Kerry Pianoforte01.15.08
The pigments market weathered another challenging year in 2007. By far the number one challenge facing the industry continues to be escalating raw material and fuel costs. However, a sluggish economy in the U.S., the recent elimination of the value added tax (VAT) on pigments exported from China coupled with the recent lead paint scandal involving China-produced toys has also had a profound impact on the market.
"The pigments market worldwide was generally good, especially in Europe," said Peter Carey-Yard, marketing director, coatings, high-performance pigments, Sun Chemical. "The U.S. is currently the most challenging region of the world for the pigments market thanks primarily to a weakened dollar, a struggling automotive market and a housing slump that led to a decline in home building and paint use. Globally, the industry was impacted by the well-publicized issues that occurred in 2007 regarding products made in China, leading to concern about product safety. The sudden and strict enforcement of environmental compliance by Chinese officials on local industry should address safety concerns, but has led to instability in the supply chain."
"The year 2007 continued the increase in costs associated with the production of both inorganic and organic pigments," said Don McBride, COO, Heucotech. "Oil was the key driver in upward pressure on energy and key intermediates as well as the elimination of the VAT in China. These occurrences were fueled by the decline in capacity of both pigments and specific raw materials and led to significant increases."
"The pigments market is even more competitive now and customers have even higher expectations," agreed Frank Lavieri of Lansco Colors. "The market is healthy though, and continues to grow at a slow rate."
Rising fuel and raw material prices continue to plague the pigments market. Over the past year, pigment manufacturers have had to work extra hard to control costs and, in some cases, raise prices.
"Obviously, the increase in fuel costs and raw materials has affected the entire value chain," said Andre Bendo, industry manager, business line coatings, Ciba Corp. "With rising costs, most companies are faced with tough decisions-lower internal costs, raise prices or lose profitability. Over the year, Ciba has been proactive in cost control through Lean Manufacturing and other similar initiatives. However, moderate price increases may still be necessary to continue our level of support given to our customers."
According to Lavieri, rising raw material and fuel costs continue to put pressure on Lansco's margins. "We have been successful at improving efficiencies and taking some costs out of our processes to minimize the impact," said Lavieri.
Metals and other petroleum-based chemical intermediates and energy high performance pigments have been affected by rising costs. "To offset these rising costs, we are utilizing our global reach to streamline supply chain activities," said Thierry Chevrier, director, performance chemicals–coatings, plastics and specialties for BASF in North America. "We have also had to announce and implement price increases during the year to try to offset some of the rising costs."
"We are constantly seeking to eliminate cost and provide value to our customers in areas we can control," said McBride. "Today's business atmosphere is such that a vendor cannot simply absorb rising costs."
Maintaining synergies with supply chain partners is one way pigment manufacturers are keeping costs under control.
Sun Chemical is working to control costs by working closely with its supply chain partners and improve internal operations. "These efforts have helped offset some rising raw material costs, however, the increases seen in many areas have outpaced our ability to offset them," said Carey-Yard. "As a result, we have had to pass some of these costs on in the way of price increases to our customers. We will continue to invest in those areas that provide our customers with innovative products and services, allowing them to be more competitive and present the best value propositions in the market."
"As a good business partner, Ciba is active in discussions with our customers about all industry challenges," said Bendo. "From a supplier side, Ciba communicates the value in use of our products, which showcases how the product could save production costs, minimize energy and increase throughput versus competition."
Lansco offers low cost alternatives to European high performance pigments. "Many coating companies have found they can completely negate price increases and even lower their raw material costs using our pigments," said Lavieri.
According to Chevrier, using low-priced pigments does not always result in lower formulation costs. "BASF promotes sustainability by offering quality in consistency, high chroma and tint strength for efficient use of pigments, and quality technical service to assist formulators in finding ways to lower over-all cost impact," he added.
"Heubach is well positioned globally with three pigment production sites in Asia and one in Europe," said McBride. "Pigment preparations are offered in NAFTA, Europe and Asia. Our technical service and application laboratories work with our customers to ensure that the utmost value is achieved with the appropriate colorant."
Unfortunately, there doesn't seem to be an end in sight for these rising costs. "There is probably no short-term relief in sight for these rising costs mainly because the increasing price of raw materials is driven by oil," said Carey-Yard. "Additionally, by eliminating the refund of VAT for exported pigments, the costs of pigments from China have risen by 13%. The vast majority of pigments come from China and India. Between the China export issues and the value of the Indian rupee continuing to rise, we expect cost pressures to continue."
"There is no sign it is going away, but we do not want price increases to limit our share growth," said Chris Whiston, regional marketing manager, Toyo Color America. "It is a very difficult balance. Increasingly we are using our wholly owned plants in China to transfer production. This is a three year program that is just at the beginning."
