European ink market faces another challenging year in 2003. (European Report).
European ink producers are preparing themselves for a period of tough market conditions in 2003 as the European printing sector virtually grinds to a halt with the specter of war looming in the Middle East.
Some ink leaders are hoping that there will be an economic revival in the second half of the year. But even they concede that they may have to wait until well into 2004 or even beyond before business returns to the levels prior to 2000.
"The best we are hoping for this year is that we can achieve the same volumes as last year, which were themselves lower than 2001," said a senior executive at one European ink company. "We are expecting that things will brighten bright·en
tr. & intr.v. bright·ened, bright·en·ing, bright·ens
To make or become bright or brighter.
bright up in the second half of this year, but even that might be too optimistic op·ti·mist
1. One who usually expects a favorable outcome.
2. A believer in philosophical optimism.
Demand in the European printing sector has been sliding since GDP GDP (guanosine diphosphate): see guanine. growth levels started to dip last year.
"Once GDP starts to slow down, it has an immediate effect on printing sales," said John Birkenshaw, printing business manager at Pira International, the U.K.-based printing and packaging consultancy.
"Growth in the European printing sector has now probably dropped to zero," he added. "While printing tends to suffer the fastest from a downturn, it also tends to recover quite early once the economy improves. We are not expecting printing demand to return to the more normal levels of the 1990s until 2004 at the earliest. It would probably be more realistic to wait until 2005."
Printers have been cutting back purchases of inks and other consumables but have also been reducing their capital investment, particularly in new technologies including digital printing.
"Investment is static at the moment," said Mr Birkenshaw. "Probably only sales of computer-to-plate (CTP CTP (cytidine triphosphate): see cytosine.
(1) (Computer-To-Plate) The production of printing plates directly from the computer without requiring film as an intermediate step. ) and digital proofing Preparing a sample of printed output on a computer printer before the job is printed on a commercial press. Contrast with Matchprint and soft proofing. equipment have been doing reasonably well, because printers are getting a rapid return from them."
While the European printing market has been sliding into a depression, European ink companies have also had to contend with a stronger euro against the U.S. dollar, making their exports more expensive. The euro has appreciated by nearly 25 percent against the dollar since the middle of the year.
"Our margins have gone down in countries where products are priced in dollars," said Erwin de Keyser, president of Trenal, a Belgian ink maker. "On the other hand, we are paying less for some imported raw materials so the overall effect is probably neutral."
European Economies Slump
Ironically, while the euro has been steadily rising on the foreign exchange markets, storm clouds have been gathering over the European economies.
There had been hopes of an upturn in consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. and economic activity in Europe in the second half of last year after signs of accelerated growth earlier in 2002.
Instead, consumer confidence weakened across much of the region because of concerns about the outbreak of war in Iraq and worsening wors·en
tr. & intr.v. wors·ened, wors·en·ing, wors·ens
To make or become worse.
Noun 1. worsening - process of changing to an inferior state
decline in quality, deterioration, declension economic conditions.
By the beginning of this year consumers were becoming even more pessimistic about the outlook for unemployment and their own expectations for household savings.
In Germany, Europe's largest economy, the government is expecting only 1 percent growth this year. Industrial production registered its steepest decline in four years in the country in December, helping to increase unemployment to more than 11 percent.
The U.K., whose economy has been among the most buoyant in Western Europe Western Europe
The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). , has been struggling with its biggest manufacturing slump in a decade.
The Frankfurt-based European Central Bank European Central Bank (ECB)
Bank created to monitor the monetary policy of the countries that have converted to the Euro from their local currencies. The original 11 countries are: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, issued a forecast in February of GDP growth in the 12 countries in the euro zone of only 1.4 percent in 2003, whereas only three months previously it published a prediction of growth for the year of just under 2 percent.
The European Chemical Industry Council (CEFIC CEFIC Conseil Europeen des Federations de l'Industrie Chimique (French: European Chemistry Industry Council; EDI) ), to which the European paints and printing inks association (CEPE CEPE Centre for Energy Policy and Economics
CEPE European Confederation of Paint, Printing Ink and Artists' Colours Manufacturers Associations
CEPE Central Experimental and Proving Establishment ) is affiliated, was predicting late last year 3 percent growth in chemicals output this year, the same level as in 2002.
