone out of business, meaning that there are fewer producers. The cost of doing business has risen, thus cutting profitability, which leads some companies to decide to leave the market. For ink manufacturers, fewer suppliers means tighter supply and higher costs.
The air quality is a serious problem. Forbes recently reported that major international companies are having trouble getting employees to relocate to China due to concerns over smog. This pollution has reached levels to the point where flights are delayed due to visibility, and has reportedly limited visibility in Beijing to 500 meters on occasion.
The need to clean up the air in China is understandable, and it appears that the Chinese government is willing to sacrifice some of its economic growth in exchange of improving its air and water quality. I suspect similar changes may occur in other countries, and raw materials will be impacted.