Siegwerk is forced to respond in Europe to the rapidly increasing costs of raw materials, energy and transportation. “Since January 2007 the prices of raw materials used in the production of inks and varnishes have climbed by up to 30 percent worldwide, costs for crude oil and natural gas have more than doubled,” stated CEO Herbert Forker. “In Europe we see no other way than to pass parts of these costs on to our customers.”
The supply situation regarding raw materials and intermediates is becoming critical, partly because of reduced production in China. This is due to environmental restrictions put in place by the Chinese government ahead of the Olympic Games in Beijing. The supply shortfall is also affected by a greater demand for these materials in the rapidly growing emerging markets in particular.
As a result, major international chemical companies and producers of pigments and intermediates already implemented or announced price increases of up to 30 percent for their products. Several suppliers have put into action their price increases with immediate effect without any room for negotiations or grace period. “This is unfortunately a new trend in the ink industry that we have to take into consideration in our pricing as well,” Mr. Forker said.
Additionally, record levels of prices for crude oil and many other commodities have a severe impact on production and transportation costs. In order to maintain a reliable product quality for its customers and the company’s margins this also makes a cost adjustment absolutely necessary for Siegwerk in Europe.
“In the past, we could partially absorb higher costs through internal rationalization measures and increasing efficiency,” Mr. Forker explained. “But these days costs are escalating faster and faster. And there is no short-term relief in sight.”