Russian Printed Inks Market is Still Adapting to Sanctions

Western sanctions have nearly crippled the Russian printed business, cutting off local firms from their trade partners in Europe. Reasonable solutions have been eventually discovered in friendly countries of Asia, but things are still far from perfect.

In October 2022, Russian newspaper Vedomosti reported that printing houses all over the country were poised to massively turn the plug on their operations, as vital imports from Europe, North America and Japan had been disrupted by sanctions.

A group of managers told the publication that the industry suffered a 90% import dependence on technologies, spare parts and consumables, including printed inks.

Pavel Arseniev, general director of Pareto-Print, a Moscow-based printing house, disclosed that a part of Western suppliers severed ties with their Russian clients on their own motion. Still, most suspended trade obeying the 5th European sanctions package, passed in July 2022, under which a broad range of chemical products were prohibited for export to Russia.

Facing unprecedented challenges, the Russian printing industry turned to alternative markets. Vedomosti disclosed that business owners managed to keep their operations running thanks to imports from politically neutral countries, in the first place China, India, Turkey, Iran and Korea.

Although the industry averted the collapse, the Russian printed ink market experienced a 35% to 40% hike in average prices, stemming from logistics challenges and other sanctions-related issues.

Reading Becomes Costly

Printing houses reportedly still struggle to fully adapt to the new conditions.

During the International Moscow Book Fair, market players talked about the creeping crisis in the industry. Since the onset of the COVID-19 pandemic, the number of printing houses in the country shrank by 20%, not least because the business bears extra costs associated with printed ink imports, a local publication, Moscow Gazette, reported.

Larisa Danilova, general director of the OktoPrint Service, one of the leading suppliers for the Russian printed industry, admitted that offset ink production is absent in the country, so the entire demand in this field was covered by imports from China and Korea.

Some varnishes for the industry are manufactured in Russia, but dependence on imported raw materials in this segment remained tough. For example, solvent D60 required for varnish production is available on the domestic market, but its quality was not what the printing houses required, Danilova claimed.

The problem fueled the upward rally in the Russian book market in 2023, RBC, a Russian business newspaper, reported. In May, several Russian publishing groups rolled out plans to raise prices, citing a 5% to 10% increase in the cost of consumables in the previous few months and another 15% rise expected during the rest of the year.

Speaking during the Moscow Book Fair, Arseniev confirmed that his company primarily relied on printed inks imported from China and Korea.

The import-replacement campaign, embarked on by the Russian coatings industry in the wake of Western sanctions, has stalled in the printed ink segment.

First Model Printing House told RBC, “It is difficult to call the process of searching new [foreign] suppliers instead of European ones import substitution.”

Russian businesses expressed little to no interest in pumping money into printed ink manufacturing. Arseniev, for example, said that the Russian printed houses tried to talk companies producing furniture adhesives into exploring opportunities for printed ink production. However, none of the engaged companies have eventually jumped into concrete projects.

The only Russian manufacturer of offset inks, Polygraphic Inks LLC, operating capacities of the Torzhok printed inks plant, have been keeping a low profile in recent years.

An anonymous source familiar with the matter told RBC that the equipment installed at large enterprises requires a certain ink composition, and it was essentially impossible to print books using the Russian company’s inks. The publication also indicated that Polygraphic Inks LLC manufactured printed inks in small volumes, not providing concrete details.

Dwindling Margins

The Russian printing industry’s turn to the east appeared to be painful for the business marginality of the sector.

Basically, the transition from European to Asian consumables has driven the operational costs up by 15% to 20%, according to Arseniev.

“Firstly, logistics are becoming more complicated,” he explained. “Secondly, delivery times have increased. Thirdly, our Asian partners do not find it necessary to come up with attractive prices, realizing that we do not have any reasonable choice. In addition, fluctuations in exchange rates also contributed to the [direness] of the situation.”

The First Model Printing House paints a similar picture, also underpinning the swings in the currency exchange market as one of the reasons for the difficulties. “As the industry is dependent on imports, all prices, even of Asian manufacturers, are denominated in foreign currency,” a spokesperson for the company said.

During 2023, Russia’s currency steadily lost value, falling 40% against the U.S. dollar since December 2022. To stabilize the currency and keep inflation at bay, the Russian Central Bank was forced to increase the key interest rate from 7.5% to 16%, which has become a problem for the Russian printing business itself, as bank loans have become less affordable for most operations.

On top of that, printing houses have to bear part of the costs, refraining from passing the rising spending onto their customers. Printing businesses plan their pricing policy taking into account the purchasing power of the Russian population. As a result, market players find themselves “engaged in dumping,” which drives business profitability down across the board, according to Arseniev.

The “basic need” of the market for consumables is indeed being met through supplies from Asian countries and parallel import, the Russian Industry and Trade Ministry said, admitting that the sector experiences certain difficulties due to the Russian ruble’s exchange rate turbulence. The Ministry, however, did not to dive into details.

Packaging Inks in Sufficient Supply

The picture is slightly different in the segment of packaging inks, where the import-replacement push seemingly succeeded.
In the middle of 2022, for ordinary Russian citizens, dairy products appeared to be a stark indicator that something was going wrong in the national economy. Consumers accustomed to colorful, diverse packaging were surprised to discover shelves filled with featureless packs.

The supply disruptions took a heavy toll on Russian operations – they struggled to stretch the available warehouse reserves for as long as possible and, then, switched to off-white, minimalist product packaging, according to Soyuzmoloko, a Russian union of dairy manufacturers.

In July 2022, the Russian government removed packaging inks from the excise tax for the use of denatured ethyl alcohol. The move was justified by a need to bolster the competitiveness of the four Russian packaging ink manufacturers Gangut, Beta-Silicon, Partner and Print-color, which had established capacities of around 45,000 tons per year, the Industry and Trade Ministry reported.

The measure paid off as Russian packaging swiftly regained its color. Soyuzmoloko said this happened primarily thanks to import-replacement efforts, as Russian packaging ink production perked up in the past few years.

However, there is no information on the scale of import dependence in this sector. Simultaneously, when designing support measures for the Russian packaging ink manufacturers, the Russian Industry and Trade Ministry also included packaging inks in the list of goods approved for parallel import.

Parallel import is a tool approved by the Russian government in May 2022 that allows Russian businesses to import goods of brands that depart from the country without the permission of the brand’s owner.

Occasional reports indicated that some Russian companies imported coatings and raw materials from Europe through third countries, such as Turkey, Armenia and the nations of Middle Asia. However, aside from the Ministry’s note, there is no indication that the tool has ever been used for sourcing printed inks.