Stainless IBCs see strong demand, flat to falling prices

By Staff -- Purchasing, 9/7/2000

Buyers will continue to see double-digit demand growth for rigid intermediate bulk containers (IBCs). According to forecasts from Cleveland, Ohio-based industrial market analysis firm, The Freedonia Group, demand of IBCs will grow 10.6% annually to reach $1.1 billion by 2003.

The current market for stainless steel IBCs is lively. With the strong demand, production levels are up. And despite ever increasing competition, most producers report increasing IBC sales. Producers continue to add capacity to meet demand. Pricing is also up, mainly due to the high cost of feedstock stainless steel sheet, which is currently high compared to recent years.

Also, the market is fairly tight. Leadtimes for steel IBCs appear to be in the six- to 10-day range, with an average delivery of eight days. Compared to last year at this time, delivery leadtimes are longer. The average leadtime for steel IBCs for July 1999 was 5.3 days.

But while the market appears to favor producers, analysts and buyers believe that there may be some price relief on the horizon. Stainless steel prices appear set to fall, which will put pressure on producers to lower their stainless steel IBC prices.

Many benefits

The bulk packaging trend has been toward the use of larger, reusable containers which typically are more cost effective than smaller, single trip containers. Public focus on safety and environmental issues has forced buyers to demand lower cost and secure containers that can be reused and recycled. For these reasons and others, IBCs are generally considered to be the fastest growing market segment in the bulk packaging industry.

Despite their higher costs compared to drums, IBCs greatly simplify handling, take up less space, and often can be integrated directly onto the processing line. Also, IBCs usually have a longer service life than drums and can offer some environmental advantages. Most producers are using this longer service life as a selling point with customers, and are developing total packaging systems and services to handle every aspect of chemical bulk shipping and container management from cradle to grave.

Price outlook

IBC manufacturers will be hard pressed to keep their prices flat in the coming year. That is because stainless steel raw material prices are in decline from the high levels seen earlier this year, mainly caused by the explosion of nickel pricing. Now, as prices for raw materials cycle down, competition will pressure producers to lower their prices. Despite the strong demand for these products, some buyers see prices remaining flat or eroding somewhat before the end of this year.

One raw materials buyer at a major bulk packaging container manufacturer, based in the Midwest says that the stainless steel IBC market is currently in a period of transition. "IBC pricing is currently flat, but we see prices probably coming down a little in the future," says the buyer. Raw material costs are to blame. "Carbon steel prices appear to be falling faster than stainless steel pricing," says the buyer. "But we see stainless steel prices continuing to fall."

According to data from Purchasing Magazine's Metals Edition, stainless steel prices have risen substantially in the last year. Prices in August of last year for stainless steel sheet type 304 averaged $1,550/ton on the spot market. In November 1999 spot prices increased to $1,750/ton and remained flat through March 2000.

In April, rising nickel prices forced stainless steel prices up to about $2,020/ton on the spot market. These high prices stayed flat for two months before eroding to about $1,835 in June. As of this writing, stainless steel spot prices remained at $1,835/ton but were showing signs of slippage. Look for stainless steel tags to cycle down in the months ahead.