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Flint Group Provides Insight into Expected Raw Material Cost Developments in 2012

March 9, 2012 By Jan Paul van der Velde, senior vice president of procurement, Flint Group
LUXEMBOURG—March 9, 2012—“There is a misplaced view that raw material costs for the graphic art industry are coming down” says Jan Paul van der Velde, senior vice president procurement of Flint Group. “After more than 1.5 years of costs constantly increasing, people have clearly been looking for good news and the fact that we witnessed prices generally stabilize in the fourth quarter of 2011, caused a sensing that things were actually improving. The fact that people were hearing on an almost daily basis about the economic crisis, prompted them to also assume that these difficult times would contribute to raw material costs going down.”

Continues van der Velde, “The reality is that, with the exception of gum rosin, which dropped a bit in Q4 and Q1 but is now already on the way back up, hardly any materials dropped significantly in price. In fact, most materials stabilized at high levels or with very minor reductions, but when compared to the increases we have seen, they are still at near record levels. Overall costs for the ink industry will be higher in 2012 than they were in 2011, which had itself been a record high year.”

The price of crude oil in 2011 was, on average, higher than in 2008, when there was talk of a crude oil crisis. In 2012, prices have already crept almost silently past 2011 figures. Crude is the single largest cost driver for the ink industry, with many materials linked to it—such as mineral oils, hydrocarbon resins, carbon black and solvents in addition to many other chemicals that are also indirectly linked to crude.

“Crude is also a good example of how raw materials have resisted the current economic conditions to remain at record high prices. Of course there is the tension in the Middle East, but it is demand and speculation that has driven the prices and unfortunately this situation has also been replicated in the costs of many of our own base chemicals such as benzene, toluene, styrene, propylene etc.,” van der Velde adds.

“The crude oil costing has a significant knock on effect and is a good example of the challenges that the ink producers have these days, due to the high costs of phenolic resins, many ink producers introduced hybrids in 2011, which are based on a combination of Phenolic - and HydroCarbon resins. However due to the crude increases this cost effective alternative is gone.
 

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