Although the pigments market must continue to deal with the challenges of escalating prices for key raw materials and fuel, improving economic conditions in Europe and increased growth in the Asia Pacific market offer pigment suppliers a ray of hope.

"On a global basis, consumption of organic pigments is growing at a rate of 2-3%," said Peter Carey-Yard, director of marketing, global coatings, Sun Chemical Corp. - Performance Pigments. "The U.S. coatings market has been adversely affected in 2006 by lower production rates of automobiles and the softening housing market, which has affected the architectural paint businesses."

However, Carey-Yard noted that overall, Sun Chemical's coatings pigments business grew in 2006. He cited improving economic conditions in Europe and growth of the Asia Pacific market as the main reasons for the growth in sales over 2005.

"Compared to the previous year, the general pigments market exhibited modest improvements in volume and sales in the face of robust economies," said Andre Bendo, industrial industry manager, business line coatings, Ciba. "The dynamics of the market continued to change due to rising competition from the Asia Pacific Rim (APR) and elsewhere. The continually competitive marketplace has put the mandate on developing differentiated products for different geographical regions. Additional change is being driven by new legislation creating opportunities in formulation modifications."

The market for pigments in coatings applications showed a strong demand in all regions except North America, where the general situation was more difficult, according to Norbert Merklein, head of marketing, pigments and additives division, Clariant International AG. "The demand definitely increased while the market remained very competitive," he said. "However, there were shortages of some products, especially high performance pigments. Nowadays suppliers are more reluctant to invest in new capabilities because their competition has intensified in recent years."

"2006 was a dynamic year for all types of pigments, both organic and inorganic," said Don McBride, COO, Heucotech. "The abrupt increases in metals along with other key raw materials, energy and transportation influenced upward by oil prices continued to challenge profits despite higher pigment pricing. Heubach experienced growth due to new technologies from our inorganic pigment site in Europe and organic pigment facilities in Asia."

"Volumes vary depending on the business segment," said Fusao Ito, president, Toyo Ink Group America. "In conventional markets overall volumes remained virtually flat or decreased slightly except, of course, in China and other SEA countries. Although share growth in new markets was small, we have been progressively gaining a bigger piece of the pie. The level of product quality demanded by customers in these markets continues to rise year by year."

For metallic pigment manufacturers especially, rising prices for metals are a major concern. The prices of copper and zinc, which are the primary raw materials for gold ink and bronze pigments, have risen dramatically in the last 12 months. This has resulted in the need for several price increases in 2006. �

"Aluminum prices have risen as well, but not nearly to the same critical levels," said Elise Balsamo, marketing manager, Wolstenholme International. "While price increases are never easy to pass along, there has been no choice, as the raw material prices remain far above their historic levels. There has still been strong demand for metallic effects despite the price increases, so we continue to provide the best products possible, in the most cost effective manner, to keep up with what the market demands."

"The increasing price of bronze pigments had a slight effect on demand in 2006," added Balsamo. "But overall, metallic and special effect pigments are still highly sought after and demanded by the market."

JDSU, a company that makes high end special effect pigments primarily for automotive and decorative consumer product applications, experienced a positive year. "2006 was a very good year with overall growth of 10%, and as high as 15% in certain niche sectors," said Thomas Hughes, business development/product line manager, JDSU � Flex Products Group. "We see that trend continuing for effect pigments."

According to Hughes, the company was able to combat the negative effects of raw material prices by negotiating price decreases with their suppliers. In addition, the company has implemented other cost-cutting measures. "We've been continuing to focus on decreasing operating costs so we don't have to pass the price increases on to our customers," said Hughes.

The rising costs of fuel and key raw materials for pigments in 2006 has inevitably led many pigment suppliers to increase prices on many pigments. �� �"We've been working hard to absorb costs to the extent possible, via advances in production technology and raw materials procurement on a global scale," said Ito. "The portion of costs we cannot absorb ourselves, we will seek the cooperation of customers in the form of price hikes."

"After years of price erosion in pigments for coatings, Clariant decided to raise the prices for a number of� products in order to compensate for the significantly higher cost base for pigments," said Merklein.

Most pigment manufacturers Coatings World spoke with did not see any immediate relief from these price pressures, although some expressed optimism that the prices may eventually level off.

"Some key raw materials seem to stabilize on a high level," said Merklein. "However, for others, the situation is somewhat unclear. For instance, the price of phthalo crude seems to continue to rise. Clariant is working on a number of initiatives to lower production costs and costs in general."

"While the rising costs will continue, the accelerated rate is predicted to decrease," said Bendo. "Ciba's preparation encompasses forecasting, process optimization and strict cost controls."

"With political uncertainty in the Middle East still an issue, and double digit growth in China creating strong demand for energy and raw materials, we do not see an end to upward pressure on pigment costs in 2007," said Carey-Yard. "To combat these increases, Sun has been very active in 2006 putting productivity improvement and cost reduction projects in place. However, it has not been possible to offset all of the cost increases for pigments by these efforts."

Pigment suppliers have devoted a considerable amount of time and� energy into creating cost cutting initiatives to combat these challenges.

"Rising costs of raw materials and fuel have been the bane of pigment manufacturers' existence," said� Bendo. "However, to keep profitability intact, Ciba continues to pursue optimizing our production processes and cost control. In addition, more purchasing efforts are being made to stabilize the price fluctuations through improved forecasting. On a brighter note, the market is calling for improvements in heat management, which could create opportunities for novel coatings."

"Heubach is committed to looking for technical solutions that are economically sound," said McBride. "The duration of the recent escalation of� copper, nickel and zinc is a concern that fuels R&D efforts today and will influence the future. The dynamics of both market conditions and raw material costing concerns made 2006 very challenging for both customers and suppliers. We have offered alternative technology to replace zinc in first generation anticorrosive pigments. Heubach has invested in more effective manufacturing equipment for titanates and our commitment to be a broader supplier of higher performing organic pigments will provide our customers with another quality-oriented vendor."

Working closely with their customers to develop value-added products is another important step.

"We work with our customers to optimize our design effects to minimize the overall cost impact in their product designs," said Hughes. "This year we are working on several new colors and effects in terms of our pigment and design offerings. We will continue to work on new products in terms of colors and effects, keeping costs lowers and penetrating new markets, specifically high-end decorative applications."

"Sun Chemical works with customers individually to develop tailor-made solutions that help them improve performance in their markets, thus making both parties successful in meeting the challenges," said Carey-Yard.

Clariant has a number of joint initiatives in place to explore cost-saving areas. "Exploring these possibilities is an important part of our relation with key customers," said Merklein. But cost-savings very much depend on the individual applications and products. On the other hand, raising the prices are in line with new service initiatives that reconfirm our position as a leading service supplier."

"As two parts of the product chain, Ciba works intimately with their customers through forecasting and contracts to create a stable product supply chain," said Bendo.

"Clariant will remain a committed innovative and service-oriented supplier to the industry," said Merklein. "We will invest in new technologies and products and continue with our initiatives in Asia based on the Baihe/Clariant joint venture in China and the new regional technical service centers. Pigments for the coatings industry are a core business for Clariant and will continue to be a priority."

"With a focus on high performance pigments development, we will strive to create high-value added pigment products for our customers," said Ito. "We plan to expand in new and existing markets by offering products that utilize our technology."