Europe's ink manufacturers expect continued problems with global supply chains well into 2022. Even if some of the current constraints ease and the recovery continues, global uncertainty from the corona virus, volatile consumer buying patterns and potential trade barriers remain.
The European Printing Inks Association (EuPIA) reiterates severe disruptions to the entire supply chain of raw materials, mainly caused by the Covid 19 pandemic, which have persisted since the association's announcement earlier this year. While EuPIA members continue to work doggedly to minimise risks to customers, they point to the economic pressures weighing on the ink market.
Global supply chains
The world economy is currently experiencing a level of volatility in global supply chains that most economists and supply chain experts believe has not been seen in recent history. Demand for products continues to outstrip supply, severely affecting the availability of raw materials and freight capacity.
The global pandemic has led to production stoppages in many countries. The situation is now exacerbated by consumers staying at home and buying more items than usual and outside the peak season, on the one hand, and the revival of the economy in all regions of the world leading to a surge in demand, on the other. Added to this is a crippled supply chain, reduced production in China due to the energy saving programme and a shortage of key raw materials.
For manufacturers of printing inks and coatings, such transport and raw material bottlenecks present a host of complex challenges. Numerous factors related to raw materials and freight transport contribute to this "perfect storm".
Raw materials
The imbalance between supply and demand for many critical raw materials used in the manufacture of printing inks - for example, vegetable oils and their derivatives, petrochemicals, pigments and titanium dioxide (TiO2) - is causing significant disruption for EuPIA member companies.
Demand for materials in all these categories has increased, albeit quite differently, while supply remains constrained. In addition, the fluctuations have made it increasingly difficult for suppliers to forecast and plan deliveries.
Looking at the individual material groups, quite different influencing factors emerge:
- Pigments, including TiO2, have been in high demand recently due to the good economy and factory closures in China caused by the Chinese energy reduction programme. Demand for TiO2 for architectural coatings and wind turbine production has increased.
- The supply of organic vegetable oils was affected by unfavourable weather conditions in the USA and Latin America. At the same time, Chinese imports and consumption of this category of raw materials increased.
- The cost of petrochemicals - UV, polyurethane and acrylic resins and solvents - has increased since the beginning of 2020. Demand for some of these materials is above normal.
The market has additionally had to endure many force majeure events, which have further tightened supply and exacerbated an already unstable situation. As costs continue to rise and supply tightens, ink and coating manufacturers are increasingly facing immense competition for materials and resources.
Packaging, freight and transport
- Packaging materials: The industry continues to face shortages of steel for drums and high-density polyethylene for bucket production. Increased demand in online retail is leading to tight supply of corrugated boxes and liners. Material allocation, production delays, raw material shortages, force majeure and labour shortages all contribute to the rise in packaging prices. Exceptional demand continues to outstrip supply.
- Limited air and sea freight capacity: The pandemic has been a catalyst for unusual consumer buying activity (both during and after production shutdowns), resulting in unusual demand in several sectors and straining air and ocean freight capacity. The cost of jet fuel has increased, as has the cost of shipping containers (on some routes from Asia to Europe and/or the United States, container costs have increased eight to ten times). Unusual sea freight schedules have emerged, some freighters have gone off track or have difficulty finding ports to unload containers. Ultimately, increased demand and ill-prepared logistics have led to a critical shortage of cargo capacity.
- Port congestion: Due to the coronavirus pandemic, strict health and safety measures are still in place at ports worldwide, affecting port capacity and goods turnover. Most cargo ships miss their scheduled arrival times and unpunctual ships face delays as they wait for new slots. All this has contributed to the sharp increase in transport costs since autumn 2020.
- Shortage of truck drivers: Another factor is the shortage of truck drivers in many regions, probably most noticeable in Europe. This shortage is not new, but has been a problem for at least 15 years. It has only been exacerbated by the global pandemic.
The pandemic has disrupted international trade, driven up the cost of transporting goods and posed a new challenge to the recovery of the global economy.
Printed products of all kinds remain an important medium for disseminating news around the world, for producing important documents and signage, and for making packaging that protects, preserves and facilitates the transportation of food and other vital goods around the world. The value of inks and coatings is undeniable, and the industry is determined to work together to ensure continuity of supply while battling persistent headwinds.