Closing of Chinese Dye Factory Causes Global Thermal Paper Shortage

So called direct thermal printing – which uses a heat sensitive paper moved past a thermal print head to produce a bar code, human readable information and other data/images on a label, is one of the most popular technologies used to print bar codes on-demand in manufacturing, distribution, retail, etc.

Supply Chain Digest Says... In the US freight rates continue to rise, adding additional costs to direct thermal and indeed all labels users to have the heavy, relatively low value labels shipped into factories and DCs. What do you say? Click here to send us your comments Click here to see reader feedback

Direct thermal is sort of a cousin to thermal transfer printing, which generally can be achieved on the same printers from companies such as Zebra, Sato, Honeywell and others as direct thermal, but which uses a heat ribbon passing over a printer head to create the bar code on non-heat sensitive label stock.

Direct thermal is unique in that it is the only on-demand printing technology that requires only one material – the label – whereas all the others (thermal transfer, laser, ink jet, etc.) require a a label and some form of ink source.

Subject to frequent fading in the early days of bar coding, great improvements in the stability of direct thermal labels when say moving cartons in a truck trailer on a hot summer day has helped to increase the share of on-demand labels printed with the technology.

Users of direct thermal labels likely have already seen prices head higher in recent months. And that trend should continue, largely but not completely due to the perhaps temporary closure of a Chinese company that is the leading provider of a key dye used in direct thermal paper.

As reported on a blog from the analysts at VDC Research, in September the Chinese government authorities closed down a factory of a company called Connect Chemicals, the world’s largest supplier of leuco dye, a vital ingredient to producing direct thermal paper.

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The factory was closed to force it to modify operations to be in compliance with environmental regulations and bring it up to standard. Given that Connect Chemicals has a global market share of the dye of 30-040% - and perhaps 70% in Asia and Europe – direct thermal paper mills have been constrained and slowed or in some cases even stopped production, leading to a shortage of supply in the marketplace.

With supplies tightening and demand strong in a general robust global economy, prices naturally are heading higher. VDC says most vendors of direct thermal bar code labels have announced price increases of 10-15%, effective in early 2018.

To add insult to injury, in the US freight rates continue to rise, adding additional costs to direct thermal and indeed all labels users to have the heavy, relatively low value labels shipped into factories and DCs.

"Even when Connect Chemicals is back up and running at its full capabilities, the thermal paper market will still face the price pressure of expensive raw materials and the effects of a strong US economy," VDC notes. "Until the overall cost of raw material reaches its pre-hurricane levels in the US, we can expect higher prices for thermal paper in 2018."

SCDigest says budget accordingly.

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