Steel drums: No dinosaurs
By Staff -- Purchasing, 2/11/1999
With so many industrial container options for buyers, the growth of steel drums has slowed--but demand is by no means going down. In fact, according to a recent study on industrial container selection done for the Steel Shipping Container Institute (ssci), container users named new steel drums and pails as superior to competitive packages.Citing the quality and durability of new steel drums, buyers rated them highest among industrial containers in eleven out of thirteen categories. Users gave steel drums lower marks in the areas of environmental friendliness and warehouse space use--two areas producers dispute, and aim to change perceptions. With the increasing collection service suppliers are offering, it may not be too long before drums rate high in those areas as well.
Demand for drums slowed a bit in the second half of 1998--the main culprit being slowing exports to Asia. "There was some slowdown in business, but not as dramatic as one would think," says Larry Porter, marketing manager for Van Leer Containers. "We hope there will be a pickup in demand in '99, but at the least it will remain a stable market with some continued growth."
"The steel drum industry is a textbook mature market," says Scott Marple, steel drum product manager for Greif Bros. "As a result, competition among suppliers is very aggressive." Major producers of steel drums in the U.S. include Russell-Stanley, Van Leer Containers, Greif Brothers, and Trilla Steel Drum. Despite some stifling of demand in '98, some producers are in growth mode. "We are in an expansion mode," says Marple, "improving efficiencies and looking at adding plants in major markets."
Stiff competition between suppliers has helped keep steel drum prices fairly level in recent years, but tags are always influenced by steel prices. The cost of steel is 70% of a drum's manufacturing cost, so watch cold-rolled steel for a sign of where steel drum prices are headed. According to Purchasing, cold-rolled steel sheet prices fell sharply over 1998, dropping from an average of $420/ton in the first quarter to $407/ton in the third. By the fourth quarter, prices hovered at $387/ton. Prices are expected to go back up this year, jitting $415/ton by the second quarter, and $440/ton by the fourth quarter.
The significant decline in steel prices in 1998 hasn't translated into a bargain for steel-drum buyers. "This is an industry with traditionally thin margins," says Porter at Van Leer. "The decline in steel prices has allowed producers to improve their margins and modernize operations." In fact, Van Leer is building a new steel drum production facility in Houston, Texas, which will have a capacity of over 2.0 million drums/yr. The facility is being built next to a contract packaging operation, allowing for a single line of drum production to filling to shipping for some customers.
Even if steel prices do increase, steel drum tags should remain fairly level. "This isn't a climate for increases," says Porter.
Easy reuse and recycling
There is a strong market for steel scrap to be melted down and remade into new steel. Only a small percentage of steel drums manufactured are not collected and reused or recycled. In fact, nearly all steel mills use a percentage of scrap in new steel manufacturing, so the demand is there.
Increasingly, manufacturers and fillers are offering help in locating drum collection services, and some suppliers offer in-house programs to manage the life of a drum. One company, Van Leer, offers a program called Container Net, which tracks and collects containers from closed-loop systems. The drums are leased in a "trip lease" program. The customer doesn't buy the container and the end user doesn't dispose of it--Van Leer picks up the container from the end user. "We can track the container through its whole life by its barcode," says Porter. "Wee know when a container leaves a site, where it is, and where it's going."
Greif Bros. also offers a collection program. GreifLink connects Greif Bros. customers and end users to a web of reconditioners and recyclers. It allows end users to call a telephone number and make arrangements for the drums to be taken away. As well, Greif has a packaging services group, which can provide container management options for users. "We offer trip leasing and other options," says Marple at Greif Bros. "We can fill a drum, label, ship, and track it; pick it up, and retire it at the end of its lifecycle."
Standardization, new designs
Despite the recycling benefits, most buyers choose steel for its strength and versatility. The standardization of the steel drum also is an asset. Also, almost all types of materials can be put into a steel drum, although some, such as materials corrosive to steel or those with sanitary concerns, need plastic liners.
The benefits of standardization aren't stopping producers from pushing forward with design innovations. In late 1998, Trilla Steel Drum introduced a high-performance tight-head drum made via an expansion technique which allows greater stacking strength and greater vacuum resistance. Trilla plans to add an ISO-design open head drum this year to complement their tight-head ISO model.
"The steel drum industry is not a dinosaur," says Lester Trilla, president of Trilla Steel Drum. "We are doing what it takes to keep the 55-gallon steel drum as the container of choice for industrial users."
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