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 At a time when US steel production is down by over 40 percent from year-ago levels, perhaps the most reliable American steel product market is also the most overlooked because it is dominated by only a handful of mills -- tinplate. Due to its uniquely recession-resistant qualities, the tinplate market has managed to weather the down economy and remains relatively consistent from previous years. And despite much uncertainty still surrounding the near future of the US economy and steel market, tinplate manufactured for consumer goods will likely remain a consistent, viable product.
The most common process of tinning steel consists of coating cold rolled sheets with a thin coat of tin through an electrolytic process which allows the mill to closely monitor the specific weights of the steel. Tin’s chemical elements have been tested and valued to protect food and most liquids from spoilage, and also to protect the can itself from corrosion. According to the Steel Market Development Institute (SMDI), a business unit of the American Iron and Steel Institute (AISI), approximately 80 percent of all tinplate is manufactured into consumer goods, about 85 percent of which is in the form of food cans. The remaining consumer goods tinplate is primarily used for include aerosol cans, paint cans and other general line containers, as well as other end-use products such as automobile oil filters, fasteners, utility sheds, commercial ceiling grid systems, toys, and shelving.
Tinplate is a valuable and reliable product to the canned food industry. In addition to its streamlined manufacturing process, the strength of tinplate allows for efficient material usage without compromising durability for maximum stack-ability and prolonged shelf life. According to the Canned Food Alliance (CFA), approximately 90 percent of all steel food cans are comprised of tinplate (the remaining 10 percent is usually a combination of aluminum and other alloys). Furthermore, steel food cans have in recent years become one of the most recycled food storage containers. According to the World Steel Association (worldsteel), an estimated 65 percent of steel cans, or “tin cans,” are recycled, compared to only about 52 percent of aluminum cans, as per figures from the Can Manufacturers Institute. Current economic conditions have not set back the tin can industry much. The primary reason for this is that many consumers are opting for a cheaper alternative to dining out. And since most canned foods have an extended shelf-life, shoppers are often able to find deals by purchasing bulk quantities of canned foods. The tinplate industry is not entirely recession-proof, as consumption of just about all consumer goods is down across the board this year as a result of the economy; however, the up-tick in consumption of canned goods in response to the tough economic times has helped bolster the tinplate market from sliding significantly from year-ago levels, whereas virtually all other steel product markets have declined severely.“During the economic downturn, research has indicated consumers are eating more meals at home, which has benefited canned food as it offers tremendous value to consumers,” Rich Tavoletti, director of the Container Market Program for the SMDI, told SteelOrbis.According to data compiled by SteelFacts, US tinplate shipments were only off slightly throughout the first two quarters of 2009 compared to the previous two years. Shipments of domestic tinplate during the first half of 2007 totaled 945,842 nt, while domestic mills shipped 1,066,730 nt of tinplate in H1 2008. Comparatively, the first two quarters of 2009 have been slightly off, with domestic mills shipping a combined 742,163 nt. Meanwhile, prices in the US and worldwide for tinplate, which is sold solely on a contract basis with approximately 15 producers supplying most of the global market, have remained strong compared to those of other steel products. In addition to solid demand for canned food, rising tin costs have also impacted the price of tinplate. At press time, the three-month contract price for tin on the London Metal Exchange was above $14,000 per metric ton, which is up over 40 percent since the start of the year and reflects a full recovery from the drop in tin prices seen late last year after the onset of the global financial crisis.
While tinplate demand and pricing have managed to stay afloat this year, tinplate's primary end-market, canned food, faces competition from other extended shelf-life food packaging products, such as plastic, paperboard, and aluminum containers. However, canned food will likely always remain appealing to consumers for its convenience, shelf-life, reliability and recyclability. Moreover, initiatives are being taken by producers to ensure tin cans will remain widely used by canned food manufacturers. SMDI expects tinplate to remain a staple in the canned food industry due to ongoing improvements in steel packaging technologies, including advancements in downgauging, easy-open ends, shapes and sizes, and even self-heating cans- all of which make steel cans more attractive to food processing companies and more convenient for consumers. Mr. Tavoletti of SMDI told SteelOrbis that while the steel can industry will continue to face competition from other forms of packaging and food, he expects that demand for tinplate products will remain relatively stable for the foreseeable future due to the long-term viability of the steel can market. According to Mr. Tavoletti, "Canned food’s convenience, package integrity, shelf-life, reliability and recyclability along with research that states canned food is nutritionally comparable to its fresh and frozen counterparts will help maintain the steel food cans position as one of the best package choices and continue to stock the pantries of consumers for years to come.”
To support the tinplate industry and save money during these tight times, find hundreds of great recipes utilizing canned food at the Canned Food Alliance's (CFA) website, www.mealtime.org.
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 As the US auto industry continues to deteriorate from bad to worse, many of the US steel industry’s largest producers, especially on the flat rolled side, are being directly hit and have been forced to idle or close down many of their plants. Now that two of the so-called Big Three US automakers (General Motors and Chrysler) have officially filed for Chapter 11 bankruptcy protection, many of the steel industry’s top executives have their hands firmly positioned over the “panic” button. However, while production and sales have nosedived, there are a couple positive signs that suggest a crisis may be averted. But will steel businesses serving the automotive industry be able to survive until then?
