Magazine Article


Silver Halide Paper Market Getting Crowded Again

The China Lucky paper is another unique story. Here is a firm that bills itself on its website as “the largest national photosensitive and magnetic recording media manufacturer in China.” In 2003, to get a China foothold, Kodak bought a 13% piece of China Lucky for $100 million (cash and tech support) and traded away some technical expertise as part of a 20-year co-op agreement. The Peoples Daily online site reports that Kodak has about 50% of the Chinese film market and Lucky about 20%.

It’s hard to believe that the agreement didn’t prohibit China Lucky from bringing into the U.S. silver halide paper and film that is being manufactured in China with Kodak technical support. But, here they are. Is Kodak happy? Upon learning that China Lucky was moving in, a Kodak spokesman stated: “As a partner we are disappointed that we did not have advance knowledge of their arrangement…”

The partnership is already under some stress in China as there are reports of marketplace confusion between the China Lucky and Kodak watermarks. China Lucky has signed a distribution agreement with Royal Marketing, a well-established California firm that has to date specialized in the distribution of products, mainly Konica brand, to the cruise industry. However, they have no distribution arms into the retail/wholesale trade and will have to develop new channels. David Press, Royal’s executive VP, is hoping to set up 3-5 master distributors.

With China Lucky and Dai Nippon getting their houses in order to attack the U.S. market it would appear that the beneficiary of the upset in the paper market in the short term will be Mitsubishi. Their fortunes were somewhat in doubt with the upcoming shutdown of the Konica plant in North Carolina as the Mitsi paper was being coated there. There was some trade speculation that, without the Konica production source, they might even pull out of the market.

David Bell, national accounts manager for Mitsi, and a 20-year industry veteran, took issue with that thought: “Mitsubishi is fully committed to the silver halide paper market and is unequivocally, 100%, staying in the business.”

He noted that Mitsi is the owner of the largest photo paper plant in the world in Kitakami, Japan, in addition to growing its own trees and is one of only two manufacturers actually making photo grade paper—not just coating it. The other is Felix Schoeller, GmbH, a privately held German firm.

David said that as the Konica U.S. plant has been phasing down, Mitsi has been bringing in more product from Japan until eventually all Mitsi paper will be imported.

Since Konica and Agfa have dropped out, David indicated, “Our own business has done quite well.” He noted there has been what he calls “perceived shortages” along the way because customers were grabbing all of the dwindling supplies of Agfa and Konica goods they could get.

As for the new competition, David said, “We fought it out daily with Agfa and Konica. I don’t see that with Lucky and Dai Nippon.” He added, “We expect that some firms will eventually drop out of the silver halide paper business. Mitsi intends to be the last one standing.”

So far, Lucky and Dai Nippon have not yet made the rounds of the major retailers with paper programs. Rich Tranchida, executive VP of Ritz Camera, said that he hasn’t been contacted by either firm. “We’ll just wait and see what they have to offer.” Rich indicated that printing is down but that Ritz is committed to silver halide. He acknowledged that some behind-the-counter printing has been switched to Kodak G-4 dye-sub systems.

Mike Woodland, president of Dan’s Camera City, Allentown, PA, said about the new firms offering silver halide paper: “It’s great that we will have choices. It’s good for both us and the consumer. I’m glad to see that.” As for pricing, Mike said that he is locked in for another year with his programs with IPI and PRO. He uses Fuji paper.

Mike Worswick, PRO buying group president and owner of Wolfe’s Camera, Topeka, KS wouldn’t comment on the contractual arrangements with his suppliers. As for future paper pricing, he said much will depend on how goes the pricing for dye-sub and inkjet, both of which have been closing the price gap with silver halide. He indicated that at one point PRO supported all five paper brands for their 450-store group, but now concentrates on Fuji and Kodak with the scale tilting a bit toward Fuji.

With Agfa and Konica out of the way, Fuji and Kodak fulfilled the prophecy of retail paper buyers that paper prices would rise. Lesser competition has a way of opening that door. On May 17, Kodak announced paper price increases ranging from 3-20%. It only took Fuji five days to respond with its own hike, from 4-10% for paper and chemicals.

Were they being opportunistic with lesser competition to contend with? No doubt that was part of it. However, there is no denying the fact that the elevated price of electric energy used in the manufacturing process and the escalating oil prices, affecting base material costs, including silver, are real.