European can makers fear knock-on effect of steel prices

- Last updated on GMT

Related tags: Steel prices, Cost

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. Anthony Fletcher reports.

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

According to the Association of Fruit and Vegetable Processing Industries (OEITFL) estimates, this increase in the price of metal packaging would lead to a rise of 5 per cent minimum in the cost prices of canned fruit and vegetables in Europe's supermarkets.

"Prices often increase from year to year, but his year we have seen an increase across the board,"​ OEIFTL secretary general Pascale Keppenne told FoodProductionDaily.com.

"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."

In addition to the fruit and vegetable processing industry, Keppenne says that the whole canned foodstuffs sector would also be penalised. Prices of lids for glass jars would also probably rise in similar proportions.

"Cost increases will obviously depend on the policy of each company concerned,"​ said Keppenne. "But these steel price increases would be difficult to absorb. I think most companies will have to apply some form of price increase."

Keppenne stresses that the effects of any steel increase would have a varying impact across Europe. 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.

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.

"Consumption in China is another factor,"​ said Keppenne. "Energy consumption is high, but the country is also using more and more cans."

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

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