According to Bendo, the escalation of costs is anticipated to continue for the next few years, albeit at a slower rate. "With expected cost escalation, Ciba will continue to pursue cost control initiatives, which minimize the potential for future price increases," he added. "However, moderate price increases may still be necessary to continue our level of support given to our customers."
In order to compete in this increasingly challenging market, pigment makers have adapted a customized approach to developing new technologies. Some key drivers for the market included the need for high performance and special effect pigments with unique styling options and the increased use of "greener" chemistries.
"The pigments market is facing a number of major challenges and opportunities, especially with regards to compliance with emerging environmental regulations and strong demand for green technologies," said Chevrier. "We see this as an opportunity to provide new technologies and innovations to help our customers meet their objectives and to be able to differentiate their products in the marketplace."
"The pigment market value increased slightly due to growth in new effects and stylings combined with price erosion of major chemistries," said Bendo. "In terms of volume growth, the market increased at a higher rate. The major market change was delivered by rising competition from non-traditional areas targeting established high-value products."
"As some of the traditionally larger markets-housing, construction and automotive-have softened, our customers are looking for ways to differentiate themselves with unique looks and functionality," added Chevrier. "For BASF, which has a broad portfolio of inorganic and organic pigments and additives, plus a variety of special effect pigments, this creates opportunities to develop new, market-focused solutions. Increasingly, our customers are looking for pigments that are functional and eye-catching, and we are seeing greater demand for our effect pigments."
"BASF is a market-focused company, so customer needs are a key driver in our development efforts," said Chevrier. "We are also focused on sustainability and eco-efficiency–innovations that help improve the quality of life. BASF embraces sustainable development as a core belief because it balances economic growth, environmental protection and social responsibility. BASF has developed an eco-efficiency analysis that looks at the entire lifecycle of a product, from the extraction of raw materials to product use to recycling or disposal after use. This analysis allows both economic and environmental factors to be considered when developing and optimizing products and processes, and makes it possible to determine the most eco-efficient of the various alternatives. The objective is to offer the best possible cost-effective products with good environmental performance."
"BASF plans to continue to focus on new technological innovation in existing markets and new applications for pigments," said Chevrier. "New technologies and applications could open new market development opportunities, for example, concrete coatings."
"At Sun Chemical, we will capitalize on our global research and development capabilities and collaborate closely with DIC, our parent company, to work with customers in developing products that can help them increase revenue and grow their businesses," said Russel Schwartz, vice president, colors technology, Sun Chemical. "We will continue using a custom-tailored approach to meet the needs of our customers by designing pigments that will specially benefit new products manufactured by our customers."
"The pigments market worldwide was generally good, especially in Europe," said Peter Carey-Yard, marketing director, coatings, high-performance pigments, Sun Chemical. "The U.S. is currently the most challenging region of the world for the pigments market thanks primarily to a weakened dollar, a struggling automotive market and a housing slump that led to a decline in home building and paint use. Globally, the industry was impacted by the well-publicized issues that occurred in 2007 regarding products made in China, leading to concern about product safety. The sudden and strict enforcement of environmental compliance by Chinese officials on local industry should address safety concerns, but has led to instability in the supply chain."
"The year 2007 continued the increase in costs associated with the production of both inorganic and organic pigments," said Don McBride, COO, Heucotech. "Oil was the key driver in upward pressure on energy and key intermediates as well as the elimination of the VAT in China. These occurrences were fueled by the decline in capacity of both pigments and specific raw materials and led to significant increases."
"The pigments market is even more competitive now and customers have even higher expectations," agreed Frank Lavieri of Lansco Colors. "The market is healthy though, and continues to grow at a slow rate."
Rising fuel and raw material prices continue to plague the pigments market. Over the past year, pigment manufacturers have had to work extra hard to control costs and, in some cases, raise prices.
"Obviously, the increase in fuel costs and raw materials has affected the entire value chain," said Andre Bendo, industry manager, business line coatings, Ciba Corp. "With rising costs, most companies are faced with tough decisions-lower internal costs, raise prices or lose profitability. Over the year, Ciba has been proactive in cost control through Lean Manufacturing and other similar initiatives. However, moderate price increases may still be necessary to continue our level of support given to our customers."
According to Lavieri, rising raw material and fuel costs continue to put pressure on Lansco's margins. "We have been successful at improving efficiencies and taking some costs out of our processes to minimize the impact," said Lavieri.
Metals and other petroleum-based chemical intermediates and energy high performance pigments have been affected by rising costs. "To offset these rising costs, we are utilizing our global reach to streamline supply chain activities," said Thierry Chevrier, director, performance chemicals–coatings, plastics and specialties for BASF in North America. "We have also had to announce and implement price increases during the year to try to offset some of the rising costs."