But within a few weeks, chemical industry forecasters were taking a more cautious view because of the mounting economic gloom.
"After the dip in chemical growth in the fourth quarter of last year, there will be a further weak performance in the first quarter," Ralf Gronych, BASF's chief economist The Chief Economist is a single position job class having primary responsibility for the development, coordination, and production of economic and financial analysis. It is distinguished from the other economist positions by the broader scope of responsibility encompassing the , told the annual business outlook conference of the U.K. Chemical Industries Association (CIA CIA: see Central Intelligence Agency.
(1) (Confidentiality Integrity Authentication) The three important concerns with regards to information security. Encryption is used to provide confidentiality (privacy, secrecy). ) in London in January.
Mr. Gronych predicted only a slow recovery in demand in the first half of this year. But prospects would change substantially for the worse in the event of a war in Iraq. "There will be an immediate negative effect on private consumption and investment," Mr. Gronych said.
The threat of conflict in the Middle East has already pushed up crude oil prices which in turn have been increasing prices of pigments, resins and other oil-based raw materials for ink producers. Hence, in the short term, there is a prospect of a further squeeze on margins in the ink sector.
At the same time printers are finding that a combination of poor demand and overcapacity o·ver·ca·pac·i·ty
Too great a capacity for production of commodities or delivery of services in relation to actual need: the problem of overcapacity in many large industries. is continuing to hit their profits, making it more difficult for them to accept higher prices from their suppliers.
If the war in Iraq is short, pressure on raw material costs should ease considerably later in the year, while the European economies should be revived relatively quickly.
"From the experience of the Gulf War in 1991, there will be a pronounced retrenchment re·trench·ment
The cutting away of superfluous tissue. in demand and production for two quarters, after which there will be a recovery sparked by the catch-up effect The catch-up effect, also called the theory of convergence, states that poorer economies tend to grow faster than richer economies. Therefore, all economies will eventually converge in terms of per capita income. ," said Mr. Gronych. Nonetheless, he predicts that growth in output in the chemicals sector for the whole year will slip to 2.7 percent.
Advertising Makes Slight Gains
While predictions for chemicals suppliers to the ink sector have been getting grimmer, analysts have been more optimistic about expectations for some end-user markets served by the printing sector.
The advertising sector, which is a major influence on printing output in publishing, has been depressed for well over a year. But now advertising agencies and media groups are claiming they are seeing a glimmer of a revival.
News Corporation, a leading newspaper publisher in the U.K., reported a 6 percent rise in advertising in its papers in the country in the fourth quarter of last year.
JC Decaux, Europe's largest outdoor advertising group, recorded a 3 percent rise in sales in the last quarter, although Jean-Charles Decaux, the company's chairman, warned that market conditions in the early part of 2003 would be "challenging."
Some top media executives in Europe are still stressing that advertising revenues are unlikely to return to their pre-slump levels until next year at the earliest.
However, the decline in ad spending at least seems to have bottomed out in many European countries. In its latest quarterly survey of marketing budgets, the Institute of Practitioners in Advertising The Institute of Practitioners in Advertising (IPA) is the trade body and professional institute for leading agencies in the UK's advertising, media and marketing communications industry, covering the creative, digital, direct marketing, healthcare, media, outdoor, sales promotion and (IPA IPA - International Phonetic Alphabet ) in the U.K., which is one of Europe's largest advertising markets, found a continued fall in planning spending but also a level-ling out of the downward curve.
Furthermore, budgets for the whole of 2003 indicated a growth in expenditure, with twice as many companies reporting an increase in budgeted spending as those that reported a decrease.
Expenditure on direct marketing will be rising even faster, with three times as many U.K. companies reporting an increase in their marketing budgets over the current year than a cut. In sharp contrast to the trend in advertising spending, budgeted expenditure in the fourth quarter on direct marketing went up for the fifth quarter in succession.
Printers have been taking advantage of the dynamism in European direct marketing by setting themselves up as full-service specialists in direct mail, which has been opening up opportunities for ink suppliers to broaden their product offering.
Instead of just providing the leaflets or brochures for direct-mail campaigns, printers are also doing the printing work for the envelopes, running databases for customers and running the mailing.