According to the American Iron and Steel institute (AISI), the automobile industry is the second-largest steel-consuming industry in the US behind construction, accounting for about 16 percent of total US steel shipments. And according to the World Steel Association (worldsteel), approximately 55 percent of a given automobile’s mass is made of steel (including power trains, gear boxes and the body frame).Therefore, it should come as no surprise that the US steel industry has been greatly impacted by the steep decline in US automobile demand and may face further negative effects resulting from the serious financial problems of the industry's top producers.
Annual US automobile sales declined by 18 percent from 16.1 million units sold in 2007 to 13.2 million in 2008, which was the industry's lowest annual sales figure since 1992. Additionally, many economists predict annual US automobile sales will plummet even further -- to about 10.5 million units -- in 2009. Based on year-to-date data through April, Autodata Corp. adjusted its 2009 annualized auto sales forecast to only 9.3 million units.
But while May automobile sales declined by almost by 34 percent from May 2008, the annualized rate jumped back up to almost 10 million new automobile sales, at 9.91 million, providing a much-needed confidence boost for the automobile and steel industries. Even though a 10 million annual US automobile sales figure is still far below the average figure for the past decade of roughly 15 million units per year, the improvement in May over April could signify that a bottom has been reached.
Nonetheless, considering that automotive industry experts estimate that annual US steel consumption for automobile production totaled about 13.5 million net tons (nt) in 2008, the ongoing US auto sales slump will result in steel consumption by the US auto industry declining by more than three million nt, to less than 10 million nt in 2009.
All eyes are now on the impact that the Chapter 11 Bankruptcy filings by both General Motors and Chrysler will have on the steel industry. If General Motors and Chrysler cannot rebound and are unable to pay past bills, according to the AISI, they will cost five major steel companies (US Steel, AK Steel, ArcelorMittal USA, Severstal NA, and Worthington Industries) nearly $69 million combined, which would deal another devastating blow to the beleaguered US steel industry. AK Steel, the US’ fifth-largest steelmaker and one of the hardest hit by the automotive collapse, could lose out on nearly $16 million combined if General Motors and Chrysler disband and cannot pay their debts. However, AK Steel spokesperson Alan H. McCoy said in early June that the company was confident it would be repaid and would be willing to still supply steel to both General Motors and Chrysler when the companies’ production capabilities resume.
The continued loss in automotive production in the coming months will also result in a loss of available automotive scrap. This could provide a short-term boon to the steel industry in terms of increasing raw material surcharges; however, increased pricing could also place a further strain on manufacturers, whose business is severely down as well. On the bright side, US steel inventories have been steadily declining despite the lack of new steel purchases. According to the Metal Service Center Institute (MSCI)’s monthly shipment and inventory report, flat rolled inventory overhang has been improving, with April service center overhang hovering at around 2.5 months, at April shipping rates, compared to an estimated 2.8 months in March and 3.2 months of inventory overhang in February.
Moving forward, the US auto industry is likely to experience an up-tick in sales after it weathers the current storm, primarily due to the basic fact that the economy is, slowly but surely, starting to improve. Many Americans forwent purchasing a vehicle this year due to the tough economic times, when they ordinarily would have bought a vehicle. Automobiles still break down after so many miles, and an additional 12,000 miles on an older vehicle means that people who waited may be forced to purchase an automobile later this year or next. While some of these buyers will still push their vehicle to its limits and others will opt for a foreign replacement, US automobiles are, on average, less expensive than their foreign counterparts, and many Americans who have owned American automobiles in the past will most likely continue to have an allegiance to all things “Made in the USA” (or at least manufactured there).
Furthermore, President Obama’s recently announced new automobile fuel efficiency standards could provide a lift for a certain segment of the steel industry. The Obama administration has mandated that by the year 2016, new passenger vehicles will have to average 39 miles-per-gallon (mpg). In order to achieve this, automobile producers will have to reduce vehicle weight. Aluminum and plastics have been experimented with but their questionable durability has led to new lightweight steel technologies, such as advanced high-strength steel (AHSS). “The use of advanced high-strength steels reduces a vehicle’s structural weight by as much as 25 percent and is the cleanest environmentally friendly solution for future vehicles compared to other automotive structural materials,” Ron Krupitzer, vice president of automotive applications for the AISI's Steel Market Development Institute (SMDI), said in a press release. The emergence of AHSS will ensure that steel will always be a dominant component of US automobiles, even though new cars will consume it in much smaller amounts compared to their gas-guzzling predecessors of the past half-century.
It is, indeed, a humbling time for both the automotive and steel industries. Even the most experienced professionals have never endured such trying times as these before. However, the US auto industry has a good chance of rebounding over the next couple years, as unnecessary overhead and inefficiencies will be shed, labor agreements will be rewritten and the economy will begin to recover. While the Big Three may no longer be an American staple of corporate business success, the United States will continue to produce automobiles domestically, and will therefore continue to provide a reliable appetite for American-made steel for years to come.
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