The tinplate segment of the U.S. steel market
is comparatively small-shipments of just 3 million tons
annually in an industry that generally manufactures more than
100 million tons of steel per year.
It's a difficult product to make, too, given
strict customer requirements for flatness and finish, needs
that essentially take mini-mills-some 70 percent of total U.S.
production capacity-out of the game. Therein lie opportunities
for the limited number of producers, according to steel
industry analysts. Only three producers are significant
manufacturers of tinplate in the United States, and while that
small number would seem to open the door for others to get into
the market, such moves are unlikely at best.
"It's very difficult to make tinplate," said
Chuck Bradford, industry analyst at Affiliated Research Group,
New York. "Flatness is very important to customers, and the
uniformity of the coating is important, too. Not very many
(steelmakers) can make it to the specifications the customers
need. You have to have degassing capabilities to be able to get
what (tinplate customers) want. That shuts out a lot of the
mini-mills right there. The mini-mills can't make this
The market thus is limited to ArcelorMittal
USA, Chicago, and U.S. Steel Corp., Pittsburgh, which
manufacture tinplate and other tin mill products; and USS-Posco
Industries Inc., Pittsburg, Calif., a joint venture of U.S.
Steel and Posco Ltd., Seoul, South Korea, and Ohio Coatings
Co., Yorkville, Ohio, a subsidiary of Severstal North America
Inc., Dearborn, Mich., which apply tin coating to substrate
provided by their parent companies.
Those companies, like others in the North
American steel industry, were hit hard by price volatility for
most products beginning in late 2008, when the global economic
downturn began to develop. The price for hot-rolled sheet, for
example, peaked at around $1,100 per ton in July 2008, only to
plummet to $380 per ton by May 2009.
Tin products pricing, however, held its own.
Producers generally need a margin of $300 to $400 per ton on
tinplate vs. hot rolled to make tinplate profitable. They were
able to get those margins despite hot-rolled price volatility
thanks to contract pricing negotiated a year earlier, and on
the fact that demand remained stable.
"In the first half of the year tin products
were the most stable part of the steel business," John Tumazos,
analyst at Very Independent Research LLC, Holmdel, N.J., said.
"Food and aerosol products and lubricant products are the ones
that were least tied to inventory fluctuations."
Luke Folta, analyst at Longbow Research,
Independence, Ohio, offered a similar view, but noted that
little information related to annual tin product sales is
available from producers. "They generally make their sales
available to us over a five-year period, so there is not a lot
of visibility there," he said. "It's a market that has not
received a lot of focus (in 2009), but it has been more stable
than most of the other steel markets."
Statistics from the American Iron and Steel
Institute (AISI), Washington, indicate how stable the market
has been: Total U.S. tin product shipments have been around 2.8
million tons annually since 2005, with tinplate accounting for
about 2 million tons.
With few players in the market, pricing
generally is not a big issue, Bradford said. "The big battle
they face is in quality. Rejection rates from can makers, I am
told, are usually pretty high. When you get into Europe and
Japan, they have good enough quality that they are making
(steel) beverage cans, which is something we do not do here.
But there has not been a new hot-strip mill built in the U.S.
in 35 years, and you can't make this stuff on a mini-mill. You
get too much nitrogen in the electric furnace process and you
don't have the flexibility in the steel that you do when it has
been degassed. It's hard to make."
Tumazos said the ability to deliver quality
and service is likely what separates the competitors. He used
ArcelorMittal Weirton of Weirton, W.Va., as one example of the
issues that U.S. competitors face. "When Weirton Steel was an
independent company, they took great pride in their tin mill,"
he said. "I'm sure the people who work there still are proud of
what they can do, but I wonder if it gets the same focus as
part of a 150-million-ton company. U.S. Steel takes great pride
in its tinplate, too. It's a solid market for them."
Thus, customers most likely make their
decisions on where to source supply based more on quality and
service than on price, Tumazos said. In commodity products like
hot rolled, price most often is the driver. "I would think
that, given the structure of the (tin products) market,
customers are very concerned with quality. There is a great
opportunity for (suppliers) to compete based on who provides
the most consistent quality and service."