Product InformationMarket Structure
The tinplate market is dominated by a limited subset of integrated steel makers and a few consolidated can makers. The large can makers negotiate the majority of their buy directly with the integrated steel mills, often purchasing over 50% of global tinplate. However, given the size of the mills, tinplate is often a secondary product that is not core to the business; mills need assistance finding and servicing other customers. As a result, the tinplate market remains open, with independent tinmills, service centers, traders and smaller end users vying for market power.
Given the opaque and inefficient nature of the market, if all the parties work together the market could work towards an efficient equilibrium in a consistent market. Mill-direct purchasing would be set on long term contracts, with the independent tinmills, service centers and traders acting as market makers for smaller clients. However, an inconsistent market leads many players to step out of line for short term gains or increased market share, sending a shock through the market. The result is the dynamic, and often unpredictable, market that we see today.
In today’s market, large can makers are losing volume to declining usage and new entrants. While international markets for tinplate may be doing well, the general markets are often suffering and the large can makers lack the flexibility to act decisively. As a result, mills are competing with a changing landscape of core buyers, which can lead to significant changes in production schedules. In addition, a need for substrate for higher margin products will often lead the mill to abandon tinplate production.
Independent tinmills mills try to balance production by purchasing substrate from diverse mill sources. But the length of production for substrate puts tinmills in danger during changing markets. Service centers and traders have managed to add some structure to the market for smaller end users. However, pricing in secular decline has negatively affected the service center model of holding significant inventory.
Tinplate was originally used exclusively for metal packaging, but, while metal packaging still remains 80%+ of the market, numerous new end uses are being discovered, particularly in the United States. In addition, the rise of of slit tinplate has allowed tinplate to be fed into new types of machinery, further expanding the universe of end uses. Sample end uses include:
- Packaging – Applicators, closure/cap/crown, composite can, decorative can, ends/covers, general line, sanitary can
- Consumer products – Ammunition boxes, battery covers, cabinet drawers, calendar edging, camping products, candles, ceiling grids/tiles, home products, kitchen pans, lighting, office products, paint trays, paint brushes, safes, window blinds
- Electronics – Acoustic products, circuit boards, computer chassis, electronics cabinets, electrical components, screens, printing systems
- Industrial products – Automotive filter, engine parts, filter adapter, specialty filters,
- Machined parts – Building products, cosmetic cases, gaskets, hinges, profiles, seals
Service Centers & Traders
Service centers generally provide three different functions for end users. First, service centers warehouse a large quantity of steel and offer customers easy availability to customers. Second, service center have manufacturing capabilities that would not be cost effective if managed by end users. Third, service centers can pool demand from customers, allowing for a more efficient ordering and production process. Many service centers are able to supplement these offerings with a range of add-on services, such as logistics, quality control, FX management, international trade/documentation, customer support, R&D, and financing.
Steel mills also receive significant value from service centers. Service centers pool small orders to simplify the production process. Service centers are a consistent outlet for material. Service centers maintain complementary and diverse sales channels.
Traders offer some similar benefits to customers. However, the lack of physical inventory and processing assets requires traders to nimbly adjust their operations to suit a changing landscape with inconsistent supply and demand.
The tinplate market has developed into a global market. Many established markets have strong national supply, but improved inefficiencies in international trade has led to an increase in international supply of tinplate. While local supply differs by market, international supply is primarily served with supply out of Asia and Europe. While international supply is still dogged by long transaction times, improved communication and containerization now allows for efficient execution of small transaction. This change can often revolutionize the steel supply chain for smaller end users.
While international trade remains complex, significant improvements have allowed more demand to build. However, the demand is also much better informed regarding pricing and quality, limited the margins on international trade.
While global consolidation has certainly occurred, the tinplate markets are far from efficient or controlled, allowing for significant opportunities and risks for market participants.
Steel pricing develops along multiple different tracts. Most large end users negotiate their core buy with the steel mills in early Q4, signing annual contracts. Mills try to push universal price increases for all end users, so that pricing for all major end users is unchanged on a relative basis. While price increases sought are often 1%-6%, mills often settle for less. In addition, changes in foreign exchange often make pricing to the end user vary wildly. While pricing can drag out into the following year, it usually settled before December.
Once the initial pricing has been established, mills have a good understanding of their remaining capacity and market demand. The mills try to push pricing changes through to other accounts such as service centers. This process often causes pricing to trickle out slowly to smaller end users.
At the same time, the spot market is in normal fluctuation based on immediate supply and demand. Depending on mill lead times, the spot market will usually track at a small premium to contract pricing. However, irregularities are common, especially in illiquid specifications.
Market dynamics have caused pricing to jump around considerably. However, inflation adjusted pricing has been on a secular decline. Exact pricing pricing remains hard to pinpoint in tinplate market due to the large variability of specification and the production risks associated with the different sources.