Material Pricing
 The economic downturn in 2008 drove many producers of raw material commodities to shut down plants and curtail capacity to align supply with demand. In addition there were a number of unplanned shut downs due to fire, explosions, and natural disasters that reduced the amount of available supply. As a result of these activities, inventories were dramatically reduced through 2009, keeping raw materials* in tight supply. In 2010, much of the same situation remained. While North America experienced a modest 2.8% growth in GDP, China grew GDP by 10.3% and India by 8.3%. Allocation and competition for these materials with developing countries and in more profitable markets has driven prices up and created the environment that carries us into 2011.
Raw material producers are controlling capacity to maintain a level of return which allows reinvestment into the business. Therefore they are not inclined to be competitive for additional volume. Additional increases are expected throughout 2011 as our supplier partners work to recover profit margins negatively affected by the narrowing cost-price gap.
As a label converter, Advanced Web is receiving price increases on every input material used. The price of titanium dioxide used in the production of paper and the pigment in inks has increased 12-14%, resulting in price increases of 5-6% in paper and 5% for inks. Continued increases in the price of petroleum are affecting the prices of acrylic adhesives and resins used to produce films.
Advanced Web diligently works to offset the impact of these unstable market conditions by strengthening our relationship with suppliers, and working to identify lower cost material options in an effort to manage through these difficult times.
*Raw materials including, but not limited to: resin for films, pulp for paper, acrylic acids used in adhesives, silicone used as a liner coating, and titanium dioxide used in paper and ink.
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