For ink industry purchasing executives, the end of 2024 brings with it a sense of relief, as the raw material market has finally stabilized for the most part. With the exception of a few ingredients and logistical issues resulting from geopolitical concerns, ingredients pricing and availability are at pre-pandemic levels, albeit at a higher level.

Understandably, ink industry executives are still keeping a close watch on the world around them.

Jeffrey Shaw, chief supply chain officer for Sun Chemical, observed that the raw material supply environment has stabilized since the global supply chain crisis began during COVID.

“Many organizations are now focused on working capital initiatives that prioritize inventory management,” Shaw noted. “Some supply delays have continued to occur due to forecasted inadequacies in segments of the supply chain, a few capacity curtailments and various supplier consolidations. Despite relative stability, there are still geopolitical challenges that cause sporadic supply chain disruptions and cost escalations, but we continue to monitor and address these issues proactively.”

“In general, I would agree that inventory levels and demand are more in balance than they have been in previous years,” said Anthony De Francesco, VP of integrated supply chain for INX International. “There is no question it is related to market stabilization post-pandemic, supported by other factors including supply chains right sizing their inventory levels. However, we are staying conscious of underlying factors which could inject outside risk into supply chains. Reduced on-hand inventories with increased demand and lead times could develop into direct supply chain risk if left unmanaged.”

“Pricing has remained stable but between ocean freight disruptions, suppliers running out of stock, and the financial stability of certain suppliers it’s challenging,” added Ken Klug, Wikoff Color’s director of purchasing.

Doug Aldred, chief commercial officer for Flint Group, reported that since the beginning of this year, many raw material markets have shown recovery due to increased economic activity in most end markets, low stock levels across the value chain, and reduced production capacity.

“However, we have observed reduced production capacity in many markets due to less reliable logistics caused by port congestion, driver shortages, and container shortages in Asia,” he added. “This has resulted in increased product costs and various supply issues related to lead times and reliability.”

Shaw observed that while there is a conscious widespread effort to nearshore, maintaining a balance between cost and supply disruption is key.

“Sun Chemical has always leveraged our global networks to ensure we have uninterrupted supply at the lowest cost position possible through collaborative supply chain optimization,” he added. “Sun Chemical buys from many global suppliers with significant international production, allowing us to nearshore when it creates a strategic advantage.”

Aldred noted that the current situation with titanium dioxide (TiO2) is worth noting.

“Geopolitical tensions have significantly impacted key raw material markets, particularly titanium dioxide (TiO2) and nitrocellulose (NC),” Aldred observed. “For instance, anti-dumping investigations have been initiated against Chinese TiO2 suppliers in Europe, India, and Brazil. Additionally, several NC suppliers have shifted from industrial to energetic grades to meet the high demand from military applications. In mid-July 2024, the European Commission announced anti-dumping duties on Chinese TiO2 ranging from 35-40%. As a result, the focus has shifted from Chinese producers to European suppliers catering to customers in the European market.”

Prices at a New Normal

While costs for key ingredients have stabilized and even come down somewhat, it is important to note that pricing levels are nowhere near pre-pandemic numbers. Aldred pointed to the crisis in the Red Sea, the Asia container shortage, and geopolitical tensions as being reflected in many key raw materials markets, keeping prices higher than in past years.

While Shaw reported that raw material pricing has stabilized after peaking in mid-2022, post-COVID prices have stabilized at a higher level.

“Crude oil continues to hover within a range much higher than late 2020 when inflation began to rise and has remained at a roughly 60 percent higher rate,” Shaw said. “The continuously high levels of inflation and interest rates have applied increased pressure to raw material markets, leading to capacity constraints and supplier consolidations, especially in the TiO2 market. Refinery outages, both planned and unplanned, have impacted key feedstock inventories and prices have episodically spiked. Fundamentally, a sustained improvement in global economic conditions will apply pressure to raw material prices when demand recovers in key markets and alternate use value dynamics play a more significant role.”

“Pricing has remained stable throughout 2024 with the exception of freight surcharges due to container costs doubling,” Klug noted. “Most pricing settled lower in early 2024 and has remained stable.”

“It’s difficult to generalize as we are seeing numerous economic factors play into varying markets and regions. That said, prices are following the upward inflationary pressures as many producers talk to ongoing labor challenges and upward pricing on core costs,” explained De Francesco.

Logistics and Transportation Concerns

Logistics and transportation are still issues for purchasing executives to navigate. Klug pointed out that ocean freight has been very challenging since Q2, especially with the potential International Longshoremen’s Association (ILA) strike. The bankruptcy of YRC Freight, or Yellow Corporation, has also impacted logistics.

“It will remain a concern throughout 2024 due to the pending ILA East Coast strike,” added Klug. “Domestic trucking – LTL (less-than-truckload) and FTL (full truckload) – has stabilized since Q2 of 2024. It took most of the larger carriers four to six months to absorb the impact of YRC Freight’s collapse.”

“Currently, there are pockets of stabilization concerns in the logistics and transportation sectors; however, we anticipate potential issues on the horizon, such as a possible strike on the Gulf and Eastern Seaboard of North America by the International Longshoremen’s Association (ILA),” Aldred reported. “The existing six-year agreement between the ILA and the United States Maritime Alliance (USMX) covers over 45,000 workers employed at ports and terminals along the Gulf and Eastern Seaboard of North America. The ILA has threatened to strike on Oct. 1, 2024, when the current contract expires, if demands under a new agreement are not met.”

Shaw said that areas of logistics and transportation continue to be monitored as issues can occur quickly and be far-reaching.

“We continue to proactively monitor all modes of transportation and take necessary precautions to avoid delays and disruptions,” said Shaw. “Ocean freight costs have increased significantly again, generating a high level of cost pressures on shipments between all continents. Delays resulting from the Red Sea conflict, as well as other variables impacting the general infrastructure of the ocean freight market, have also affected transportation costs and lengthened transit time.

“In general, sea freight costs have escalated more than three times their pre-pandemic levels,” Shaw pointed out. “Trucking issues have subsided for the time being, but we continue to monitor over-the-road freight closely and take the necessary measures to avoid further delays.”

“It is not so much a question of availability, but more of order lead time. We are seeing lead times increase across most supply lines due to varying factors, but most predominantly it is due to logistics,” said De Francesco.

“Logistically, this year has really tested supply chains at a global level, specifically calling out the Red Sea conflict which has been escalating since December 2023,” acknowledged De Francesco. “Global container miles traveled are up almost ~19% this year. More miles in transit equals increased voyage costs and fewer free containers as they are in use longer.

“Ultimately this has reflected higher logistics costs; the Drewry World Container Index (WCI) as an example shows rates up ~170% this year from January to August 2024. As we saw in 2023 with the West Coast ILWU, we are now monitoring the East Coast ILWU situation closely as their contract expires Sept. 30, 2024.”

Thoughts on the Future

The past few years have been extremely challenging for purchasing and manufacturing departments. Shaw pointed out that supply chain risk management, optimization and agility are key.

“Collaborating with commercial partners to gain a more in-depth understanding of their requirements and developing a successful demand plan to meet those requirements is paramount to maintain stability,” Shaw observed. “We continue to develop a very diversified supply base that supports various technologies from a chemical and functional perspective. Our risk mitigation contingencies remain an integral component of our global sourcing strategies, so we are prepared for any abrupt supply disruptions that may occur. Sun Chemical’s main objective is to ensure our internal cost structure is sufficiently optimized to support customer requirements and future investment in our businesses.”