Rising imports threaten EU steel prices
expensive market in the world, with inevitable consequences for the
region's packaging industry. Anthony Fletcher reports.
According to a new report from UK-based steel industry analyst MEPS, the EU average price for cold rolled coil was $US838 per tonne in January, considerably higher than in the other main consuming countries. Prices for hot rolled plate, galvanized sheet and some other products show a similar divergence.
MEPS points out that last year the USA - which had the world's highest prices for much of the period - acted like a magnet for steel and imports jumped by more than 50 per cent year-on-year. The EU market might soon be in a similar position.
The likely increase in competition from imports will add pressure to what is already a sensitive market. Repeated price increases over the last year or more have left some buyers reeling, and MEPS predicts that larger-volume users will see an erosion of the discounts they previously enjoyed.
More significantly though, imports will have most effect on prices at the commodity end of the market, and here the outcome could be substantial. The knock-on effect for steel packagers, already battling tight profit margins and threats from innovative new packaging materials such as Tetra Pak's Recart, could be severe.
The recent decision by UK supermarket Sainsbury to switch the packaging of its own brand of chopped tomatoes from cans to Tetra Recart retortable cartons has been seen as something of a watershed in packaging preferences. In addition, the development of an innovative multi-layer polypropylene pack from RPC Bebo UK Corby can be seen as a further blow to the metal packaging sector, which is beginning to see a shift away from traditional methods of packaging and a move towards new innovative plastics.
This then compounds the fact that EU steel costs are likely to continue increasing. Arcelor, the Luxembourg-based steel giant has raised prices in the first quarter 2005 and already renegotiated two-thirds of its packaging industry contracts. Others such as Corus and ThyssenKrupp are likely to lift their figures by a similar amount.
As a result, many packaging manufacturers, are now talking less about resisting steel price rises and more about how they can pass on the increase to their own customers - a tricky proposition given that there now alternative forms of packaging on the market.
But the steel packaging industry is not prepared to throw in the towel just yet. As the Metal Packaging Manufacturers Association (MPMA) points out, 27 billion food cans are used every year in Europe alone.
"The metal food can will be around for some considerable time yet," said MPMA technical manager David Smith. "There will always be tests for new products and packages and the food can industry is an active innovator and will go from strength to strength through innovation, the provision of safe, nutritious food, and in addition to all the attributes mentioned above, good value for money."
The high value of the Euro against the dollar has been partly responsible for the run-up in EU prices. Moreover, there are larger quantities of steel available internationally, as Chinese import demand dropped 30 per cent last year. Exporters in countries such as Brazil, India, Iran and Turkey are among those now reported to be shipping more steel into Western Europe.
Statistics for the first ten months show EU steel imports little changed from 2003 at a monthly average of 1.53 million tonnes (excluding semi-finished products). But the figures also show an acceleration of the import inflow in the second half of last year, when the monthly average (disregarding the holiday month of August) was 1.77 million tonnes.
