Rising Costs Affecting Raw Materials for the Print Industry
Because ink manufacturers buy relatively small volumes of raw materials compared to other users, they have little leverage in a competitive environment. “If raw material suppliers decide to favor more profitable outlets, prices will continue to rise, and ink manufacturers could even find themselves without key raw materials,” Parisi continued. “Since the beginning of 2006, we have seen dramatic increases in the price of cuprous chloride and phthalic anhydrate, both raw materials based on copper. Copper prices are 60 percent higher than at the end of 2005.”
Pass It On
For now, the situation seems to have stabilized for adhesives and base films. However, Mohni pointed out, “Paper prices are much more sensitive to fuel prices, and they are still volatile. I believe we will see ongoing increases on all components.” Hill also believes the issues will continue for some time. “And, [it is] affecting general and administrative costs, as well. Passing along an increase is a tough decision, but selling and losing money is not an alternative,” he said. “The feedback I get is that print service providers are passing on some of the increases,” offered Mohni. She suggested relating the increases to everyday things customers understand, like the price of fuel for cars and home heating. “I would also offer rebates or discounts for customers who sent more or all of their printing business my way. I would offset some of the cost increases by locking my customers in for more volume.” Printers can also look for alternative raw materials that are less expensive. “But, one has to weigh any loss of quality,” stressed Hill.
“It’s still clear that printers are not able to pass on the rising costs of materials,” said Dr. Joe Webb, director, whattheythink center for economics and research. “The industry appears to be coping with this by reducing the number of employees in non-production positions. Print buyers shifting to other media can change the costs.”