"They are providing a full service, and we are able to provide a full service to them by supplying them with sheetfed offset inks for the printing of the brochures and flexo inks for the envelopes," said Wim van Maastricht, sales and marketing manager at Van Son, Netherlands.
"We've been successful with this combination in the U.K., which is a big direct mail market, and also in Spain and France," he added.
While the expansion in direct marketing is helping to boost sales among some commercial printers, the continued rapid growth in online advertising in many parts of Europe is taking sales away from the printing sector altogether.
In the U.K., which is a pioneer in Europe in the development of online advertising, Internet advertising Delivering ads to Internet users via Web sites, e-mail, ad-supported software and Internet-enabled cellphones. Also called an "ad network," Internet advertising organizations act as a middleman between the advertiser and the Web sites and software publishers that display the ads. spending is predicted to increase by 43 percent this year.
Although total online ad expenditure lags well behind that of the main media, it has already overtaken cinema advertising spending in the U.K., according to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. the country's Interactive Advertising Bureau.
"Many believe that this will be the year when online advertising really comes into its own as a mainstream medium," said the U.K. Association of Online Publishers (AOP (Automatic OPerator) An IRC channel host who moderates the topics, keeps online users in check and provides help for newbies unfamiliar with IRC software (mIRC, etc.). Whenever AOPs come into the channel, they inherit operator status. ).
Although large sections of the print media suffered falls in advertising last year--and look likely to do so again for much of 2003--magazine and newspaper publishers have been able to raise circulations.
Average net circulation of U.K. consumer magazines rose by 3 percent in 2002, according to the Audit Bureau of Circulations The Audit Bureau of Circulations is one of the several organizations of the same name operating in different parts of the world. It audits circulation, readership, and audience information for the magazines, newspapers, and other publications produced by (ABC ABC
in full American Broadcasting Co.
Major U.S. television network. It began when the expanding national radio network NBC split into the separate Red and Blue networks in 1928. ). The biggest increases by sector were for TV listing, home interest, pets and motoring publications.
In a reflection of the increase in direct marketing, all except one of the top 10 magazines in terms of circulation were free magazines, including publications for TV channel subscribers, supermarket customers and members of motoring organizations and leisure groups.
While parts of the publishing and commercial printing sectors have been able to buck the downward trend in consumer spending, segments of the packaging market have also withstood the severe economic climate.
Packaging volumes have been curbed by regulatory restrictions, particularly those relating to relating to relate prep → concernant
relating to relate prep → bezüglich +gen, mit Bezug auf +acc recycling and limits on the use of plastic bags in some Western European countries. On the other hand packaging sales by value in some segments have been going up. This is especially the case in markets like OTC OTC
See over-the-counter market (OTC). medicines, cosmetics, drinks and confectionery confectionery, delicacies or sweetmeats that have sugar as a principal ingredient, combined with coloring matter and flavoring and often with fruit or nuts. In the United States it is usually called candy, in Great Britain, sweets or boiled sweets. where manufacturers are demanding more visually attractive packages as well as more informative labeling.
At the same time, there is a continued switch to plastic substrates. Analysts believe that demand for polyethylene and polypropylene--the two main plastic packaging materials--will rise at a rate well above GDP rates in Western Europe over the next few years.
Despite the relative resilience of the packaging sector, many packaging companies have been suffering from a tight squeeze on margins. This has led to increased concentration within the European packaging sector as companies look to improvements in profitability through economies of scale, particularly through the creation of Europe-wide operations.
Opportunities in Eastern Europe Eastern Europe
The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991.
The economic slowdown, particularly in Europe's consumer sectors, has, in fact, accelerated trends towards a pan-European market in the printing industry as a whole. Companies in the printing sector, including suppliers like ink makers, are having to expand beyond their regional and national markets in the search for new business.
Barriers to trade in printing products and consumables have progressively been dismantled dis·man·tle
tr.v. dis·man·tled, dis·man·tling, dis·man·tles
a. To take apart; disassemble; tear down.
b. within Western Europe over the last two decades. The fall of Communism in Eastern Europe has led to the emergence of a Europe-wide market.
