The curious case of printing ink economics - The Noel D'Cunha Sunday Column

Ashish Pradhan (AP): The increase of petroleum prices is definitely going to impact raw material prices for the ink manufacturers as most of the raw materials have a direct and indirect connection with the petroleum products. Impact of such increase is already being felt in the market where even the committed supply contract is not being fully honoured by raw material suppliers.

 

AP: It is difficult, as some raw materials have a direct impact in proportion to the increase in petroleum price, for example, mineral oil, solvent etc. Whereas in some others the impact is not in direct proportion.

 

NMD: GST for printing inks was reduced from 18 to 12% from 15 November 2017, but "a Sin Tax" of 28% on varnishes and reducer which was clubbed with cigarettes, liquor and luxury goods, remain. This nullifies the first good move. What could be the reason, and has the ink association make any representation to the GST Council on the issue?
AP: One of the reasons may be due to the simplicity of GST credit mechanism. Pre GST any such differential rate of duty had an impact on landed cost as CENVAT credit was allowed, based on a number of conditions, but post GST, this credit mechanism is more simple. Further, varnish and reducer transaction is between B2B mainly and the higher rate does not impact the overall landed cost of raw material.

AP: GST and de-monetisation are both structural reforms that were expected to have a long-term beneficial impact while having some adverse short-term impact.

 

NMD: So it did have an impact?
AP: This script has played out on expected lines for the industry and also for Siegwerk. Our 2017 results have been lower than our trajectory in the past few years.

 

AP: Most of the investments have happened in the areas of efficiency improvements and not additional capacity build up. This is true for all the established players. However, manufacturers are optimistic that the economy will recover in 2018.

 

AP: In 2018, we are targeting a robust growth in all our business units. However, the raw material price increase is a major factor that needs to be managed carefully.

 

AP: India is predominantly a gravure market with a very large base of rotogravure presses. However, 2017-18 has seen a huge influx of high-end CI flexo presses, most of which will be used for surface printing. Flexo graphics quality is moving ever closer to gravure with HD flexo gaining popularity.

 

NMD: What role does Siegwerk play?
AP: With its global expertise and experience, Siegwerk is ideally placed to help the converters gradually move their short-run jobs from gravure to flexo to add to the versatility and cost-effectiveness. Talent availability to manage the CI flexo operation is scarce and here Siegwerk actively supports the printing community by training these resources with the help of its highly specialised and experienced flexo onsite consultants.

 

AP: There is a definite shift towards compliant inks. This was being driven primarily by the brand owners but we see regulatory changes on the horizon. Siegwerk is a pioneer in the compliant ink movement and as an entity, we don’t procure toluene, and run a complete “toluene–free” operation in India. All liquid inks supplied for food applications by Siegwerk globally and in India are toluene-free and comply with stringent standards across the nations as applicable.

 

NMD: Your view about low migration inks?
AP: Low migration inks are currently being used only when asked for by the end customers – mainly exports to regulated markets. Over a period of time, with regulatory changes, we should see an increase in usage.

 

NMD: What is the total percentage of use?
AP: Currently, the usage is at a very nascent stage. Their time will undoubtedly come, but gradually, as product safety awareness spreads.

 

AP: In India, the direction is moving towards LMLO inks (low migration low odour), but the momentum is very slow. The proliferation is more in the UV ink usage.

 

AP: However, in terms of safety and regulations, LM inks are not legislated yet for critical applications, hence non-LM inks continue to thrive. In the foreseeable future though, LM inks are expected to become the norm rather than the exception they are today. 

 

NMD: The absence of regulation is impeding the use, is it?
AP: In the absence of strong regulations, brand owners have still not woken up to the need to use LMLO inks. LMLO inks are a very small percentage of UV-consumption, and limited only to certain pharmaceutical labels which are exported mainly to the US. Once strong regulations are in place, the brands will then automatically move towards LMLO inks.

 

NMD: The global UV ink market will reach USD3.5 billion in 2020, with a CAGR of 15.7% from 2015-2020. What are the India numbers for UV inks?
AP: The CAGR is in line with the global markets.

 

AP: It is too early to comment. Currently, Benzophenone is not recommended in UV inks and coatings when the functional barrier is not present, which prevents migration.

 

NMD: How so?
AP: In labelling it is on account of advantages of technical superiority in terms of press-performance, print-quality, instant curing, robust scuff and product-resistance, no clean-up during press-idling, to name a few. And in the case of offset printing, we have seen UV replacing conventional inks in mono-carton printing where metallised high-end cartons have become very popular. Recently, sheetfed converters have been increasingly using UV for regular cartons too, as it lends itself immediately to post-printing operations, thereby reducing work-in-progress (WIP) on the shopfloor.

 

AP: Our outlook for print and packaging industry in 2018 is cautiously optimistic. We expect a strong pick-up in the growth as the Indian economy has digested the major structural changes like GST and de-monetisation. Consumption is likely to pick up as evidenced in the recent months. However, as I explained earlier, the raw materials price headwind is likely to put high pressure on margins and this could make it challenging for the industry to sustain profitable growth.

PVG's flexo ink lab being inaugurated by Ashish Pradhan