April 28: Leading tinplate manufacturer ArcelorMittal Europe will be increasing its prices for European canmaking customers next year by “at least” 30 percent and restructuring its business in the face of rising raw material costs and overcapacity in Europe.
The move, revealed exclusively to The Canmaker during the Metpack trade show in Germany by chief executive Gil Perrot and head of sales Guillaume de Formanoir, came just days after Corus Packaging Plus said it would be closing one of its three mills in Europe, cutting capacity at another and raising its prices by 30 percent.
First steps to raising prices at ArcelorMittal will take place this summer, said de Formanoir. “Our intention is to start talking with our customers to apply a first raise of 150 euros per tonne from July 2008,” he said.
But in contrast to expectations that ArcelorMittal would cut production capacity to reduce its cost base, Perrot added that it would be dedicating one of its mills to export production and incorporating its tinplate business into its Flat Carbon Europe division “with the objective of adjusting production by 200,000 tonnes for price and profitability reasons”.
Perrot was keen to assure the canmaking industry that he wanted ArcelorMittal’s business to prosper. “It is not sustainable to lose money,” Perrot said, “but we want to be a dynamic player, even with less volume. Better that than to die.”
He pointed out that ArcelorMittal had already reduced capacity with a series of closures between 2002 and 2006. And to tighten the European supply, its Liege mill, one of five in Europe, will be dedicated to export production only.
And he disagreed with the suggestion that it would be better to concentrate tin mill operations in fewer plants to reduce costs. “What we know is that isolated sites get better performance than integrated plants,” added de Formanoir. “There is more competition, and there are supply chain advantages in having plants close to customers.”
He was also positive about the European beverage can business, where there has been loss of share to aluminium in a market growing at 10 percent a year. “Crown is adding a line in Spain, as is Rexam, and we know of a steel can plant being built in Poland.”
ArcelorMittal has tin mill production capacity in Europe of 1.6 million tonnes a year, representing about one third of the region’s capacity. But Europe, where lightweighting of cans has been advanced, tonnage has declined to just over four millions tons a year. At the same time, world prices of hot rolled steel and energy costs have risen above the contract prices for tinplate in recent years.
ArcelorMittal Europe's 30 percent increase for next year will apply for shipments in the first quarter of 2009. Further price increases are also possible: for new 2009 contracts “prices will be adjusted according to the external factor costs evolution,”, said ArcelorMittal Europe in a statement.