Lubricant blenders and marketers in the United States will be paying more for one of their favorite containers, thanks to trade sanctions imposed to protect U.S. steel makers.
In the past few weeks, steel drum makers have announced price increases of 8 to 10 percent. Container companies say they are simply passing on hikes that they have faced from steel suppliers – and that they expect further increases in coming months.
There are some people walking around grumbling about this, Pinnacle Oils John Massel, president of the Petroleum Packaging Council, said Tuesday from the groups spring meeting in Destin, Fla. This increases our costs, and blenders are operating on such tight margins and in such a competitive market that any cost increase is a sensitive issue.
President George W. Bush announced earlier this month that the United States would impose tariffs of up to 30 percent on steel imports from nations such as Russia, China and Brazil. The administration claims that cheap imports from these countries are threatening the U.S. steel industry, which has seen more than 30 producers shut down or file for bankruptcy in the past few years.
Container makers and other observers contend the sanctions exceeded expectations of U.S. steel makers and that the industry has indicated plans to raise prices more than 60 percent. Sources said steel costs have jumped approximately 20 percent this month and that they expect another increase of similar size this summer.
The steel industry has been quick to take advantage of this, said Grif Carnes, district sales manager for Russell-Stanley Corp. Theyve also made it clear that they plan to raise prices further. When that happens, we have no choice but to pass on the increases.
The lubricants industry is one of the largest consumers of steel drums, container makers say. Several said they expect lube blenders to shift toward plastic drums.
The increase in steel prices makes plastic drums more attractive in terms of cost, said Kyle R. Stavig, vice president of sales and marketing for Myers Container Corp. But theres not as much of a recycling network for plastic drums, so youll run into collection problems.
Others predicted that reconditioned steel drums will regain some of the popularity that they lost to new containers in recent years, as steel prices fell. But reconditioning poses its own potential problems. In cases where tops are replaced, size uniformity may be compromised. Moreover, lightweight drums may not recondition well.
I think people are going to wait and see where this settles, Massel said. But then youre going to see blenders re-evaluating their operations to try to minimize the impact of these costs increases.