High performance pigments update: how are suppliers of HPPs dealing with record feedstock and fuel price increases?Suppliers of high performance pigments (HPP) for the coatings market must continue to deal with the onslaught of record feedstock and fuel costs. As it seems there is no immediate end in sight to these increases, high performance pigment suppliers must prepare to weather another rocky year.
"Oil has an affect on almost everything that we do from freight and packaging costs, to raw material and energy costs," said Andrew Edwards, director of global ink marketing, Silberline. "Just consider the inflation of prices everyone is seeing at the filling stations for their cars and at the supermarket for their groceries--the special effect pigment market is experiencing the same pressures. With analysts disagreeing on which direction the price of oil will head over the next 12 months and the global community already having to deal with prices double those from September 2007 there is a significant level of uncertainty of what the future holds."
"A number of issues are affecting pricing and supply issues in the market," said Mehran Yazdani, vice president, marketing, performance pigments, Sun Chemical. "First, the price of raw materials continues to increase at an unprecedented rapid pace since it is driven by energy and the availability of raw materials. Second, the cost of pigments and raw materials from China has risen significantly due to the elimination of the refund of the value added tax for exported pigments. Third, environmental constraints on manufacturing in China are being exacerbated by the upcoming Summer Olympics in Beijing. As an example, there has been a 100% increase in export duty for phosphorus, the feed stock for manufacturing quinacridones."
"We believe that the many challenges facing high performance pigment producers are well known, such as rising intermediates and basic chemicals, all sources of energy and increasing regulatory matters with REACH," said Don McBride, COO Heucotech. "But what has become a very key issue is the supply of critical raw materials to keep our facilities supplying quality pigments to our customers. The change in perspective with respect to environmental and regulatory issues has affected the main source of basic raw material and key intermediates from Asia. There exists a tightness of specific ingredients that has not been felt in our industry and that is giving way to a general uncertainty about supply."
Heubach is active with committees in Europe with respect to REACH and its affect on various industries. "This initiative is very time consuming as well as expensive, but is necessary to supply products to the European Union and part of being global in nature with manufacturing sites in three continents as well as customers," said McBride. "The downstream focus of our supply bases continues to be of more importance today."
Another challenge is to secure a steady and consistent supply of intermediates for production of high performance pigments.
"With the rising requirements in environmental laws, not only the cost of major raw materials drastically increases but in some cases the capabilities dwindle," said Falko Orlowski, business manager for coatings, Clariant. "This creates irrational demands in the marketplace which are difficult to mange. Further increasing fuel and transportation costs, in addition to a weak U.S. dollar, are creating urgent needs for price increases in the marketplace."
"Our biggest challenge has been dealing with extreme competitive pressure from all sides to reduce product costs," said Kiyotaka Kido, specialty pigments and dispersion division, color materials business, Toyo Ink. "We emphasize competition based on quality and performance differentiation, not just a price-based one. Sales of high performance pigments continue to rise as they deliver outstanding value without compromising on product performance. It all comes down to performance for value."
In order to survive during these challenging times high performance pigment companies not only need to effectively raise prices, but they also must balance out these price increases with innovative technologies and services that will help their customers reduce a company's overall costs.
"The unprecedented raw material and energy increase force market leaders and their competitors to aggressively move pricing to ensure financial viability," said Michael McHenry, NAFTA regional manager--coating effects, Ciba Corp. "Additionally, Ciba is leveraging dispersion technology expertise to ensure the maximum efficiencies of pigments with our complementary EFKA product line. Lastly, Ciba's global network of manufacturing sites allows us to respond to local market demands and assure security of supply."
Silberline increased prices to the market earlier this year because of the increasing pressure associated with energy, freight and raw material costs. "There is only so far a company can go with process efficiency improvements before the escalating costs force a price increase," said Edwards. "That is not to say that our efforts to turn every stone looking for savings have stopped. Continual improvement is a way of life and is even more necessary in a turbulent economic climate."
"As a major global supplier of pigments and additives to the paint and coatings market, Clariant is backwards-integrated in most of the key intermediates which are used for the production of high performance pigments," said Orlowski. "Production facilities of intermediates and pigments throughout the globe help us to secure the demand for the marketplace. Over the last few months Clariant has made available resources to evaluate and implement fall-back options for raw materials. These actions and measures enable us to be confident that we will continue to produce pigments and additives in needed volumes requested by our customers."
Sun Chemical is working to control its own costs closely with its supply chain partners to improve internal operations. "These efforts have helped offset some of these rising raw material costs," said Yazdani. "However, the increases seen in many areas have outpaced our ability to offset them. As a result, we have had to pass some of these costs on in the way of price increases to our customers. Prices for high-performance pigments recently rose 10-20%. Since we expect no relief in the higher costs of raw materials, it is likely that more price increases may be needed in the future. 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."
COST VERSUS FEATURES
HPP suppliers know they must offer their customers a truly value added product in order to justify the premium price tag attached to it. "With escalating costs for fuel and materials, the balance of costs versus features is always an issue," said Thierry Chevrier, director, BASF Performance Chemicals--coatings and plastic chemicals. "We see tremendous opportunity for pigments that combine color with functionality."
HPP offers formulators a number of advantages. Highly valued for their durability, they are often used where there is a need for light fastness, chemical and high temperature resistance. "An investment in high performance pigments can yield more in return for our customers than standard pigments," said Peter Carey-Yard, marketing director, coatings, performance pigments, Sun Chemical. "High performance pigments make products that are more appealing to consumers, help businesses become more competitive, grow sales and improve margins."
Besides offering higher performance in terms of durability, HPP also offer formulators the opportunity to create aesthetically-pleasing products.
"Color and effects are often key differentiators to the end user in terms of their purchase criteria," said McHenry. "Color is serious business and conveys a mood and a message that can make or break sales at the end user level. Consumer preferences for color have been well documented in terms of symbolism and preferences. New effect pigments can further enhance this appeal by adding subtle nuances to the high performance pigment palette."
"A special effect pigment can have a huge advantage in adding perceived value to a product or just make it stand out thereby helping position within a competitive market," said Edwards. "Anything that helps sell a product by improving the aesthetics, durability or function is appealing to designers, manufacturers and consumers, and this is where special effect high performance pigments fit. Also significant increases in organic pigment price means that special effect pigments are closing the gap and becoming even more attractive."
HPPs have traditionally dominated the automotive market due mainly to its stringent durability requirements, but are making inroads into the architectural and decorative coatings market.
"High cost limited the usage of high performance pigments in other markets such as decorative and industrial coatings where performance requirements were not as demanding, but this is now changing," said William Zonin, technical manager, coatings, Clariant. "The decorative coatings market is currently developing paints with improved durability using high performance pigments."
"Historically, high performance pigments have been used in the automotive and industrial coatings and inks markets," said McHenry. "More and more adoption of these pigments has been occurring in the architectural coatings markets as well. Effect pigments have seen growth in all of the coatings and packaging markets."
"The demand for more durable, brilliant color solutions especially in the automotive, architectural and coil markets will be certainly a growing field for high performance pigments in the future," said McBride. "As products and services increase in price, consumers will look for better performance to find a way to balance out the financial perspective with lower term and better solutions."
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BY KERRY PIANOFORTE