"We are constantly seeking to eliminate cost and provide value to our customers in areas we can control," said McBride. "Today's business atmosphere is such that a vendor cannot simply absorb rising costs."
Maintaining synergies with supply chain partners is one way pigment manufacturers are keeping costs under control.
Sun Chemical is working to control costs by working closely with its supply chain partners and improve internal operations. "These efforts have helped offset some rising raw material costs, however, the increases seen in many areas have outpaced our ability to offset them," said Carey-Yard. "As a result, we have had to pass some of these costs on in the way of price increases to our customers. We will continue to invest in those areas that provide our customers with innovative products and services, allowing them to be more competitive and present the best value propositions in the market."
"As a good business partner, Ciba is active in discussions with our customers about all industry challenges," said Bendo. "From a supplier side, Ciba communicates the value in use of our products, which showcases how the product could save production costs, minimize energy and increase throughput versus competition."
Lansco offers low cost alternatives to European high performance pigments. "Many coating companies have found they can completely negate price increases and even lower their raw material costs using our pigments," said Lavieri.
According to Chevrier, using low-priced pigments does not always result in lower formulation costs. "BASF promotes sustainability by offering quality in consistency, high chroma and tint strength for efficient use of pigments, and quality technical service to assist formulators in finding ways to lower over-all cost impact," he added.
"Heubach is well positioned globally with three pigment production sites in Asia and one in Europe," said McBride. "Pigment preparations are offered in NAFTA, Europe and Asia. Our technical service and application laboratories work with our customers to ensure that the utmost value is achieved with the appropriate colorant."
Unfortunately, there doesn't seem to be an end in sight for these rising costs. "There is probably no short-term relief in sight for these rising costs mainly because the increasing price of raw materials is driven by oil," said Carey-Yard. "Additionally, by eliminating the refund of VAT for exported pigments, the costs of pigments from China have risen by 13%. The vast majority of pigments come from China and India. Between the China export issues and the value of the Indian rupee continuing to rise, we expect cost pressures to continue."
"There is no sign it is going away, but we do not want price increases to limit our share growth," said Chris Whiston, regional marketing manager, Toyo Color America. "It is a very difficult balance. Increasingly we are using our wholly owned plants in China to transfer production. This is a three year program that is just at the beginning."
According to Bendo, the escalation of costs is anticipated to continue for the next few years, albeit at a slower rate. "With expected cost escalation, Ciba will continue to pursue cost control initiatives, which minimize the potential for future price increases," he added. "However, moderate price increases may still be necessary to continue our level of support given to our customers."
In order to compete in this increasingly challenging market, pigment makers have adapted a customized approach to developing new technologies. Some key drivers for the market included the need for high performance and special effect pigments with unique styling options and the increased use of "greener" chemistries.
"The pigments market is facing a number of major challenges and opportunities, especially with regards to compliance with emerging environmental regulations and strong demand for green technologies," said Chevrier. "We see this as an opportunity to provide new technologies and innovations to help our customers meet their objectives and to be able to differentiate their products in the marketplace."
"The pigment market value increased slightly due to growth in new effects and stylings combined with price erosion of major chemistries," said Bendo. "In terms of volume growth, the market increased at a higher rate. The major market change was delivered by rising competition from non-traditional areas targeting established high-value products."
"As some of the traditionally larger markets-housing, construction and automotive-have softened, our customers are looking for ways to differentiate themselves with unique looks and functionality," added Chevrier. "For BASF, which has a broad portfolio of inorganic and organic pigments and additives, plus a variety of special effect pigments, this creates opportunities to develop new, market-focused solutions. Increasingly, our customers are looking for pigments that are functional and eye-catching, and we are seeing greater demand for our effect pigments."
"BASF is a market-focused company, so customer needs are a key driver in our development efforts," said Chevrier. "We are also focused on sustainability and eco-efficiency–innovations that help improve the quality of life. BASF embraces sustainable development as a core belief because it balances economic growth, environmental protection and social responsibility. BASF has developed an eco-efficiency analysis that looks at the entire lifecycle of a product, from the extraction of raw materials to product use to recycling or disposal after use. This analysis allows both economic and environmental factors to be considered when developing and optimizing products and processes, and makes it possible to determine the most eco-efficient of the various alternatives. The objective is to offer the best possible cost-effective products with good environmental performance."
"BASF plans to continue to focus on new technological innovation in existing markets and new applications for pigments," said Chevrier. "New technologies and applications could open new market development opportunities, for example, concrete coatings."
"At Sun Chemical, we will capitalize on our global research and development capabilities and collaborate closely with DIC, our parent company, to work with customers in developing products that can help them increase revenue and grow their businesses," said Russel Schwartz, vice president, colors technology, Sun Chemical. "We will continue using a custom-tailored approach to meet the needs of our customers by designing pigments that will specially benefit new products manufactured by our customers."
