Mixed prospects for drums

By Jianfeng Pei -- Purchasing, 7/13/2000

Drum users are increasingly looking for fewer suppliers to provide a higher percentage of their industrial container supply and service requirements. They are also seeking broader product lines and global services.

To capture more market share, large drum suppliers are trying to improve operating efficiencies and offer more product choices. Consolidation is continuing in the industry as smaller and regional companies find it more difficult to compete with large manufacturers.

Although many customers are converting to intermediate bulk containers (IBCs), shipping drums will remain the packaging workhorse. Sales of drums (steel, plastic and fibre) are forecast to increase 3.2% annually to reach $1.5 billion in 2003, according to the Freedonia Group, a market research firm in Cleveland, Ohio.

Steel drums

Demand for steel drums is expected to stay flat this year. "This is a mature market and there is no serious increase in demand," says Scott Marple, product manager for steel drums, Greif Bros., Delaware, Ohio.

Steel drum demand has been steady over the past few years. "Sales of new steel drums are growing at a slower pace than plastic," says Ed Gunn, North American sales manager-steel, Russell-Stanley, Bridgewater, N.J. One positive sign is that major customers are increasing their exports, which will fuel demand for steel drums, Gunn says.

Steel drum sales will grow slowly in coming years, but it will remain a mainstay of the bulk packaging industry because of steel's strength and fire resistance and the presence of a strong national network of steel drum reconditioners, according to Freedonia Group.

The market for steel drums is very competitive. Prices have been declining in the past two years even though raw material costs have increased steadily. Gunn of Russell-Stanley expects prices to remain flat this year.

Because of rising material costs, many manufacturers will likely try to increase their prices this year. But competitive pressure will make this difficult. Most market observers expect only modest price increases this year.

"We are at the mercy of steel companies when it comes to raw material prices," says Haron Wise, vice president of sales and marketing, Berenfield Containers, Mason, Ohio. "When raw material prices rise, we have to raise our prices."

Manufacturers are making efforts to improve efficiencies in a bid to reduce costs and expand market shares. Over the last year, Russell-Stanley opened a new research, development and testing facility to strengthen product development and innovation. It is also improving automation to cut costs.

Although the industry is bothered by overcapacity, Greif Bros. plans to add a new facility in Eastern, Texas. "We expect more business this year as we pursue new businesses and attract more new customers," says Marple.

Plastic drums

Demand for plastic drums will expand at the fastest pace within the drum segment because of their light weight, one-piece construction and impact and corrosion resistance, according to the Freedonia Group.

Sales of plastic drums are expected to grow 6% to 8% this year, says Jim Craig, product manager for plastic drums, Greif Bros. Improvement in style and materials is attracting more customers to use plastic drums, he says.

Don Lumpkin, North American sales manager-plastics, Russell-Stanley, believes that demand will be strong this year. "Many fibre drum users are converting to use plastic drums because of the higher performance and reuse characteristics of polyethylene drums and the high cost of fibre drum disposal," he says.

Prices of plastic drums are facing an upward trend this year due to rising raw materials costs, says Lumpkin of Russell-Stanley.

The major raw material for plastic drums is polyethylene, whose prices are closely related to crude oil tags. This year costs of plastic resins have been rising due to crude oil price hikes. "Costs of resins will continue to increase in the rest of the year, and I expect some increases in plastic drum prices," says Craig of Greif Bros.

Fibre drums

Fibre drums will continue to face challenges and demand declines but have the advantages of being light weight and recyclable, as well as the least expensive form of bulk packaging, according to the Freedonia Group.

Demand for fibre drums is tied with the economy. As the economy remains strong this year, demand for fibre drums is also very robust. "This will be a very good year for fibre drum manufacturers," says Pat Griendling, product manager for fibre drums, Greif Bros. "I don't see any decline in demand this year."

Food, chemical and pharmaceutical industries are major customers of fibre drums. The continuing growth of these industries is expected to keep fibre drum demand steady this year.

Griendling believes that the market for fibre drums will be here to stay in coming years in spite of the challenge from plastic drums and flexible intermediate bulk containers. "There are some niche markets that can not use steel or plastic drums," she says.

Prices of fibre drums are closely tied to costs of raw materials. As prices of raw materials have been increasing, manufacturers are facing the pressure to raise prices for fibre drums.

Manufacturers are trying to develop new products and explore new markets for fibre drums. Greif Bros. has developed a biodegradable drum made of tightly wound fibreboard. The fibre container can safely break down in the environment and is currently used by the feed industry.

"The fully degradable drum is a new direction for the industry," says Griendling. "We are looking for new markets for the environment-friendly product."