The large multinational ink manufacturers, like Sun Chemical, have been relatively quick to establish both production and distribution operations in Eastern Europe, including Russia. Medium-sized producers such as Swedish-based Akzo Nobel Akzo Nobel is a multinational company, active in the fields of healthcare products, coatings and chemicals. Headquartered in Amsterdam, the Netherlands, the company has activities in more than 80 countries, and employs approximately 62,000 people. Inks have made Eastern Europe into one of their main European markets after being active in the region before the fall of the Berlin Wall in 1989.
Eastern European printers, particularly those in countries like Czech Republic Czech Republic, Czech Česká Republika (2005 est. pop. 10,241,000), republic, 29,677 sq mi (78,864 sq km), central Europe. It is bordered by Slovakia on the east, Austria on the south, Germany on the west, and Poland on the north. and Hungary with a tradition of quality printing, are becoming major exporters into Western Europe.
As a result, Western European ink producers are now finding that they need a presence in Eastern Europe, particularly since there are few domestic producers of quality inks in most Eastern European countries.
With Eastern and Western Europe becoming increasingly integrated, the bigger ink producers are giving priority to the creation of pan-European distribution networks.
Flint Ink Corporation established last year a strong base in Germany after merging its European operations with the German ink manufacturer Gebruder Schmidt GmbH. The U.S.-based company had only a limited presence in Germany, despite it being Europe's largest printing ink market.
The merger has also made Flint a stronger force in Central and Eastern Europe The term "Central and Eastern Europe" came into wide spread use, replacing "Eastern bloc", to describe former Communist countries in Europe, after the collapse of the Iron Curtain in 1989/90. , where Schmidt has facilities in Austria, Poland and Hungary.
"Together we will concentrate on serving all our customers with a special focus on the Eastern European region, where we see considerable opportunity for growth," said Jim Mahony, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of the new enlarged company Flint-Schmidt GmbH & Co, which is now one of the largest ink producers in Europe.
There have been reports of further consolidation initiatives within the European ink sector with some leading and medium-sized producers offering deals involving the swapping of assets.
Generally, companies in the European ink sector have been reluctant to invest money in takeovers at a time of deep economic uncertainty.
U.K. oil company BP found a buyer for Sericol, the leading producer of screen printing inks, when Saratoga Partners, a New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of investment firm, agreed to buy the business along with the company's management in January. It had been up for sale for three years after BP took over its parent Burmah Castrol to gain control of its global Castrol lubricants lubricants
preparations for the lubrication of passages to reduce frictional injury, e.g. oily preparations, including petroleum jelly, lanolin or water-soluble preparations such as methyl cellulose. operation.
Saratoga is paying [pounds sterling]74.5 million ($121 million) for Sericol, which some analysts believe is a good bargain but acknowledge that the price is a reflection of the poor state of the printing ink market. Sericol had sales of [pounds sterling]130 million in 2002, while prior to BP's takeover it was achieving operating margins Operating Margin
A ratio used to measure a company's pricing strategy and operating efficiency.
Calculated by: of close to 30 percent.
"We believe this deal reflects the true value of the business and will provide a good future for Sericol and its staff," said Gordon Souter, BP's business unit leader at Castrol Chemicals.
The internationalization The support for monetary values, time and date for countries around the world. It also embraces the use of native characters and symbols in the different alphabets. See localization, i18n, Unicode and IDN.
internationalization - internationalisation of the European printing market has encouraged printing companies, especially those in high volume segments like gravure printing gravure printing
Printing processes used for catalogs, magazines, newspaper supplements, cartons, floor and wall coverings, textiles, and plastics. The Bohemian Karel Klíc made photogravure a practical commercial process in 1878. , to spread themselves out more across Europe.
Large German publishing/printing houses, like Burda Publishing, Munich, and Heinrich Bauer, Hamburg Hamburg, city, Germany
Hamburg (häm`brkh), officially Freie und Hansestadt Hamburg (Free and Hanseatic City of Hamburg), city (1994 pop. , which operate their own gravure equipment have expanded into Eastern Europe where they print regional mass-circulation magazines on their own presses.
Germany, which accounts for the majority of gravure capacity in Europe, has now established itself as a European center for the printing of bulk publications.
