Chinese energy and steel consumption hits global packaging prices

Related tags Nicolas sarkozy Cost

Chinese consumption is a major factor behind potential steel price
increases in Europe, something that could hit food and beverage
packagers globally, writes Anthony Fletcher.

EU fruit and vegetable canners are concerned that major European steel producing companies such as Arcelor, Corus, Rasselsein and US-steel could be about to increase steel prices by 20 to 30 per cent.

This massive increase, which would come into effect on January 1st 2005, would have immediate repercussions on the prices of cans, which would rise by between 12 per cent and 15 per cent.

If this happens, then the massive growth in Chinese consumption of both energy and steel will have been a major factor, according to the Association of Fruit and Vegetable Processing Industries (OEITFL).

"Consumption in China is a factor,"​ said OEIFTL secretary general Pascale Keppenne. "Energy consumption is high, and the country is also using more and more cans."

The causes of the increase in steel prices, said Keppenne, are well known. Energy costs have risen, which has driven up the cost of steel. According to market analyst MEPS​, prices for flat rolled steel products in Europe have now in most cases reached their highest level in the last two decades, a factor that has had a knock-on effect on the packaging industry.

The upturn of the present cycle began in early 2002, but then lost a little ground as a result of the market uncertainty caused by the outbreak of SARS disease in Asia in 2003. But the explosion of prices since then has driven the value of flat steel in Europe to its current record high.

"Prices often increase from year to year, but his year we have seen an increase across the board,"​ said Keppenne.

"Now we hear that steel prices could be increased by a massive 20 per cent, which would make negotiating buying cans very difficult. Steel makers are clearly preparing to pass on costs to can makers. We are worried."

The effects of any steel increase would have a varying impact across the globe, and will depend on domestic factors. In France for example, finance minister Nicolas Sarkozy has tried to pull down consumer prices. France is a big market, and canners would find it tough to absorb higher costs if they were unable to raise prices.

Next year could be tough. The decision to dramatically increase steel prices has not been taken yet, but OEITFL is worried.

Related suppliers

Follow us