US tinplate producers fall short of demand

The canned food industry could suffer if the Section 232 investigation into steel results in tariffs being placed on imports of tinplate products, industry experts warned, as U.S. producers lack the ability to meet market demands.

The domestic suppliers are limited to ArcelorMittal USA LLC, U.S. Steel Corp., Ohio Coatings Co. and USS-Posco Industries Inc.—a joint venture of U.S. Steel and Posco Ltd. The first two produce tinplate with their own substrate, while the latter two apply tin coating to substrate purchased from others.

Not only do foreign mills make tinplate that is significantly wider and thinner than domestic, but the quality of the products is much better. This is primarily due to lack of investment in mills for tinplate lines, compared with “significant” investment in steelmaking capacity overseas, Max Levin, vice president at Titan Steel Corp., told AMM.

Domestic mills lack the incentive to invest in new tinplate lines due to the small size of the market. “Tinplate doesn’t rise to the top of the list for importance. It’s too small to make that big of an impact compared to cold-rolled or other large volume (steel) items,” Levin said.

Demand for tinplate in the U.S. totaled 2.1 million tons in 2016, while domestic tinplate production was 1.2 million tons, according to Robert Budway, president of the Can Manufacturers Institute. Meanwhile, 2016 steel demand reached 93.8 million tonnes, according to the International Trade Administration.

The can industry is a $14-billion-per-year industry, Budway told AMM, noting that roughly 2 percent of total domestic steel production is tinplate. . “It’s not a large segment to invest in.”

“(Domestic mills) are losing market share because they don’t compete,” an industry source told AMM, adding that can manufacturers are forced to look overseas because the quality of tinplate produced in the United States doesn’t meet industry standards.

Indeed, RG Steel LLC shuttered its steelmaking mill in Sparrows Point, Md., in 2012 due to a lack of investment, Levin said. “It wasn’t getting material of suitable quality for the U.S. market.”

However, USS-Posco supports the Section 232 probe and “would like to see tinplate included in the potential tariffs and/or quotas,” Brent Lerno, manager of marketing and tin sales, told AMM via email.

“The can manufacturers claim that there is not enough domestic supply. This may be true in certain parts of the country but not in others,” Lerno said.

But if tariffs are placed on imports on tinplate, “U.S. consumers will suffer. U.S. mills might get a price bump, but that might not materially help them if their supply is limited,” Levin argued.

And since U.S. mills can’t meet certain material specifications, “sanctions would only raise the price on current products and would make cans uncompetitive to other products,” he said.

If there were a quota on the amount of tinplate allowed to be brought in from overseas, “we would have to run the narrower plate with some technical changes,” Budway said.

Down the road, increases in the price of cans could lead to substitution in the industry. “Substitution a concern. We think it’d be unfair to have the U.S. government impose an artificial tax on our goods when other substrates, including flexible or plastic or glass, don’t have a tax,” Budway said.

While domestic mills could argue that they’d be more inclined to update their lines if they had the tinplate market to themselves, history suggests otherwise, according to the industry source. While domestic producers have asked for relief from dumped shipments in the past, “mills didn’t do anything to improve the situation—20 years later and they’re still complaining about imports.”

Between 1980 and 2003, the U.S. steel industry and unions “filed hundreds of petitions against firms from dozens of exporting countries over thousands of steel products,” according to a July 2004 research paper by Chad P. Brown in the Department of Economics and International Business School at Brandeis University.

Meanwhile, the U.S. tinplate industry is slowly shrinking “one or two percentage points a year,” Levin said, citing substitution as well as consumers shifting to thinner tinplate.

Editor’s Note: This story was updated on June 22, 2017, to correct a reporting error.

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