The past two years have proved to be difficult for the printing and ink industries, as the global recession, combined with rising raw material costs, have impacted these businesses. While Latin America did not feel the full impact of the recession, it still felt the effects.

“The crisis did hit the whole Central America region, although México was one of the countries with worse results not only in the region but worldwide,” said Ernesto Sánchez, president of Sanchez S.A. de C.V. “With a decline of 6.5 percent in the GDP, the country saw the worst crisis in more than 30 years.”

“The printing industry as a whole suffered severe set backs in 2009 and did not reflect growth,” said George Sickinger, president and CEO of Color Resolutions International (CRI). “The flexo industry was flat for the first six months and showed single-digit growth in commodity market niches. Our ink sales were also affected by the downturn, and we had to pursue niche markets to maintain single-digit growth.”

“The economic downturn witnessed over the last 12 months has affected everybody involved within the printing industry, and Flint Group Latin America has unfortunately been no exception to this,” said Bill Miller, president, Americas for Flint Group.

“We have worked hard to turn this crisis into an opportunity to honor our principles and mission ‘to become the best performing supplier to the printing and packaging industries, through our ability to deliver exceptional value to customers, shareholders and employees around the world,’” added Claudio Labbe, president, Latin America for Flint Group.

“There was some contraction of the market,” said Javier Treviño, managing director, Siegwerk Mexico. “It was a difficult market. There are identified markets like tobacco where there was excess of inventories because the tobacco consumption decreased significantly in comparison to previous years.”

“Even though the printing industry in Brazil and South America were hard hit by the recession caused by the Lehman shock, economic conditions were not as serious as those in the U.S.,” said Aviv Haruta, corporation communication, Toyo Ink Mfg. Co., Ltd. “The industry proved resilient to economic stress and continues its growth trend. As for Chile, the industry has not recovered fully due to lingering effects of the last earthquake.”

Mr. Sánchez said there have been some signs of recovery.

“In 2010 the recovery has begun, although at a slower pace than expected,” Mr. Sánchez noted. “We are seeing good signs of recovery in the market, and the return of some of the volume lost during 2009. Again, the markets showing better signs of recovery are those related to packaging.”

The Impact of the Recession

The global recession affected Latin America as well, with the printing industry contracting approximately 10 percent, according to industry leaders.

“The impact was drastic as reflected in industry unemployment rates, management turnovers and delays in capital investments,” Mr. Sickinger said. “In the ink industry, pricing became a critical factor with decision makers as cost reductions were the aprinciple focus for manufacturers. By the end of the second quarter 2009, a small positive rate was reflected in the packaging industry with a comparable effect on ink sales. By the end of the fourth quarter, electronics and commodity packaging was recovering to previous year levels.”

“Local commerce suffered greatly in Latin America this year, largely due to the fierce credit crunch and a lack of foreign investment,” said Jackie Rivas, Flint Group’s vice president of finance, Latin America. “Spending capacity was also devastated by a strong wave of increasing prices in basic products and sharp currency depreciations which all significantly affected the region greatly during 2009. Import and export volumes for the region were estimated to be down by 13 percent in 2009, which has resulted in the worst regional economic figures for 72 years in export and in 27 for imports.”

For ink manufacturers, growth comes from developing new customers. “Siegwerk accomplished the budgeted growth due to new customer opportunities,” Mr. Treviño said.

“Flint Group Latin America has been able to survive the economic crisis, and deliver good results, thanks to our strong company and excellent team,” noted Mr. Labbe. He added that “2009 was undoubtedly difficult for everybody within the graphic arts market in Latin America. Flint Group worked hard to remain competitive in these markets and we entered 2010 in good shape as a result of this. We see significant potential in developing our chemical sales, particularly in Brazil, where we have increased manufacturing potential due to the site expansion.”

Growth Opportunities

Still, Latin America offers opportunities for ink manufacturers. In May 2010, Toyo Ink Mfg. Co. Ltd. established Toyo Ink Brasil Ltda., a sales subsidiary dealing primarily in printing inks, in São Paulo, Brazil. Toyo Ink considers Brazil, its neighboring countries and the surrounding area to be a key growth market and intends to gradually expand the range of products offered in Latin America, using this new company as a central hub to ensure steady supplies of Toyo Ink products.

“As a global provider of advanced chemicals, the Toyo Ink Group focuses on promoting growth opportunities in emerging markets such as China, India, Indonesia and Brazil,” Mr. Haruta said. “The decision to establish a local office in Brazil arose out of the strategic need to build a sound infrastructure including ink manufacturing, sales and support, so that we may better serve customers in Latin America.

