Tin plate packaging and closures

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Rapid Collapse of Prices for Steel Products

In summer last year the manufacturers of tin plate packaging and closures still faced drastic rises in the price of supply materials. Then the December motto ran: feedstock prices for sheet steel packaging no longer follow spot market prices. The result is great insecurity amongst steel processing companies and their industrial buyers.

The background for the price increases announced in mid 2008 for feedstock for sheet steel packaging were tin plate producers’ intentions to impose a minimum 30% price increase for packaging steel by January this year. From January to June 2008 prices for tin plate feedstock – hot rolled strip – had gone up by 50%. Tin plate producers were in turn compelled to push ahead with a major part of these 30% price increases originally scheduled for the first quarter 2009 already in 2008. This created an extremely precarious situation for the manufacturers of sheet steel packaging since 65% of their value added depends on the upstream supply material price.

Now the most recent developments in steel markets have created even more insecurity in the industry and in the buying sectors. The noticeable slump in demand felt after the price increase has made most steel working companies change their purchasing behaviour by withdrawing the purchased steel volumes from the contract market and adjusting them to spot-market prices – wherever possible. Since these developments have “mapped” the sector-relevant price indices the steel working sectors of industry can no longer see the development of their supply material costs reflected in these price indices in the current business situation. Furthermore, they continue to be tied to the contract market as before.

Explaining this Peter Fish of MEPS Ltd., Sheffield, said: “Like other suppliers of steel market information and price indices we in our publications have also followed the current market trends and currently display price trends on the spot market and in service centres predominantly. This is why the actual trends in supply material costs for some, few sectors of industry, as in the manufacture of sheet steel packaging, deviate from our trend forecasts.”

The German Association “Verband Metallverpackungen e.V.”, Düsseldorf, currently expects no major changes for supply material costs for steel packaging between November and December 2008. According to the Association demand was already muted in the third quarter of 2008 suggesting that producers are obviously well equipped with supply material stocks.

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Aluminium foil sales dipped due to recession

Likewise, sales of tin foil dropped sharply in Europe. Over the first three quarters of 2008 sales were down by 4.9 % against the same period in 2007. In the third quarter alone deliveries were down to 198,300 t in total – this corresponds to a 6.4 % decrease. However, the sales of thin foil for flexible packaging and household foils “only” dropped by 3.3 %.

“The global economic downswing has affected aluminium foil producers just as much as other sectors. After several consecutive years with record sales the first months of this year posed quite a challenge to our industry. We hope the current recession is only a glitch and we will already see light at the end of the tunnel in late 2009,” said Stefan Glimm, CEO of the European Aluminium Foil Association e.V. (EAFA), and added: “Since approximately 75 % of our sales go to foil producers for food, beverages and pharmaceuticals the economic setback will affect our industry less than other branches.”

Sector banks on sustainability

All in all, the sector is banking on that omnipresent buzzword “sustainability”: metal packaging boasts the highest recycling rate of all packaging materials worldwide since metal can be reworked any number of times without compromising on quality. Waste aluminium is turned into new aluminium products, waste steel into new steel products – and everything is kept within a closed-loop material cycle. This saves resources, reduces energy consumption and CO2 emissions in packaging production. Metal packaging is therefore considered a precious raw material.

Metal packaging and metal closures are made of aluminium and steel and resources are plentiful for both. In Europe metal packaging also scores the highest recycling rate of all types of packaging: here 66% of steel and 58% of aluminium packaging is recycled. The proportion of recycled material in metal packaging is correspondingly high. On average 56% of steel products consists of recycled materials while aluminium for packaging contains about 50% recycled material. And although aluminium has been used commercially for 150 years now 75% of the original primary aluminium is still in circulation!

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