ArcelorMittal SA will hike tin plate steel costs by 79%
Cost of cans to manufacturers could rise by up to 40%
March 20, 2009
By Justin Brown
The cost of cans could rise by between 35 percent and 40 percent next month after ArcelorMittal South Africa told customers this week that it would increase the price of tin plate steel by almost 80 percent.
Graham Hayward, a spokesman for Nampak, said ArcelorMittal SA had notified the packaging group of the hike in tin plate prices as well as two other steel products used in packaging, which would increase in price by between 69 percent and 79 percent.
Hayward said steel made up half the cost of a can. He would not say how much Nampak sold cans for. Tins and cans were mainly used for beer and soft drinks as well as fish, fruit and vegetables, he said.
In a note to its tin plate customers, ArcelorMittal SA said it "will review the prices again after six months, for a possible adjustments from October".
Geoff Feldon, the managing director of Metalix, which makes baking products, said the price of tin plate had increased by 17.5 percent last year, so the total increase in the year to April was 98 percent.
Sven Lunsche, a spokesman for ArcelorMittal SA, confirmed the tin plate price increases and said the hikes would take effect from April 1.
"The adjustment is based on a long-standing formula that comprises a basket of prices from a number of international markets - including the US, Germany, France, Italy, the UK, South Korea, Taiwan and China - to which the ruling rand-dollar exchange rate is applied," he said.
Lunsche said the agreement with tin plate customers included an adjustment clause, which would come into effect on October 1 if the basket price of tin plate rose or fell by more than 10 percent.
Hayward said: "We don't expect the price of tin plate to stay high for long. We expect a price reduction in six months."
Nampak consumed about 90 percent of the tin plate produced in the local market by ArcelorMittal SA, he added.
Hayward said Nampak generated about 30 percent of its earnings from its metals and glass division.
Feldon said the extent of the increase made him think the steel maker was taking advantage of its "monopoly position" in South Africa.
ArcelorMittal SA had given Metalix, which employs 100 people, only 15 days' notice of the increases in tin plate.
The level of the increase could result in buyers of bakeware switching from steel products to plastic products.
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