The rising competition from German printers has prompted printing companies in other European countries to invest in gravure capacity to win back business. In the U.K., where 60 percent of gravure work is done outside the country, mainly in continental Europe Continental Europe, also referred to as mainland Europe or simply the Continent, is the continent of Europe, explicitly excluding European islands and, at times, peninsulas. , Polestar Polestar: see Polaris. and John Howitt Group have both announced plans for new gravure presses.
Suppliers Are Also Active
While there are signs of growing concentration among ink makers' customers, their suppliers have also continued to consolidate, both vertically and horizontally.
UCB UCB - University of California at Berkeley , the Belgium-based producer of resins and additives for printing inks, has just taken over the resins, additives and adhesives activities of Solutia. These include the waterborne resins business of German-based Vianova, which was part of the former Hoechst group until the late 1990s.
As a result, UCB is now able to combine its expertise in UV resins and binders with Solutia's know-how in ingredients for waterborne inks.
The Belgian company is expecting that the combination of its and Solutia's operations will help it develop new technologies for products which are safer for human health and the environment.
UCB has now merged its chemicals and films activities to form a business with [euro]1.5 billion ($1.6 billion) in sales covering resins, binders and other ingredients for printing inks as well as packaging films.
The company aims to extend its activities downstream by marketing more pre-coated films to customers such as label printers.
"Our objective is to become a one-stop supplier," said an official at UCB, which has R&D alliances with pigment makers and ink producers. "Our chemicals and film businesses have the same customer base so it makes sense to bring them together into the same unit."
Other major suppliers to the ink sector have also been reorganizing to be able to present a single face to their customers.
Clariant has restructured its pigments and additives divisions along customer lines so that it has a printing industries business unit as well as ones covering coatings and plastics. As a result, the marketing of pigments and additives such as light and UV stabilizers and waxes to ink makers is done by a single entity.
"This new structure will make us much more efficient and will enable us to improve our services to the customer by having a one-stop shop One-Stop Shop
A company or a location that offers a multitude of services to a client or a customer. The idea is to provide convenient and efficient service and also to create the opportunity for the company to sell more products to clients and customers. ," said Alexander Sieber, head of Clariant's printing industries unit.
Ciba Specialty Chemicals “Ciba” redirects here. For the pre-1971 company, see Novartis.
Ciba Specialty Chemicals is a chemical company based in and near Basel, Switzerland. It was formed as the non-pharmaceuticals elements of Novartis were spun out in 1997, following the merger in the has been combining its expertise in dyes, pigments, binders, dispersants and other additives to expand into digital inks, although only in textile printing.
The company has put itself in the forefront of the growing market for digital inks for textiles by providing an ink which enables the speed of textile inkjet printing to be increased 10-fold to 150 square meters Noun 1. square meter - a centare is 1/100th of an are
centare, square metre
area unit, square measure - a system of units used to measure areas per hour.
The ink was developed in partnership with Reggiani Mecchine, an Italian printing equipment manufacturer, and Aprion Digital, an Israeli maker of ink jet See inkjet printer. printheads.
"This is a sort of project which requires a cooperative relationship between companies specializing in different areas," said Christoph Biedermana, Ciba's executive vice president, textile effects. "It also fits in well with our strategy of providing integrated solutions because the ink contains specialist dyes and chemicals."
Ciba, which is a leading supplier of pigments, light stabilizers, UV absorbers and photoinitiators for inks, is aiming to extend the expertise built up in textile digital inks to ingredients in other inks.
"We are setting up a joint research team in ink jet inks with people from both our textile and coatings effects sectors," said Hermann Angerer, head of Ciba's coatings effects operation, which supplies the printing ink market.
"The textile effects business has had a lot of experience working with print-head manufacturers and in combining pigments, dyes and binders for ink jet inks," he said. "We don't see any reason why we ourselves in the coating effects business should start making ink jet inks as well. We want merely to use the company's experience in the textile printing area to bring more value to our customers in coatings effects."
The present harsh economic climate could lead to radical changes in the structure of the supply chains for ink and other printing materials. One result could be a greater overlap between suppliers and their customers in the provision of both products and services.
European Editor Sean Milmo is an Essex, U.K.-based writer specializing in coverage of the chemical industry.