Metal packaging industry in the doldrums

Sanjay Bhatia | Updated on August 05, 2021

Though the demand is good, the imposition of BIS standards on tinplate/tin-free steel imports is choking the industry that is trying to overcome the pandemic impact

The packaging industry is one of the fastest growing sectors in country. The total size of the industry is $52.3 billion, and is growing around 12 per cent per annum. The industry is coming up with some interesting and captivating packaging concepts but the key component is sustainability and re-cyclability of the packaging material. Experts envisage a key role for metal packaging in the future as it is manufactured out of a sustainable material, namely, tinplate/tin-free steel, and follows the principles of reduce-reuse-recycle.

The metal packaging industry is growing at 5-6 per cent and is likely to reach around 770-800 kilotonnes (kt) per annum by 2024. The growth in this sector is largely driven by, among others, the pharma, food, beverages and paint sectors. The companies engaged these sector are making huge investments, which are generating opportunities for the growth of the packaging industry as well.

In countries like Germany, the material has consistently exceeded the recycling rates for 10 years. According to Recycling Week (June 2020) data, in 2018 a whopping 90.4 per cent of the tinplate used as packaging material in Germany was recycled — in Europe the figure was 82.5 per cent.

Quality control

Despite the immense opportunity, the industry in India is going through one of its toughest times now. The major issue is the mandatory imposition of the BIS standard — vide steel and steel products QCO dated July 17, 2020 — issued by the Ministry of Steel.

The quality control order has mandated use of only BIS certified material like tinplate/tin-free steel for tin cans and also imposed condition of use of BIS material for manufacture of various imported components steel products like easy-open ends, peel-off ends, etc., which the industry imports from various countries in different sizes and specifications as they are virtually not manufactured in the country.

There are many reasons for the resistance of the metal packaging industry to the imposition of BIS. The QCO has been issued at a time when the entire industry is already stressed, trying to retune the business owing to the pandemic. Besides, it is practically impossible to force the international suppliers to go for BIS certifications as the process for getting BIS licence is quite cumbersome and costly. Moreover, a few foreign tinplate producers applied for BIS licence in July 2020, but no action has been taken by the BIS authorities due to Covid restrictions.

From the perspective of international suppliers of tin plates, India is fairly a small market so they are not very keen to get into lengthy bureaucratic and cost intensive BIS certification procedures. As a result, the foreign suppliers have halted shipping tin plates to India and this has led to acute shortage in the domestic market.

Domestic demand

Industry needs about 700,000 tonnes of tinplate/tin-free steel while the domestic production is about 450,000 tonnes. Industry imports about 200,000-250,000 tonnes of tinplate/tin free steel per annum from different countries. Due to the imposition of mandatory QCO, the import of such material has substantially come down as the date of implementation of the QCO is being extended by only three months.

Since the lead time for import of material is much longer, the imports have substantially reduced, virtually resulting in an acute shortage of tinplate/tin-free steel in the country. This has also led to a virtual monopoly of the two producers in the country. Taking advantage of this shortage, the domestic prices of tinplate/tin-free steel have already increased already by almost 60 per cent since October 2020.

This exorbitant price increase in tinplate, consequently cans, may compel the existing customers to move away from metal packaging to other alternative packaging options, especially in the food, beverage and paint sectors.

The industry which is mainly concentrated in the MSME sector will not be able to survive the hefty price increase of tinplate, loss of business to alternative packaging materials and an upsurge in working capital requirements.

Moreover, the industry imports both prime and non-prime materials for manufacture of tin containers/various products for food and non-food segments. The industry is able to use non-prime material for manufacture of tin containers for non-edible products like paints, chemicals, etc., and various other products like stationery items, lanterns, etc.

Non-prime materials are commercially cheaper and can be conveniently used in India where availability of labour is comparatively cost efficient and the cans/products are manufactured either manually or in a semi-automatic process.

In case of imposition of BIS, such non-prime material will not be available to the metal packaging units in the MSME sector. It means that they will have to depend on the prime material which is around 35 per cent more expensive than the non-prime material and which is already in short-supply.

The policy wish-list

The market is already favouring the industry in terms of demand, but now much is dependent on government policies. As soon as they become favourable, the Indian metal packaging industry will have a promising future ahead.

By withdrawing the mandatory certification, the foreign suppliers will restart shipping tin plates to India; there is a huge shortage in the domestic market now.

Furthermore, to make the environment more conducive and in order to promote localisation of steel products, the government should provide soft loans, payable over more than 10 years, for the packaging industry.

Also, since metal packaging is 100 per cent recyclable, environment-friendly and a sustainable packaging material, the government should introduce a scheme that incentivises the user industry to make use of such packaging material.

The writer is President, Metal Container Manufacturers Association

Published on August 05, 2021

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