“We see strong demand in the region, particularly in Brazil, for value-added products and advanced technologies such as high performance printing inks and environmentally-friendly materials,” Mr. Haruta added. “We will be introducing our cutting-edge ink products, such as offset, UV curable and gravure, together with our latest technologies and solutions.”

Sanchez S.A. de C.V. also was active in Central America, forming two new subsidiaries.

“At the end of last year, we opened our subsidiary in Guatemala, which is showing good results right from the beginning, and right now we are a few days away from opening our subsidiary in Costa Rica,” Mr. Sánchez reported. “With our own companies in Costa Rica, El Salvador and Guatemala, we will have full coverage of the Central America region.”

As large printers consolidate, ink companies have opportunities to make gains. “Siegwerk Mexico is taking advantage of the global acquisitions between big printing companies,” Mr. Trevino noted.

For CRI, narrow web offers excellent potential.

“The narrow web flexo market continues to be our biggest opportunity in the region,” said Miguel Rocha, director sales/marketing – Mexico for CRI. “Wide web flexible packaging has stayed strong and is a strong contender to show the greatest growth. CRI has excellent opportunities in the ‘high graphics’ packaging markets in well-defined regions that export to the U.S. markets. Capital investments are underway to address the demand from the U.S. market, but the Mexico market is still lagging behind with this trend. CRI is positioning to be a part of this ‘high end’ packaging sector through alliances with integrated customers and equipment manufacturers. Also, the demand for quality, low maintenance UV inks has brought new opportunities for our products. We are achieving more ‘brand recognition” for quality products and the ‘word of mouth’ references are increasing.”

Expectations for the Coming Year

So what does the next year hold for the ink and printing industries? Economists in general are optimistic about the future for Latin America. Main financial and economic indicators show that, along with Asia and the Middle East, Latin America is in good shape to face the effects of the recent European crisis. In fact, analysts believe this is one of the regions with the largest growth potential worldwide.

According to a study that analyzed 16 countries in the region, Brazil, Mexico, Colombia, Peru and Chile are showing signs of recovery, while Argentina, Ecuador, Bolivia and Venezuela still look like they will face difficulties in the months ahead.

There is also uncertainty as to whether raw material prices will further challenge ink makers, or if the economic problems cropping up in Europe will spill over into Latin America.

“The increase in prices and the demand for raw materials are slowly pushing the recovery of some economic indicators – for example, the prices of many raw materials continue to increase as supply continues to tighten – but are also affecting the price of manufacturing many of the products we produce,” said Adhemur Pilar, vice president operations, Latin America for Flint Group.

“As are most of our competitors, we are concerned about the increase of our raw materials,” said Mr. Sánchez. “It is for sure one of our issues, nevertheless, some of this pressure has been compensated by the strength of our currency during the present year.”

“We are facing a global raw materials shortage with another global raw material price increase pressure from the market,” Mr. Treviño noted. “We foresee a difficult second semester in the ink printing industry. We have not quantified yet if the European economic crisis is going to hit drastically the Mexican ink printing industry.”

Still, there is room for optimism, particularly on the packaging side.

“With the upcoming FIFA World Cup and Olympic games to be hosted by Brazil, we are confident that local markets will rapidly expand, boosted by the surge in infrastructure development needs,” Mr. Haruta said. “This surge is also expected drive growth in the printing industry among others.”

“The maquiladora regions have seen an increase in Far East investments that are servicing electronics manufacturers from their home countries – Sony, Sanyo, Panasonic and LG Electronics are consolidating border manufacture centers in key market centers,” Mario Arellano, vice president of Mexico operations at CRI, said. “CRI has successfully pursued certification of its inks from these manufacturers and is positioned to service this market sector. The increased use of UV inks for beverage and commodity products has opened inroads for our product lines. Increased demand for inks that work well with shrink sleeves has also opened new opportunities for our products. CRI’s technical service policies, to provide support in new product applications, have been a competitive advantage that has resulted in new sales.”

“We expect the flexo market to return to its traditional double-digit growth rates based on several key economy indicators,” added Mr. Rocha. “The consumer market has suffered less downturn than the auto, electronics and maquiladora industries and growth rates will be easier to attain. There has been an increase in new equipment expenditures focused on throughput and value-added features for packaging. The maquiladora industry has expanded in the last four months and this has increased packaging demand.”