Printing Process Inputs -- Consumables: A Mixed BagJanuary 2009 By Mark Smith
Looking at the paper market from the buyer’s perspective, Alex Brown, founder of Printmark Corp., an East Montpelier, VT-based consultancy to magazine publishers that specializes in manufacturing and distribution, has come to a similar conclusion regarding the outlook for 2009. “Prices will go down, but I don’t think they are going to plunge,” she says.
Little Demand for Supply
Economic conditions would seem to argue for bigger declines than the ones paper buyers will see because of the counterbalancing force of mills taking downtime, Brown explains. “Mills are going to take downtime rather than try to use lower prices to spur continued cash flow.”
The simple fact is that demand isn’t there, she notes. Lower paper prices cannot bring magazine publishers and catalogers back to life, and there are economic and market forces putting pressure on demand that paper prices can’t offset, she says. “I am especially concerned about the potential loss of titles.”
There are complexities to the question of what the outlook for paper demand will be from the magazines and catalogs that do continue to be printed, the industry consultant continues. “To me, the interesting factor is where those companies will fall along the spectrum of invest or economize.”
In response to the current business climate, the two poles of the options available to publishers and catalogers are to treat their printed products as luxury items and invest in them to maximize sales, or cut every expense possible simply to survive, Brown says. “Everybody will fall somewhere along that spectrum, and you can’t say that one strategy is better than the other.”
Consumers would rather see a magazine ad than hear a commercial on the radio, watch a TV spot or see a banner ad online, she asserts. “People have an amazing level of engagement with magazines.” Treating print as a luxury means possibly taking advantage of the price declines to upgrade the paper used, or at least sticking with the current grade.
Downgrading a publication’s trim size, paper basis weight and quality are all on the table in the economizing model, and Brown doesn’t believe publishers and catalogers have already pushed the limits of the cuts they’re willing to make.
“It would be rare for there still not to be something else one could nip off,” Brown says. “Another pattern of economizing is to really increase your ad percentage and stop publishing as many pages. That lever can probably be pushed quite a long way with most magazines.”
Sustainability is a distinct paper characteristic in the selection equation. Brown believes there is enough interest in and momentum behind using chain-of-custody certified paper that the economy won’t get bad enough for it to be viewed as a luxury item, which companies decide they no longer can afford.
The economy is no less a factor in the outlook for printing inks; it just happens that 2008 saw wild swings in oil prices that overshadowed all other concerns.
According to data from the National Association of Printing Ink Manufacturers (NAPIM), raw materials now account for almost 60 percent of an ink manufacturer’s operating expenses. If they are tracked back far enough, most of those materials (pigments, resins, solvents, etc.) are derived from petroleum, says John Daugherty, NAPIM’s technical director. That’s true even for water-based, UV and gravure ink systems, he adds.
With the price of a barrel of oil exceeding $140 at one point in 2008, but dropping to under $40 by the end of the year, it’s anyone’s guess what the price range will be in 2009. Israel launching a new campaign against Hamas only added to the uncertainty.
Petro Products Still Tops
One thing that doesn’t seem to be in the offing for inks is any significant shift away from petroleum-derived raw materials for cost, supply or sustainability reasons. The requirements of printing processes, heatset web offset in particular, work against replacing petroleum as a materials source, explains George Fuchs, NAPIM’s manager of environmental affairs and information systems. He notes that the American Soybean Association (ASA) even recognized that fact by stipulating a heatset ink could be designated as soy ink with only 7 percent soybean oil content.
While the efforts of the ASA predated the sustainability movement, soy inks have become equated with the greening of print. Daugherty says this development has been frustrating for NAPIM because it is too narrow a view. Soy is one option, but it has some limitations.
“Our perspective on sustainability is that it’s much broader than just the use of bio-derived renewable materials,” Fuchs adds. “It has to do with health and safety in the workplace, reduction of air emissions, cutting the use of toxic materials—a whole host of other issues that the ink industry has been addressing for years.
“There’s also the issue of the environmental impact of farming and questions about using farming to provide industrial materials as opposed to food,” Fuchs says.
Nonetheless, NAPIM created an Environmental Impact Task Force to explore the issue of bio-derived renewable materials and came up with a list of more than 60 types of such materials already being used in the formulation of inks. It is now developing a labeling process and standard methodology for providing bio-derived content information to ink buyers.
Plate manufacturers are in a similar position to ink companies in that a major portion of their costs are tied to the outlook for aluminum prices, which have been rising in the last couple of years. Ultimately, though, the business outlook for everyone will come back to the economy. PI